NNAX 8-K
New Momentum Corp. (NNAX)
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): July 6, 2020
| New Momentum Corporation |
| (Exact name of registrant as specified in its charter) |
Nevada
(State or other jurisdiction of incorporation)
000-52273
(Commission File Number)
88-0435998
(IRS Employer Identification No.)
1303, 13/F Technology Plaza
651 King’s Road
North Point, Hong Kong
(Address of principal executive offices)(Zip Code)
+852 2911-0119
Registrant’s telephone number, including area code
Eason Education Kingdom Holdings, Inc.
Unit 19, 35/F., Tower 1,
Millennium City 1, No. 388 Kwun Tong Road,
Kwun Tong, Kowloon, Hong Kong
(Former name or former address, if changed since last report.)
Copies to:
Thomas E. Puzzo, Esq.
Law Offices of Thomas E. Puzzo, PLLC
3823 44th Ave. NE
Seattle, Washington 98105
Telephone No.: (206) 522-2256
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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Indicate by check mark whether the registrant is an emerging growth company as defined in 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 checkmark 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. ☐
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Current Report on Form 8-K contains forward looking statements that involve risks and uncertainties, principally in the sections entitled “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All statements other than statements of historical fact contained in this Form 8-K, including statements regarding future events, our future financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology. Although we do not make forward looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk Factors” or elsewhere in this Form 8-K, which may cause our or our industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assumes no obligation to update any such forward-looking statements.
You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this Form 8-K. Before you invest in our securities, you should be aware that the occurrence of the events described in the section entitled “Risk Factors” and elsewhere in this Form 8-K could negatively affect our business, operating results, financial condition and stock price. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this Form 8-K to conform our statements to actual results or changed expectations.
Item 1.01 Entry into a Material Definitive Agreement
On July 6, 2020, New Momentum Corporation, a Nevada corporation, formerly known as “Eason Education Kingdom Holdings, Inc.”, (the “Company”) entered into a Share Exchange Agreement (the “Share Exchange Agreement”), by and among the Company, Nemo Holding Corp., a British Virgin Islands corporation (“Nemo Holding”), and the holders of common shares of Nemo Holding. The holders of the common stock of Nemo Holding consisted of 29 stockholders.
Under the terms and conditions of the Share Exchange Agreement, the Company offered, sold and issued 10,000,000 shares of common stock in consideration for all the issued and outstanding shares in Nemo Holding. Leung Tin Lung David, the Company’s sole officer and director, is the beneficial holder of 6,000,000 common shares, or 60%, of the issued and outstanding shares of Nemo Holding. The effect of the issuance of the 10,000,000 shares issued under the Share Exchange Agreement represents 10.8% of the issued and outstanding shares of common stock of the Company.
Immediately prior to the closing of the transactions under the Share Exchange Agreement, Mr. Leung was the holder of 233,813,213 shares of common stock, or 75.2%, of the issued and outstanding shares of common stock of the Company. Giving effect to the closing of the transactions under the Share Exchange Agreement, Mr. Leung acquired 6,000,000 shares of common stock of the Company, by virtue of his 60% beneficial ownership of Nemo Holding. The remaining 28 common shareholders of Nemo Holding acquired 4,000,000 shares of common stock under the Share Exchange Agreement, by virtue of their aggregate of 40% beneficial ownership of Nemo Holding.
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Giving effect to the transactions under the Share Exchange Agreement, Mr. Leung is now the beneficial holder of 239,813, 213 shares of common stock, or 74.7%, of the issued and outstanding shares of common stock of Nemo Holding.
Nemo Holding was incorporated on April 16, 2020, in the British Virgin Islands. The business of Nemo Holding is now our principal business. Nemo Holding is organized for various investments under the Stony Hill brand as well as to conduct any other related business and activities. Stony Hill is the owner and has right to intellectual property, including trademark, trade dress, images, likenesses and other associated intellectual property, such as the name “Sony Hill” related to Damian Marley.
Our executive offices are located at Room 1303, 13/F, Technology Plaza, 651 King’s Road, North Point, Hong Kong, and our telephone number is +852 2911-0119.
Item 2.01 Completion of Acquisition or Disposition of Assets
The information disclosed in Item 1.01 of this Form 8-K is hereby incorporated by reference into this Item 2.01.
As described in Item 1.01 above, on we completed the acquisition of Nemo Holding pursuant to the Share Exchange Agreement. The disclosures in Item 1.01 of this Form 8-K regarding the transactions contemplated by the Share Exchange Agreement are incorporated herein by reference in its entirety.
FORM 10 DISCLOSURE
The Company was a “shell company” (as such term is defined in Rule 12b-2 under the Exchange Act) immediately before the completion of the transactions contemplated by the Share Exchange Agreement. Accordingly, pursuant to the requirements of Item 2.01(f) of Form 8-K, set forth below is the information that would be required if the Company was required to file a general form for registration of securities on Form 10 under the Exchange Act with respect to its common stock, which is the only class of the Company’s securities subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act upon consummation of the transactions contemplated by the Share Exchange Agreement. The information provided below relates to the combined operations of the Company after the acquisition of Nemo Holding, except that information relating to periods prior to the date of the reverse acquisition only relate to Nemo Holding and its consolidated subsidiaries unless otherwise specifically indicated.
DESCRIPTION OF BUSINESS
Our Corporate History and Background
The Company was incorporated on July 1, 1999, under the laws of the State of Nevada, under the name “Han Logistics, Inc.” The Company changed its name to “Eason Education Kingdom Holdings, Inc.” on August 6, 2015.
Amee Han Lombardi served as President, Secretary, Treasurer and a director from July 1, 1999 until her resignation on February 13, 2015. Michael Vardakis served as a director from April 19, 2012 until his resignation on February 13, 2015. On February 13, 2015, Kin Hon Chu was appointed a director, Law Wai Fan was appointed Chief Executive Officer, Cheng Kin Ning was appointed Chief Financial Officer, and Marie Huen Lai Chun was appointed Chief Operating Officer. On April 27, 2020, Leung Tin Lung David acquired approximately 233,813,213, or approximately 75.2%, of the issued and outstanding shares of common stock of the Company on such date.
On May 27, 2020, Chu Kin Hon resigned a director; Law Wai Fan resigned as Chief Executive Officer and President; Cheng Kin Ning resigned as Chief Financial Officer, Secretary and Treasurer; and Marie Huen Lai Chun resigned as Chief Operating Officer, of the Company.
Effective May 27, 2020, Leung Tin Lung David was appointed as President, Secretary, and Treasurer and a Director of the Company. Mr. Leung is currently the sole director and officer of the Company.
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On June 18, 2020, we filed a Certificate of Amendment to our Articles of Incorporation, as amended, with the Secretary of State of the State of Nevada, effecting a change of the name of the Company to New Momentum Corporation.
The Company does not have any current plans, arrangements, discussions or intentions, whether written or oral, to engage in a merger or acquisition with an identified or unidentified company or person to be used as a vehicle for a private company to become a reporting company.
From inception until we completed our reverse acquisition of Nemo Holding, the principal business of the Company was a plan to establish education centers in China to provide a high quality, comprehensive six-year education plan beginning at birth with fundamental training and ending with kindergarten education.
Reverse Acquisition of Nemo Holding
On July 6, 2020, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”), by and among the Company, Nemo Holding Company Limited, a British Virgin Islands corporation (“Nemo Holding”), and the holders of common shares of Nemo Holding. The holders of the common stock of Nemo Holding consisted of 29 stockholders.
Under the terms and conditions of the Share Exchange Agreement, the Company offered, sold and issued 10,000,000 shares of common stock in consideration for all the issued and outstanding shares in Nemo Holding. Leung Tin Lung David, the Company’s sole officer and director, is the beneficial holder of 6,000,000 common shares, or 60%, of the issued and outstanding shares of Nemo Holding. The effect of the issuance of the 10,000,000 shares issued under the Share Exchange Agreement represents 10.8% of the issued and outstanding shares of common stock of the Company.
Immediately prior to the closing of the transactions under the Share Exchange Agreement, Mr. Leung was the holder of 233,813,213 shares of common stock, or 75.2%, of the issued and outstanding shares of common stock of the Company. Giving effect to the closing of the transactions under the Share Exchange Agreement, Mr. Leung acquired 6,000,000 shares of common stock of the Company, by virtue of his 60% beneficial ownership of Nemo Holding. The remaining 28 common shareholders of Nemo Holding acquired 4,000,000 shares of common stock under the Share Exchange Agreement, by virtue of their aggregate of 40% beneficial ownership of Nemo Holding.
Giving effect to the transactions under the Share Exchange Agreement, Mr. Leung is now the beneficial holder of 239,813, 213 shares of common stock, or 74.7%, of the issued and outstanding shares of common stock of Nemo Holding.
As a result of the share exchange, Nemo Holding is now a wholly-owned subsidiary of the Company.
The share exchange transaction with Nemo Holding was treated as a reverse acquisition, with Nemo Holding as the acquiror and the Company as the acquired party. Unless the context suggests otherwise, when we refer in this Form 8-K to business and financial information for periods prior to the consummation of the reverse acquisition, we are referring to the business and financial information of Nemo Holding.
Organization & Subsidiaries
We have one operating subsidiary, Nemo Holding Corp., a British Virgin Islands corporation.
Overview of Nemo Holding
Our wholly owned subsidiary, Nemo Holding was incorporated on April 16, 2020, in the British Virgin Islands.
The business of Nemo Holding is now the principal business of the Company. Nemo Holding has developed and operates an online ticketing platform named Gagfare.com, which provides a ticketing system for individuals and agencies to search, book and issue flight tickets and other services.
Nemo Holding principal administrative offices are located at Room 1303, 13/F, Technology Plaza, 651 King’s Road, North Point, Hong Kong, and our telephone number is +852 2911-0119. Our website is www.gagfare.com.
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Summary Financial Information
The tables and information below are derived from our audited financial statements as of March 31, 2020.
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| March 31, 2020 |
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| Financial Summary |
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| Cash and Cash Equivalents |
| $ | 16,429 |
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| Total Assets |
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| 28,476 |
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| Total Liabilities |
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| 107,404 |
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| Total Stockholders’ Equity (Deficit) |
| $ | 28,476 |
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Nemo Holding Company Limited has developed and operates an online ticketing platform named Gagfare.com, which provides a ticketing system for individuals and agencies to search, book and issue flight tickets and other services.
Being the pioneer to provide ‘book-now-pay-later’ option for securing flight ticket reservations, Gagfare enables travelers to search flights directly with over 500 airlines globally, and securing a confirmed, impartial airfare on their desired flight, instantly. With a unique and first time ever ‘book-now-pay-later’ solution provides by Gagfare, travelers can now pay only $2.00 to secure up to nine flight seats, well in advance in schedule, on their desired flight. Travelers don’t have to pay the rest of the fare until closer to their travel date.
The business mission of Gagfare is to let customers to “get a good fare.” Gagfare taps into multiple global distribution systems specifically for flight reservations, enables customers to be able to search and book their flights directly in the airlines’ own reservation systems. This gives travelers access to the best available promotional deals they may never encounter anywhere else online. Gagfare ensures to offer the best available airfare, on any given travel day, on any given flight, on any of the world’s leading airlines.
Travelers are using many of the existing online travel booking sites are spending lots of time searching and comparing for flight ticket options, and being rushed to pay the full ticket price as early as the platforms want. Often travelers may find out the selected flight fare options may no longer be available when they want to make the purchase. Advance booking is not available in most online travel booking sites today.
With user-friendly web and mobile application interfaces, Gagfare enables instant access to hundreds of thousands of flights around the world. Customers can also choose from their favorite airlines or search for alternate route options. Travelers can book itineraries with multiple stops, and check for their bookings through the airline official booking web sites by using the Gagfare booking reference information. Gagfare user just needs to pay $2.00 through multiple popular online payment methods to secure the best seats on their best flight choice instantly. A reminder will be sent through email to the customer when it is time to pay the flight ticket fare and issue the flight ticket.
In the future, Gagfare will also tap into the booking of travel packages, cruises, trains and buses tickets, hotels, theme parks, sports and event tickets as well, giving a one-stop travel and entertainment booking center for the consumers worldwide.
Revenue and User Model
Gagfare plans that its revenue will be derived from online flight ticket booking and ticket issuance.
For each advance booking that user makes through the Gagfare’s state of the art book-now-pay-later solution, a non-refundable $2.00 booking fee is paid to Gagfare. The booking fee will not apply to the flight ticket payment at ticket issuance.
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When user has decided to issue the booked flight plan, full payment for the tickets will be made for ticket issuance. Gagfare may still get a market ticket price margin from the ticket issuance transactions, depending on the type of ticket offering from the ticket source which the user has chosen.
Gagfare will also provide advertising spots on the web and mobile application platforms, for travel related businesses to advertise on the platforms, which will bring a stream of advertising income to the platform.
While the technology already developed and operational, Gagfare will later expand into the other ticketing markets, include travel packages, cruises, trains and buses, hotel rooms, theme parks, sports and even tickets, apply similar search, book and buy ticket business model and mechanisms which is already applied to flight tickets.
Intellectual Property
We rely on a combination of trademark laws, trade secrets, confidentiality provisions and other contractual provisions to protect our proprietary rights, which are primarily our brand names, product designs and marks. We do not own any patents.
Pursuant to a Cooperation Agreement, dated February 1, 2016, by and between Gagfare Limited, a Hong Kong corporation and wholly owned subsidiary of the Company, and JJ Explorer Tours Limited, a Hong Kong corporation (“JJ Explorer”), controlled by Leung Tin Lung David, JJ Explorer develops and maintains website and mobile application platforms the Company uses in the operation of its business in exchange for 50% of the net earnings the Company earns through its Gagfare website and mobile application platforms for a term of five years.
Government Regulation and Approvals
We are not aware of any governmental regulations or approvals for any of our products. We do not believe that we are subject to any government regulations relating to the ownership and licensing of our intellectual property.
Employees
As of the date hereof, we have 1 non-employee officer who operates our company.
DESCRIPTION OF PROPERTIES
Our executive offices are located at Room 1303, 13F, Technology Plaza, 651 King’s Road, North Point, Hong Kong, and our telephone number is +852 2911-0119. We do not own any real estate or other physical properties.
RISK FACTORS
You should carefully consider the risks described below together with all of the other information included in this Form 8-K before making an investment decision with regard to our securities. The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment.
RISKS RELATING TO OUR COMPANY
Our auditors have expressed substantial doubt about our ability to continue as a going concern.
Our audited financial statements for the years ended December 31, 2019 and 2018, and our unaudited financial statements for the three months ended March 31, 2020, were prepared assuming that we will continue our operations as a going concern. Our wholly-owned subsidiary, Nemo Holding, was incorporated on April 16, 2020, and has net revenues of $20, and net income of $6,777, at March 31, 2020. As a result, our independent accountants in their audit report have expressed substantial doubt about our ability to continue as a going concern. Continued operations are dependent on our ability to complete equity or debt financings or generate profitable operations. Such financings may not be available or may not be available on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty.
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If our estimates related to future expenditures are erroneous or inaccurate, our business will fail and you could lose your entire investment.
Our success is dependent in part upon the accuracy of our management’s estimates of our future cost expenditures for legal and accounting services (including those we expect to incur as a publicly reporting company), for website and mobile application marketing and development expenses, and for administrative expenses, which management estimates to be approximately $1,000,000 over the next twelve months. If such estimates are erroneous or inaccurate, or if we encounter unforeseen costs, we may not be able to carry out our business plan, which could result in the failure of our business and the loss of your entire investment.
Potential disputes related to the existing agreement pursuant to which we purchased the intellectual property rights underlying our business could result in the loss of rights that are material to our business.
The acquisition of the intellectual property of Nemo Holding, by way of the Share Exchange Agreement, by and among the Company, Nemo Holding, and the holders of common shares of Nemo Holding, is of critical importance to our business and involves complex legal, business, and accounting issues. Although we have clear title to and no restrictions to use our intellectual property, disputes may arise regarding the Share Exchange Agreement, including but not limited to, the breaches of representations or other interpretation-related issues. If disputes over intellectual property that we have acquired under the Share Exchange Agreement prevent or impair our ability to maintain our current intellectual property, we may be unable to successfully develop and commercialize our business.
If we are not able to develop out business as anticipated, we may not be able to generate meaningful revenues or achieve meaningful profitability and you may lose your investment.
Our wholly-owned subsidiary, Gagfare Limited, was incorporated on July 31, 2015, and our comprehensive income for the year ended December 31, 2019 and December 31, 2018, was $183 and $11,636 respectively. We have few customers, and we have earned limited revenues to date. Our business prospects are difficult to predict because of our limited operating history, and unproven -marketing strategy. Our primary business activities will be focused on the operation of our online platform, gagfare.com, which is a global flight booking platform for individuals and agencies to search, book and issue of their most favorable flight tickets. Although we believe that our business plan has significant profit potential, we may not attain profitable operations and our management may not succeed in realizing our business objectives. If we are not able to develop our business as anticipated, we may not be able to generate revenues or achieve profitability and you may lose your entire investment.
Potential disputes related to the existing agreement pursuant to which we purchased the intellectual property rights underlying our business could result in the loss of rights that are material to our business.
The acquisition of the intellectual property of Nemo Holding, by way of the Share Exchange Agreement, by and among the Company, Nemo Holding, and the holders of ordinary shares of Nemo Holding, is of critical importance to our business and involves complex legal, business, and scientific issues. Although we have clear title to and no restrictions to use our intellectual property, disputes may arise regarding the Share Exchange Agreement, including but not limited to, the breaches of representations or other interpretation-related issues. If disputes over intellectual property that we have acquired under the Share Exchange Agreement prevent or impair our ability to maintain our current intellectual property, we may be unable to successfully develop and commercialize our business.
We expect to suffer losses in the immediate future that may cause us to curtail or discontinue our operations.
We expect to incur operating losses in future periods. These losses will occur because have limited revenues to offset the expenses associated with the development of brand and our business operations, generally. We cannot guarantee that we will ever be successful in generating revenues in the future. We recognize that if we are unable to generate meaningful revenues, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will almost certainly fail.
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We may not be able to execute our business plan or stay in business without additional funding.
Our ability to generate future operating revenues depends in part on whether we can obtain the financing necessary to implement our business plan. We will likely require additional financing through the issuance of debt and/or equity in order to establish profitable operations, and such financing may not be forthcoming. As widely reported, the global and domestic financial markets have been extremely volatile in recent months. If such conditions and constraints continue or if there is no investor appetite to finance our specific business, we may not be able to acquire additional financing through credit markets or equity markets. Even if additional financing is available, it may not be available on terms favorable to us. At this time, we have not identified or secured sources of additional financing. Our failure to secure additional financing when it becomes required will have an adverse effect on our ability to remain in business.
We process, store and use personal information and other data, which subjects us to governmental regulations and other legal obligations related to privacy. Our actual or perceived failure to comply with such obligations could harm our business.
We receive, store and process personal information and other user data, including credit card information for certain users. There are numerous federal, state and local laws around the world regarding privacy and the storing, sharing, use, processing, disclosure and protection of personal information and other user data, the scope of which are changing, subject to differing interpretations, and may be inconsistent between countries or conflict with other rules. We generally comply with industry standards and are subject to the terms of our privacy policies and privacy-related obligations to third parties (including, in certain instances, voluntary third-party certification bodies such as TRUSTe). It is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to users or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other user data, may result in governmental enforcement actions, litigation or negative publicity and could cause our users and advertisers to lose trust in us, which could have an adverse effect on our business. Additionally, if third parties with whom we work, such as advertisers, vendors or developers, violate applicable laws or our policies, such violations may also put our users’ information at risk and could have an adverse effect on our business.
We operate in a highly competitive industry and may face increased competition.
We operate in the travel industry and face strong competition in terms of distribution, brand recognition, taste, quality, price, availability, and product positioning. The market is highly fragmented, and the resources of our competitors may increase due to mergers, consolidations or alliances, and we may face new competitors in the future. Our main competitors include a plethora of internet-based travel websites. Furthermore, we face competition from producers of other beverages. In addition, as we seek to expand our market share and to penetrate into new markets, we may have difficulty competing. From time to time in response to competitive and customer pressures or to maintain market share, we may be forced to reduce our selling prices or increase or reallocate spending on marketing, advertising, or promotions in order to compete. These types of actions could decrease our profit margins. Such pressures may also restrict our ability to increase our selling prices in response to raw material and other cost increases. In light of the strong competition that we currently face, and which may intensify in the future, there can be no assurance that we will be able to increase the sales of our products or even maintain our past levels of sales, or that our profit margins will not be reduced. If we are unable to increase our product sales or to maintain our past levels of sales and profit margins, our business, financial condition, results of operations and prospects may be materially and adversely affected.
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Our business is subject to a variety of U.S. and foreign laws, many of which are unsettled and still developing and which could subject us to claims or otherwise harm our business.
We are subject to a variety of laws in the United States and abroad, including laws regarding data retention, privacy, distribution of user-generated content and consumer protection, that are frequently evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly outside the United States. For example, laws relating to the liability of providers of online services for activities of their users and other third parties are currently being tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement, and other theories based on the nature and content of the materials searched, the ads posted, or the content provided by users. In addition, regulatory authorities around the world are considering a number of legislative and regulatory proposals concerning data protection and other matters that may be applicable to our business. It is also likely that if our business grows and evolves and our solutions are used in a greater number of countries, we will become subject to laws and regulations in additional jurisdictions. It is difficult to predict how existing laws will be applied to our business and the new laws to which we may become subject.
If we are not able to comply with these laws or regulations or if we become liable under these laws or regulations, we could be directly harmed, and we may be forced to implement new measures to reduce our exposure to this liability. This may require us to expend substantial resources or to discontinue certain products or features, which would negatively affect our business. In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could harm our reputation or otherwise impact the growth of our business. Any costs incurred to prevent or mitigate this potential liability could also harm our business and operating results.
Any significant disruption in our website and mobile application presence or services could result in a loss of customers.
Our plans call for our customers to access our service through our website, www.gagfare.com and our mobile applications. Our reputation and ability to attract, retain and serve our customers will be dependent upon the reliable performance of our website, network infrastructure and fulfillment processes (how we deliver services purchased by our customers). Prolonged or frequent interruptions in any of these systems could make our website unavailable or unusable, which could diminish the overall attractiveness of our subscription service to existing and potential customers.
Our servers will likely be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions and delays in our service and operations and loss, misuse or theft of data. It is likely that our website will periodically experience directed attacks intended to cause a disruption in service, which is not uncommon for web-based businesses. Any attempts by hackers to disrupt our website service or our internal systems, if successful, could harm our business, be expensive to remedy and damage our reputation. Efforts to prevent hackers from entering our computer systems are expensive to implement and may limit the functionality of our services. Any significant disruption to our website or internal computer systems could result in a loss of subscribers and adversely affect our business and results of operations.
Our connections to the airline booking systems may be interrupted and causing delays or unavailability to search and book the flight tickets, which may affect the user experiences and trust significantly.
Technology changes rapidly in our business and if we fail to anticipate or successfully implement new technologies or the manner in which use our products and services, the quality, timeliness and competitiveness of our products and services will suffer.
Rapid technology changes in our industry require us to anticipate, sometimes years in advance, which technologies we must implement and take advantage of in order to make our products and services competitive in the market. Therefore, we must start our product development with a range of technical development goals that we hope to be able to achieve. We may not be able to achieve these goals, or our competition may be able to achieve them more quickly and effectively than we can. In either case, our products and services may be technologically inferior to our competitors’, less appealing to consumers, or both. If we cannot achieve our technology goals within the original development schedule of our products and services, then we may delay their release until these technology goals can be achieved, which may delay or reduce revenue and increase our development expenses. Alternatively, we may increase the resources employed in research and development in an attempt to accelerate our development of new technologies, either to preserve our product or service launch schedule or to keep up with our competition, which would increase our development expenses. Any such failure to adapt to, and appropriately allocate resources among, emerging technologies would harm our competitive position, reduce our market share and significantly increase the time we take to bring our product to market.
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Our potential customers will require a high degree of reliability in the delivery of our services, and if we cannot meet their expectations for any reason, demand for our products and services will suffer.
Our success depends in large part on our ability to assure generally error-free services, uninterrupted operation of our network and software infrastructure, and a satisfactory experience for our customers’ end users when they use Internet-based communications services. To achieve these objectives, we depend on the quality, performance and scalability of our products and services, the responsiveness of our technical support and the capacity, reliability and security of our network operations. We also depend on third parties over which we have no control. For example, our ability to serve our customers is based solely on our network access agreement with one service provider and on that service provider’s ability to provide reliable Internet access. Due to the high level of performance required for critical communications traffic, any failure to deliver a satisfactory experience to end users, whether or not caused by our own failures could reduce demand for our products and services.
Technology changes rapidly in our business and if we fail to anticipate or successfully implement new technologies or the manner in which people use our products and services, the quality, timeliness and competitiveness of our products and services will suffer.
Rapid technology changes in our industry require us to anticipate, sometimes years in advance, which technologies we must implement and take advantage of in order to make our products and services competitive in the market. Therefore, we must start our product development with a range of technical development goals that we hope to be able to achieve. We may not be able to achieve these goals, or our competition may be able to achieve them more quickly and effectively than we can. In either case, our products and services may be technologically inferior to our competitors’, less appealing to consumers, or both. If we cannot achieve our technology goals within the original development schedule of our products and services, then we may delay their release until these technology goals can be achieved, which may delay or reduce revenue and increase our development expenses. Alternatively, we may increase the resources employed in research and development in an attempt to accelerate our development of new technologies, either to preserve our product or service launch schedule or to keep up with our competition, which would increase our development expenses. Any such failure to adapt to, and appropriately allocate resources among, emerging technologies would harm our competitive position, reduce our market share and significantly increase the time we take to bring our product to market.
If we fail to promote and maintain our brand in an effective and cost-efficient way, our business and results of operations may be harmed.
We believe that developing and maintaining awareness of our brand effectively is critical to attracting new and retaining existing customers. Successful promotion of our brand and our ability to attract customers depends largely on the effectiveness of our marketing efforts and the success of the channels we use to promote our services. It is likely that our future marketing efforts will require us to incur significant additional expenses. These efforts may not result in increased revenues in the immediate future or at all and, even if they do, any increases in revenues may not offset the expenses incurred. If we fail to successfully promote and maintain our brand while incurring substantial expenses, our results of operations and financial condition would be adversely affected, which may impair our ability to grow our business.
Declines or disruptions in the travel industry could adversely affect our business and financial performance.
Our financial results and prospects are almost entirely dependent upon the sale of travel services. Travel, including accommodation (including hotels, motels, resorts, homes, apartments and other unique places to stay), rental car and airline ticket reservations, is significantly dependent on discretionary spending levels. As a result, sales of travel services tend to decline during general economic downturns and recessions and times of political or economic uncertainty as consumers engage in less discretionary spending, are concerned about unemployment or inflation, have reduced access to credit or experience other concerns or effects that reduce their ability or willingness to travel.
Perceived or actual adverse economic conditions, including slow, slowing or negative economic growth, high or rising unemployment rates, inflation and weakening currencies, and concerns over government responses such as higher taxes or tariffs, increased interest rates and reduced government spending, could impair consumer spending and adversely affect travel demand.
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These and other macro-economic uncertainties, such as oil prices, geopolitical tensions and differing central bank monetary policies, have led to significant volatility in the exchange rates between the U.S. Dollar and the Euro, the British Pound Sterling and other currencies. Significant fluctuations in foreign currency exchange rates, stock markets and oil prices can also impact consumer travel behavior. For example, although lower oil prices may lead to increased travel activity as consumers have more discretionary funds and airline fares decrease, declines in oil prices may be indicative of broader macro-economic weakness, which in turn could negatively affect the travel industry, our business and results of operations. Conversely, higher oil prices may result in higher airfares and decreased travel activity, which can negatively affect our business and results of operations.
The uncertainty of macro-economic factors and their impact on consumer behavior, which may differ across regions, makes it more difficult to forecast industry and consumer trends and the timing and degree of their impact on our markets and business, which in turn could adversely affect our ability to effectively manage our business and adversely affect our results of operations.
In addition, events beyond our control, such as oil prices, stock market volatility, terrorist attacks, unusual or extreme weather or natural disasters such as earthquakes, hurricanes, tsunamis, floods, fires, droughts and volcanic eruptions, travel-related health concerns including pandemics and epidemics such as coronaviruses, Ebola and Zika, political instability, changes in economic conditions, wars and regional hostilities, imposition of taxes, tariffs or surcharges by regulatory authorities, changes in trade policies or trade disputes, changes in immigration policies, travel-related accidents or increased focus on the environmental impact of travel, have previously and may in the future disrupt travel, limit the ability or willingness of travelers to visit certain locations or otherwise result in declines in travel demand and adversely affect our business and results of operations. Because these events or concerns, and the full impact of their effects, are largely unpredictable, they can dramatically and suddenly affect travel behavior by consumers, and therefore demand for our services and our relationships with travel service providers and other partners, any of which can adversely affect our business and results of operations. Certain jurisdictions, particularly in Europe, are considering regulations intended to address the issue of “overtourism,” including by restricting access to city centers or popular tourist destinations or limiting accommodation offerings in surrounding areas, such as by restricting construction of new hotels or the renting of homes or apartments. Such regulations could adversely affect travel to, or our ability to offer accommodations in, such markets, which could negatively impact our business, growth and results of operations. The United States has implemented or proposed, or is considering, various travel restrictions and actions that could affect U.S. trade policy or practices, which could also adversely affect travel to or from the United States.
As a result of the recent coronavirus outbreak, the travel industry to experience, and continue to experience, a significant decline in travel demand and increase in customer cancellations predominantly related to travel to, from or in China and certain other Asian markets, though concerns about the coronavirus are also negatively impacting travel demand (and therefore our business) generally. Some countries have implemented travel bans or restrictions and some airlines have suspended or limited flights to or from China. In addition, like many other companies, we have instructed or allowed employees in high-risk areas to work from home or not report to work, which, especially if this persists for a prolonged period of time, may have an adverse impact on our employees, ability to service travelers, operations and systems. The ultimate extent of the coronavirus outbreak and its impact on travel in currently affected countries or more broadly is unknown and impossible to predict with certainty. As a result, the full extent to which the coronavirus will impact our business and results of operations is unknown. However, decreased travel demand resulting from the outbreak has had a negative impact, and is likely to have a negative and material impact, on our business, growth and results of operations. In addition, we may incur additional customer service costs in connection with servicing travelers affected by the outbreak, which would also have a negative impact on our results of operations.
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Our failure to protect our intellectual property and proprietary technology may significantly impair our competitive advantage.
Our success and ability to compete depends in large part upon protecting our proprietary technology. We rely on a combination of patent, trademark and trade secret protection, nondisclosure and nonuse agreements to protect our proprietary rights. The steps we have taken may not be sufficient to prevent the misappropriation of our intellectual property, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. The patent and trademark law and trade secret protection may not be adequate to deter third party infringement or misappropriation of our patents, trademarks and similar proprietary rights.
We may in the future initiate claims or litigation against third parties for infringement of our proprietary rights in order to determine the scope and validity of our proprietary rights or the proprietary rights of our competitors. These claims could result in costly litigation and the diversion of our technical and management personnel.
We may face costly intellectual property infringement claims, the result of which would decrease the amount of cash we would anticipate to operate and complete our business plan.
We anticipate that from time to time we will receive communications from third parties asserting that we are infringing certain copyright, trademark and other intellectual property rights of others or seeking indemnification against alleged infringement. If anticipated claims arise, we will evaluate their merits. Any claims of infringement brought of third parties could result in protracted and costly litigation, damages for infringement, and the necessity of obtaining a license relating to one or more of our products or current or future technologies, which may not be available on commercially reasonable terms or at all. Litigation, which could result in substantial cost to us and diversion of our resources, may be necessary to enforce our patents or other intellectual property rights or to defend us against claimed infringement of the rights of others. Any intellectual property litigation and the failure to obtain necessary licenses or other rights could have a material adverse effect on our business, financial condition and results of operations.
The loss of the services of Leung Tin Lung David, our sole director and officer, and majority shareholder, or our failure to timely identify and retain competent personnel could negatively impact our ability to develop our website and sell our services.
We are highly dependent on Leung Tin Lung David, who is our sole director and officer, and beneficially owns approximately 75.2% of our issued and outstanding shares of common stock. The development of our business will continue to place a significant strain on our limited personnel, management, and other resources. Our future success depends upon the continued services of our executive officers who are developing our business, and on our ability to identify and retain competent consultants and employees with the skills required to execute our business objectives. The loss of the services of Jing Li or our failure to timely identify and retain competent personnel would negatively impact our ability to develop our business and license our brand, which could adversely affect our financial results and impair our growth.
We incur costs associated with SEC reporting compliance, which may significantly affect our financial condition.
The Company made the decision to become an SEC “reporting company” in order to comply with applicable laws and regulations. We incur certain costs of compliance with applicable SEC reporting rules and regulations including, but not limited to attorneys’ fees, accounting and auditing fees, other professional fees, financial printing costs and Sarbanes-Oxley compliance costs in an amount estimated at approximately $500,000 per year. On balance, the Company determined that the incurrence of such costs and expenses was preferable to the Company being in a position where it had very limited access to additional capital funding.
We may be required to incur significant costs and require significant management resources to evaluate our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act, and any failure to comply or any adverse result from such evaluation may have an adverse effect on our stock price.
As a smaller reporting company as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, we are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Section 404 requires us to include an internal control report with our Annual Report on Form 10-K. This report must include management’s assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year. This report must also include disclosure of any material weaknesses in internal control over financial reporting that we have identified. Failure to comply, or any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on the trading price of our equity securities. Achieving continued compliance with Section 404 may require us to incur significant costs and expend significant time and management resources. No assurance can be given that we will be able to fully comply with Section 404 or that we and our independent registered public accounting firm would be able to conclude that our internal control over financial reporting is effective at fiscal year-end. As a result, investors could lose confidence in our reported financial information, which could have an adverse effect on the trading price of our securities, as well as subject us to civil or criminal investigations and penalties. In addition, our independent registered public accounting firm may not agree with our management’s assessment or conclude that our internal control over financial reporting is operating effectively.
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We may not be able to meet the internal control reporting requirements imposed by the SEC resulting in a possible decline in the price of our common stock and our inability to obtain future financing.
As directed by Section 404 of the Sarbanes-Oxley Act, the SEC adopted rules requiring each public company to include a report of management on the company’s internal controls over financial reporting in its annual reports. Although the Dodd-Frank Wall Street Reform and Consumer Protection Act exempts companies with a public float of less than $75 million from the requirement that our independent registered public accounting firm attest to our financial controls, this exemption does not affect the requirement that we include a report of management on our internal control over financial reporting and does not affect the requirement to include the independent registered public accounting firm’s attestation if our public float exceeds $75 million.
While we expect to expend significant resources in developing the necessary documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act, there is a risk that we may not be able to comply timely with all of the requirements imposed by this rule. Regardless of whether we are required to receive a positive attestation from our independent registered public accounting firm with respect to our internal controls, if we are unable to do so, investors and others may lose confidence in the reliability of our financial statements and our stock price and ability to obtain equity or debt financing as needed could suffer.
In addition, in the event that our independent registered public accounting firm is unable to rely on our internal controls in connection with its audit of our financial statements, and in the further event that it is unable to devise alternative procedures in order to satisfy itself as to the material accuracy of our financial statements and related disclosures, it is possible that we would be unable to file our Annual Report on Form 10-K with the SEC, which could also adversely affect the market for and the market price of our common stock and our ability to secure additional financing as needed.
We face risks related to Novel Coronavirus (COVID-19) which could significantly disrupt our research and development, operations, sales, and financial results.
Our business will be adversely impacted by the effects of the Novel Coronavirus (COVID-19). In addition to global macroeconomic effects, the Novel Coronavirus (COVID-19) outbreak and any other related adverse public health developments will cause disruption to our operations and sales activities. Our third-party vendors, third-party distributors, and our customers have been and will be disrupted by worker absenteeism, quarantines and restrictions on employees’ ability to work, office and factory closures, disruptions to ports and other shipping infrastructure, border closures, or other travel or health-related restrictions. Depending on the magnitude of such effects on our activities or the operations of our third-party vendors and third-party distributors, the supply of our products will be delayed, which could adversely affect our business, operations and customer relationships. In addition, the Novel Coronavirus (COVID-19) or other disease outbreak will in the short-run and may over the longer term adversely affect the economies and financial markets of many countries, resulting in an economic downturn that will affect demand for our products and services and impact our operating results. There can be no assurance that any decrease in sales resulting from the Novel Coronavirus (COVID-19) will be offset by increased sales in subsequent periods. Although the magnitude of the impact of the Novel Coronavirus (COVID-19) outbreak on our business and operations remains uncertain, the continued spread of the Novel Coronavirus (COVID-19) or the occurrence of other epidemics and the imposition of related public health measures and travel and business restrictions will adversely impact our business, financial condition, operating results and cash flows. In addition, we have experienced and will experience disruptions to our business operations resulting from quarantines, self-isolations, or other movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to develop and design our products and services in a timely manner or meet required milestones or customer commitments.
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It will be extremely difficult to acquire jurisdiction and enforce liabilities against our officers, directors and assets outside the United States.
Substantially all of our assets are currently located outside of the United States. Additionally, our sole director and officer resides outside of the United States, in Hong Kong. As a result, it may not be possible for United States investors to enforce their legal rights, to effect service of process upon our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors and officers under Federal securities laws. Moreover, we have been advised Hong Kong and the PRC do not have a treaty providing for the reciprocal recognition and enforcement of judgments of courts with the United States. Further, there are no extradition treaties now in effect between the United States and, on the other hand, Hong Kong and China, which would permit effective enforcement of criminal penalties of the Federal securities laws.
RISKS ASSOCIATED WITH OUR SECURITIES
Our shares of common stock presently has a limited trading market, with no substantive daily trading volume, and the price may not reflect our value and there can be no assurance that there will be an active market for our shares of common stock either now or in the future.
Although our common stock is quoted on the OTC Markets, our shares of common stock trade only nominally and the price of our common stock, if traded, may not reflect our value. There can be no assurance that there will be an active market for our shares of common stock either now or in the future. Market liquidity will depend on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. As a result holders of our securities may not find purchasers our securities should they to sell securities held by them. Consequently, our securities should be purchased only by investors having no need for liquidity in their investment and who can hold our securities for an indefinite period of time.
If a more active market should develop, the price of our shares of common stock may be highly volatile. Because there may be a low price for our shares of common stock, many brokerage firms may not be willing to effect transactions in our securities. Even if an investor finds a broker willing to effect a transaction in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of such shares of common stock as collateral for any loans.
Our common stock is subject to the “penny stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
Under U.S. federal securities legislation, our common stock will constitute “penny stock”. Penny stock is any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a potential investor’s account for transactions in penny stocks, and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve an investor’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person, and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination. Brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
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We may, in the future, issue additional common shares, which would reduce investors’ percent of ownership and may dilute our share value.
Our Articles of Incorporation authorize the issuance of 500,000,000 shares of common stock and 175,000,000 shares of preferred stock, all of which have been designated as Class A Preferred Stock. As of July 6, 2020, the Company had 320,868,500 shares of common stock issued and outstanding, assuming consummation of the Share Exchange Agreement, and no shares of Class A Preferred Stock issued or outstanding. The future issuance of common stock and/or preferred stock will result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.
Our sole director and officer beneficially owns a majority of our stock, and accordingly, collectively has control over stockholder matters, our business and management.
Leung Tin Lung David, our sole officer and director, beneficially owns 233,813,213 shares of common stock, or 75.2% of our issued and outstanding shares of common stock. As a result, Mr. Leung has a substantial voting power in all matters submitted to our stockholders for approval including:
| • | Election of our board of directors; | |
| • | Removal of any of our directors; | |
| • | Amendment of our Articles of Incorporation or bylaws; | |
| • | Adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us. |
As a result of his ownership and position, Mr. Leung is able to substantially influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, the future prospect of sales of significant amounts of shares held by him could affect the market price of our common stock if the marketplace does not orderly adjust to the increase in shares in the market and the value of your investment in our company may decrease. Mr. Leung’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
In addition, sales of significant amounts of shares held by our officers and directors, or the prospect of these sales, could adversely affect the market price of our common stock. Mr. Leung’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
State securities laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell the shares offered by this prospectus.
Secondary trading in common stock sold in this offering will not be possible in any state until the common stock is qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, the common stock in any particular state, the common stock could not be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity for the common stock could be significantly impacted thus causing you to realize a loss on your investment.
The Company does not intend to seek registration or qualification of its shares of common stock the subject of this offering in any State or territory of the United States. Aside from a “secondary trading” exemption, other exemptions under state law and the laws of US territories may be available to purchasers of the shares of common stock sold in this offering,
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Anti-takeover effects of certain provisions of Nevada state law hinder a potential takeover of us.
Though not now, we may be or in the future we may become subject to Nevada’s control share law. A corporation is subject to Nevada’s control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and it does business in Nevada or through an affiliated corporation. The law focuses on the acquisition of a “controlling interest” which means the ownership of outstanding voting shares sufficient, but for the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the election of directors:
(i) one-fifth or more but less than one-third, (ii) one-third or more but less than a majority, or (iii) a majority or more. The ability to exercise such voting power may be direct or indirect, as well as individual or in association with others.
The effect of the control share law is that the acquiring person, and those acting in association with it, obtains only such voting rights in the control shares as are conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to strip voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is free to sell its shares to others. If the buyers of those shares themselves do not acquire a controlling interest, their shares do not become governed by the control share laws.
If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, any stockholder of record, other than an acquiring person, who has not voted in favor of approval of voting rights is entitled to demand fair value for such stockholder’s shares.
Nevada’s control share law may have the effect of discouraging takeovers of the corporation.
In addition to the control share law, Nevada has a business combination law which prohibits certain business combinations between Nevada corporations and “interested stockholders” for three years after the “interested stockholder” first becomes an “interested stockholder,” unless the corporation’s board of directors approves the combination in advance. For purposes of Nevada law, an “interested stockholder” is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (ii) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term “business combination” is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquiror to use the corporation’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.
The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of us from doing so if it cannot obtain the approval of our board of directors.
Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.
We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. Stockholders may never be able to sell shares when desired. Before you invest in our securities, you should be aware that there are various risks. You should consider carefully these risk factors, together with all of the other information included in this annual report before you decide to purchase our securities. If any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the results of operations and financial condition for the period from March 15, 2016 (inception) through June 30, 2016 and for the three months ended June 30, 2016 should be read in conjunction with our financial statements, and the notes to those financial statements that are included elsewhere in this Form 8-K. References in this section to “we,” “us,” “our” or “Nemo Holding” are to the consolidated business of Nemo Holding.
Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in this Form 8-K. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Recent Developments
Reverse Acquisition of Nemo Holding
On July 6, 2020, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”), by and among the Company, Nemo Holding Company Limited, a British Virgin Islands corporation (“Nemo Holding”), and the holders of common shares of Nemo Holding. The holders of the common stock of Nemo Holding consisted of 29 stockholders.
Under the terms and conditions of the Share Exchange Agreement, the Company offered, sold and issued 10,000,000 shares of common stock in consideration for all the issued and outstanding shares in Nemo Holding. Leung Tin Lung David, the Company’s sole officer and director, is the beneficial holder of 6,000,000 common shares, or 60%, of the issued and outstanding shares of Nemo Holding. The effect of the issuance of the 10,000,000 shares issued under the Share Exchange Agreement represents 10.8% of the issued and outstanding shares of common stock of the Company.
Immediately prior to the closing of the transactions under the Share Exchange Agreement, Mr. Leung was the holder of 233,813,213 shares of common stock, or 75.2%, of the issued and outstanding shares of common stock of the Company. Giving effect to the closing of the transactions under the Share Exchange Agreement, Mr. Leung acquired 6,000,000 shares of common stock of the Company, by virtue of his 60% beneficial ownership of Nemo Holding. The remaining 28 common shareholders of Nemo Holding acquired 4,000,000 shares of common stock under the Share Exchange Agreement, by virtue of their aggregate of 40% beneficial ownership of Nemo Holding.
Giving effect to the transactions under the Share Exchange Agreement, Mr. Leung is now the beneficial holder of 239,813, 213 shares of common stock, or 74.7%, of the issued and outstanding shares of common stock of Nemo Holding.
As a result of the share exchange, Nemo Holding is now a wholly-owned subsidiary of the Company.
As a result of the controlling financial interest of the former stockholders of Nemo Holding for financial statement reporting purposes, the merger between the Company and Nemo Holding was treated as a reverse acquisition, with Nemo Holding deemed the accounting acquirer and the Company deemed the accounting acquiree under the acquisition method of accounting in accordance with the Section 805-10-55 of the FASB Accounting Standards Codification. The reverse acquisition is deemed a capital transaction in substance whereas the assets and liabilities of Nemo Holding (the accounting acquirer) are carried forward to the Company (the legal acquirer and the reporting entity) at their carrying value before the combination and the equity structure (the number and type of equity interests issued) of Nemo Holding is being retroactively restated using the exchange ratio established in the Share Exchange Agreement and Stock Redemption Agreements to reflect the number of shares of First American Group issued to effect the acquisition. The number of common shares issued and outstanding and the amount recognized as issued equity interests in the consolidated financial statements is determined by adding the number of common shares deemed issued and the issued equity interests of Nemo Holding Corp. immediately prior to the business combination to the unredeemed shares and the fair value of First American Group determined in accordance with the guidance in ASC Section 805-40-55 applicable to business combinations, i.e. the equity structure (the number and type of equity interests issued) in the consolidated financial statements immediately post combination reflects the equity structure of Nemo Holding, including the equity interests the legal acquirer issued to effect the combination.
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Nemo Holding was incorporated on April 16, 2020, in the British Virgin Islands. We have generated only nominal revenues. The commercialization of our travel services business is in its incipient stages and must be developed before we can commercialize the our brand and generate any revenues.
12-MONTH PLAN OF OPERATION
We have not yet generated or realized any revenues from our business. In the next 12 months, we plan to increase our revenues by garnering more customers.
Results of Operations
The Three-Month Period Ended March 31, 2020 and 2019
We earn revenues of $20 for the three months ended March 31, 2020, and $37 for the three months ended March 31, 2019.
For the three months ended March 31, 2020, we incurred total operating expenses of $3,538, consisting solely of general and administrative expenses. For the three months ended March 31, 2019, we incurred total operating expenses of $7,339, consisting solely of general and administrative expenses.
For the three-month period ended March 31, 2020, we had net income of $6,777. For the three-month period ended March 31, 2019, we had a net loss of $7,301.
Limited Business History; Need for Additional Capital
There is no historical financial information about the Company upon which to base an evaluation of our performance. We have not generated any revenues from our business. We cannot guarantee we will be successful in our business plans. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the exploration and/or development, and possible cost overruns due to price and cost increases in services. We have no intention of entering into a merger or acquisition within the next twelve months and we have a specific business plan and timetable to complete our 12-month plan of operation based on the success of the primary offering.
We anticipate that additional funding, if required, will be in the form of equity financing from the sale of our common stock. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of shares to fund additional expenditures. We do not currently have any arrangements in place for any future equity financing. Our limited operating history and our lack of significant tangible capital assets makes it unlikely that we will be able to obtain significant debt financing in the near future. If such financing is not available on satisfactory terms, we may be unable to continue or expand our business. Equity financing could result in additional dilution to existing shareholders.
Liquidity and Capital Resources
At March 31, 2020, we had a cash balance of approximately $16,429. Such cash amount was not sufficient to commence our 12-month plan of operation. We will need to raise funds to commence our 12-month plan of operation and fund our ongoing operational expenses. Additional funding will likely come from equity financing from the sale of our common stock. If we are successful in completing equity financing, existing shareholders will experience dilution of their interest in our Company. We do not have any financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our 12-month plan of operation and ongoing operational expenses. In the absence of such financing, our business will likely fail. There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our 12-month plan of operation and our business will fail.
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Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Principles of Consolidation
The condensed consolidated financial statements include the financial statements of the Company, its subsidiaries and the VIE for which the Company is primary beneficiary. All significant inter-company transactions and balances between the Company, its subsidiaries and the VIE have been eliminated upon consolidation.
Estimates and Assumptions
The financial statements are prepared in conformity with US GAAP, which require the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the periods presented. Management has made significant estimates in a variety of areas, including but not limited to allowance for doubtful accounts, inventories valuation, useful lives and residual values of long-lived assets and impairment for long-lived assets. Management believes that the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates, actual results could differ from the original estimates, requiring adjustments to these balances in future periods.
Foreign currency translation
The reporting currency is the United States Dollars (“USD”) and the functional currency is the Renminbi (“RMB”). An entity’s functional currency is the currency of the primary economic environment in which it operates, normally that is the currency of the environment in which it primarily generates and expends cash. Management’s judgment is essential to determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and intercompany transactions and arrangements.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and in banks.
Fair Value
Fair value is the price we would receive to sell an asset or pay to transfer a liability (exit price) in an orderly transaction between market participants. For assets and liabilities recorded or disclosed at fair value on a recurring basis, we determine fair value based on the following:
Level 1: The carrying value of cash and cash equivalents approximates fair value because of the short-term nature of these instruments. For equity and U.S. government treasury securities and commodity futures contracts, we use quoted prices in active markets for identical assets to determine fair value.
Level 2: When quoted prices in active markets for identical assets are not available, we determine the fair value of our available-for-sale securities and our over-the-counter forward contracts, collars and swaps based upon factors such as the quoted market price of similar assets or a discounted cash flow model using readily observable market data, which may include interest rate curves and forward and spot prices for currencies and commodities, depending on the nature of the investment. The fair value of our long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt of the same remaining maturities.
Level 3: We determine the fair value of our auction rate securities using an internally-developed valuation model, using inputs that include interest rate curves, credit and liquidity spreads and effective maturity. Assets and liabilities recognized or disclosed at fair value on a nonrecurring basis may include items such as property, plant and equipment, goodwill and other intangible assets, equity and other investments and other assets. We determine the fair value of these items using Level 3 inputs, as described in the related sections below.
| 19 |
Allowance of Accounts Receivable
The management regularly review the creditworthiness of our customers, and generally does not require collateral or other security from the customers.
The carrying value of accounts receivable is reduced by an allowance that reflects our best estimate of the amounts that will not be collected. We make estimations of the collectability of accounts receivable. Many factors are considered in estimating the allowance, including but not limited to reviewing delinquent accounts receivable, performing aging analyses and customer credit analyses, and analyzing historical bad debt records and current economic trends. Additional allowance for specific doubtful accounts might be made if our customers are unable to make payments due to their deteriorating financial conditions. The management has no significant credit risk associated with accounts receivable.
Inventories
Inventories are stated at the lower of cost (primarily moving average cost) or net realizable value. We record inventory reserves for obsolete and slow-moving inventory and for estimated shrinkage between physical inventory counts. Inventory reserves are based on inventory obsolescence trends, historical experience and application of the specific identification method. No inventory write-down was made in the years ended March 31, 2019 and 2018.
Property, plant and equipment, net
Property, plant and equipment are recorded at cost less accumulated depreciation. Major improvements that extend the useful life of property are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred.
The depreciation method is summarized in the following table:
| Category |
| Depreciation method |
| Salvage value rate |
|
| Estimated useful lives | ||
| Renovation cost |
| Straight-line |
|
| 10% |
| 10 years | ||
| Office equipment |
| Straight-line |
| 20%-33% |
|
| 3-5 years | ||
| Store equipment |
| Straight-line |
| 20%-33% |
|
| 3-5 years | ||
The management reassesses the reasonableness of the estimates of useful lives and residual values of long-lived assets when events or changes in circumstances indicate that the useful lives and residual values of a major asset or a major category of assets may not be reasonable. Factors that we considers in deciding when to perform an analysis of useful lives and residual values of long-lived assets include, but are not limited to, significant variance of a business or product line in relation to expectations, significant deviation from industry or economic trends, and significant changes or planned changes in the use of the assets. The analysis will be performed at the asset or asset category with the reference to the assets’ conditions, current technologies, market, and future plan of usage and the useful lives of major competitors.
Impairment of long-lived assets other than goodwill
We evaluates its long-lived assets, including property, plant and equipment with finite lives, for impairment whenever events or changes in circumstances, such as a significant adverse change to.
Revenue Recognition
Revenues from fresh brewed drink and other products are recognized when the payment is tendered at the point of sale as the performance obligation has been satisfied. The payment made with different option through third party payment services provider, and the transaction is made through a customized point-of-sale system installed in each of the store. Revenue are report net of value added tax and discounts.
| 20 |
Other revenues primarily include training services, sales of equipment, and other materials to the platform store. Sales of these products and providing services are generally recognized upon shipment to customers or services rendered, depending on contract terms.
Cost of revenues
Cost of products consists of the purchase price of raw materials, electricity and other utilities, consumables, direct labor, overhead costs, depreciation of property, plant and equipment.
Income taxes
We use the asset and liability method in accounting for income taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, using the statutory tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date under the law. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such asset will be realized.
We recognize a tax benefit associated with an uncertain tax position when, in management’s judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. The Company has elected to classify interest and penalties related to an uncertain tax position, if any and when required, as general and administrative expenses.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 6, 2020, certain information regarding the ownership of the Company’s capital stock by each director and executive officer of the Company, each person who is known to the Company to be a beneficial owner of more than 5% of any class of the Company’s voting stock, and by all officers and directors of the Company as a group. Unless otherwise indicated below, to the Company’s knowledge, all persons listed below have sole voting and investing power with respect to their shares of capital stock, except to the extent authority is shared by spouses under applicable community property laws.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (“SEC”) and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants or convertible securities exercisable or convertible within 60 days of July 6, 2020 are deemed outstanding for computing the percentage of the person or entity holding such options, warrants or convertible securities but are not deemed outstanding for computing the percentage of any other person, and is based on 320,868,500 shares of common stock issued and outstanding on a fully diluted basis, as of July 6, 2020.
| Title of Class |
| Name and Address of Beneficial Owner (3) |
| Amount and Nature of Beneficial Ownership |
|
| Percent of |
| ||
|
|
|
|
|
|
|
|
|
| ||
| Common Stock |
| Leung Tin Lung David (2) |
|
| 239,813,213 |
|
|
| 74.7 | % |
| Common Stock |
| Chak Wan Ling Margaret |
|
| 25,000,000 |
|
|
| 7.7 | % |
| Common Stock |
| Leung Chue |
|
| 25,000,000 |
|
|
| 7.7 | % |
| Common Stock |
| Leung Suk Mun |
|
| 25,000,000 |
|
|
| 7.7 | % |
| All directors and executive officers as a group (1 person) |
|
|
|
| 239,813,213 |
|
|
| 74.7 | % |
(1) As of July 6, 2020, we had 320,868,500 shares of common stock outstanding.
(2) Appointed President, Secretary, Treasurer and director on May 27, 2020.
(3) Unless otherwise noted, the address of each person listed is c/o New Momentum Corporation, 1303, 13F, Technology Plaza, 651 King’s Road, North Point, Hong Kong, and our telephone number is +852 2911-0119.
| 21 |
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages, and positions of our executive officers and directors as of the date of this Form 8-K.
| Name |
| Age |
| Positions |
|
|
|
|
|
|
| Leung Tin Lung David |
| 58 |
| President, Secretary, Treasurer and member of the Board of Directors |
Leung Tin Lung David
President, Secretary, Treasurer and Director
Mr. Leung, age 58, has served as our President, Secretary, Treasurer and sole Director since May 27, 2020. Mr. Leung is a long-term veteran in the travel industry, with many years of experience working with government and travel trade partners. He is the founder and has been the Managing Director of JJ Explorer Tour Limited, a position he has held since 2007. From 2011 until 2017, Mr. Leung was the Marketing Representative of Philippine Department of Tourism, Hong Kong and Macau. Mr. Leung graduated from the University of Minnesota in 1984. Mr. Leung’s background in the travel industry led to our conclusion that he should serve as a director in light of our business and structure.
Employment Agreements
We have no employment agreement with any person.
Indemnification Agreements
The Company has no indemnification agreements with any officer or director of the Company.
Family Relationships
No family relationships exist between Leung Tin Lung David and any person who is an affiliate of the Company.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers have been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement.
Code of Ethics
We have not adopted a Code of Ethics but expect to adopt a Code of Ethics.
EXECUTIVE COMPENSATION
The following table sets forth information regarding each element of compensation that we paid or awarded to our named executive officers for the fiscal years ended December 31, 2019 and 2018:
| 22 |
Summary Compensation Table
| Name and Principal Position |
| Year |
| Salary ($) |
|
| Bonus ($) |
|
| Stock Awards ($) |
|
| Option Awards ($) |
|
| Non-Equity Incentive Plan Compensation ($) |
|
| Nonqualified Deferred Compensation ($) |
|
| All Other Compensation ($) |
|
| Total ($) |
| ||||||||
| Law Wai |
| 2019 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| Fan (1) |
| 2018 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cheng Kin |
| 2019 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| Ning (2) |
| 2018 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Marie Huen |
| 2019 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| Lai Chun (3) |
| 2018 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
___________
| (1) | Appointed Chief Executive Officer and President on February 13, 2015; resigned from all such positions on May 27, 2020. |
| (2) | Appointed Chief Financial Officer, Secretary and Treasurer on February 13, 2015; resigned from all such positions on May 27, 2020. |
| (3) | Appointed Chief Operating Officer on February 13, 2015; resigned from such position on May 27, 2020. |
There has been no compensation awarded to, earned by, or paid to the executive officers by any person for services rendered in all capacities to us for the fiscal period ended December 31, 2019, and through the date of filing of this Form 8-K.
Option Grants
The following table sets forth stock option grants and compensation for the fiscal year ended December 31, 2019:
|
|
| Option Awards |
|
| Stock Awards |
| ||||||||||||||||||||||||||||
| Name |
| Number of Securities Underlying Unexercised Options (#) Exercisable |
| Number of Securities Underlying Unexercised Options (#) Unexercisable |
|
| Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
|
| Option Exercise Price ($) |
|
| Option Expiration Date |
|
| Number of Shares or Units of Stock That Have Not Vested (#) |
|
| Market Value of Shares or Units of Stock That Have Not Vested ($) |
|
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
|
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
| ||||||||
| Law Wai Fan (1) |
| -0- |
|
| -0- |
|
|
| -0- |
|
| $ | -0- |
|
|
| N/A |
|
|
| -0- |
|
|
| -0- |
|
|
| -0- |
|
|
| -0- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Cheng Kin Ning (2) |
| -0- |
|
| -0- |
|
|
| -0- |
|
| $ | -0- |
|
|
| N/A |
|
| -0- |
|
|
| -0- |
|
| -0- |
|
|
| -0- |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Marie Huen Lai Chun (3) |
| -0- |
|
| -0- |
|
|
| -0- |
|
| $ | -0- |
|
|
| N/A |
|
|
| -0- |
|
|
| -0- |
|
|
| -0- |
|
|
| -0- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Chu Kin Hon (4) |
| -0- |
|
| -0- |
|
|
| -0- |
|
| $ | -0- |
|
|
| N/A |
|
|
| -0- |
|
|
| -0- |
|
|
| -0- |
|
|
| -0- |
|
___________
| (1) | Appointed Chief Executive Officer and President on February 13, 2015; resigned from all such positions on May 27, 2020. |
| (2) | Appointed Chief Financial Officer, Secretary and Treasurer on February 13, 2015; resigned from all such positions on May 27, 2020. |
| (3) | Appointed Chief Operating Officer on February 13, 2015; resigned from such position on May 27, 2020. |
| (4) | Appointed a director on February 13, 2015; resigned from such position on May 27, 2020. |
| 23 |
Option Exercises and Fiscal Year-End Option Value Table.
There were no stock options exercised by the named executive officers as of the end of the fiscal period ended December 31, 2019, and through the date of filing of this Form 8-K.
Long-Term Incentive Plans and Awards
There were no awards made to a named executive officer, under any long-term incentive plan, as of the end of the fiscal period ended December 31, 2019, and through the date of filing of this Form 8-K.
Other Compensation
There are no annuity, pension or retirement benefits proposed to be paid to officers, directors, or employees of our company in the event of retirement at normal retirement date as there was no existing plan as of the end of the fiscal year ended December 31, 2019, and through the date of filing of this Form 8-K, provided for or contributed to by our company.
DIRECTOR COMPENSATION
The following table sets forth director compensation as of December 31, 2020, and as the date of filing of this Form 8-K:
| Name |
| Fees Earned or Paid in Cash |
|
| Stock Awards |
|
| Option Awards |
|
| Non-Equity Incentive Plan Compensation($) |
|
| Nonqualified Deferred Compensation Earnings |
|
| All Other Compensation($) |
|
| Total |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
| Chu Kin Hon (1) |
|
| -0- |
|
| -0- |
|
|
| -0- |
|
|
| -0- |
|
| -0- |
|
|
| -0- |
|
|
| -0- |
| ||
______________
(1) Appointed a director on February 13, 2015; resigned from such position on May 27, 2020.
Directors of our company who are also employees do not receive cash compensation for their services as directors or members of the committees of the Board of Directors. All directors may be reimbursed for their reasonable expenses incurred in connection with attending meetings of the Board of Directors or management committees.
Securities Authorized for Issuance under Equity Compensation Plans
The Company has no equity compensation plans.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
On July 6, 2020, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”), by and among the Company, Nemo Holding Corp., a British Virgin Islands corporation (“Nemo Holding”), and the holders of common shares of Nemo Holding. The holders of the common stock of Nemo Holding consisted of 29 stockholders.
Under the terms and conditions of the Share Exchange Agreement, the Company offered, sold and issued 10,000,000 shares of common stock in consideration for all the issued and outstanding shares in Nemo Holding. Leung Tin Lung David, the Company’s sole officer and director, is the beneficial holder of 6,000,000 common shares, or 60%, of the issued and outstanding shares of Nemo Holding. The effect of the issuance of the 10,000,000 shares issued under the Share Exchange Agreement represents 10.8% of the issued and outstanding shares of common stock of the Company.
| 24 |
Immediately prior to the closing of the transactions under the Share Exchange Agreement, Mr. Leung was the holder of 233,813,213 shares of common stock, or 75.2%, of the issued and outstanding shares of common stock of the Company. Giving effect to the closing of the transactions under the Share Exchange Agreement, Mr. Leung acquired 6,000,000 shares of common stock of the Company, by virtue of his 60% beneficial ownership of Nemo Holding. The remaining 28 common share holders of Nemo Holding acquired 4,000,000 shares of common stock under the Share Exchange Agreement, by virtue of their aggregate of 40% beneficial ownership of Nemo Holding.
Giving effect to the transactions under the Share Exchange Agreement, Mr. Leung is now the beneficial holder of 239,813, 213 shares of common stock, or 74.7%, of the issued and outstanding shares of common stock of Nemo Holding.
As a result of the share exchange, Nemo Holding is now a wholly-owned subsidiary of the Company.
Pursuant to a Cooperation Agreement, dated February 1, 2016, by and between Gagfare Limited, a Hong Kong corporation and wholly owned subsidiary of the Company, and JJ Explorer Tours Limited, a Hong Kong corporation (“JJ Explorer”), controlled by Leung Tin Lung David, JJ Explorer develops and maintains website and mobile application platforms the Company uses in the operation of its business in exchange for 50% of the net earnings the Company earns through its Gagfare website and mobile application platforms for a term of five years.
DIRECTOR INDEPENDENCE
Our board of directors is currently composed of one member, who does not qualify as an independent director in accordance with the published listing requirements of the NASDAQ Global Market. The NASDAQ independence definition includes a series of objective tests, such as that a director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of his family members has engaged in various types of business dealings with us. In addition, our board of directors has not made a subjective determination as to each director that no relationships exist which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. Had our board of directors made these determinations, our board of directors would have reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management.
LEGAL PROCEEDINGS
We are not currently involved in any legal proceedings. From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
MARKET PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Since August 27, 2015, the OTCQB and/or OTCPink tier of the OTC Markets Group Inc., under the stock symbol “EKKH.” Between February 1, 2011, and August 26, 2015, our shares of common stock were quoted on the OTC Bulletin Board and the OTCQB, under the stock symbol “HANO”. The following table shows the reported high and low closing bid prices per share for our common stock based on information provided by the OTCQB. The over-the-counter market quotations set forth for our common stock reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
|
|
| Common Stock Bid Price |
| |||||
| Financial Quarter Ended |
| High ($) |
|
| Low ($) |
| ||
| June 30, 2020 |
|
| 0.80 |
|
|
| 0.55 |
|
| March 31, 2020 |
|
| 0.70 |
|
|
| 0.32 |
|
| December 31, 2019 |
|
| 0.34 |
|
|
| 0.32 |
|
| September 30, 2019 |
|
| 0.34 |
|
|
| 0.34 |
|
| June 30, 2019 |
|
| 0.34 |
|
|
| 0.34 |
|
| March 31, 2019 |
|
| 0.34 |
|
|
| 0.34 |
|
| December 31, 2018 |
|
| 0.58 |
|
|
| 0.525 |
|
| September 30, 2018 |
|
| 0.65 |
|
|
| 0.65 |
|
As of July 7, 2020, approximately 320,868,213 shares of our common stock were issued and outstanding.
| 25 |
Holders
As of July 7, 2020, there were approximately 97 holders of record of our common stock. This number does not include shares held by brokerage clearing houses, depositories or others in unregistered form.
Dividends
We have never declared or paid a cash dividend. Any future decisions regarding dividends will be made by our Board of Directors. We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Our Board of Directors has complete discretion on whether to pay dividends. Even if our Board of Directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the Board of Directors may deem relevant.
Securities Authorized for Issuance under Equity Compensation Plans
We do not have in effect any compensation plans under which our equity securities are authorized for issuance.
Penny Stock Regulations
The Commission has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share. Our common stock, when and if a trading market develops, may fall within the definition of penny stock and be subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000, or annual incomes exceeding $200,000 individually, or $300,000, together with their spouse).
For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s prior written consent to the transaction. Additionally, for any transaction, other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our common stock and may affect the ability of investors to sell their common stock in the secondary market.
RECENT SALES OF UNREGISTERED SECURITIES
Reference is made to the disclosure set forth under Item 3.02 of this report, which disclosure is incorporated by reference into this section.
| 26 |
DESCRIPTION OF OUR SECURITIES
Introduction
In the discussion that follows, we have summarized selected provisions of our articles of incorporation relating to our capital stock. This summary is not complete. This discussion is subject to the relevant provisions of Nevada law and is qualified in its entirety by reference to our articles of incorporation and our bylaws. You should read our articles of incorporation and our bylaws as currently in effect for provisions that may be important to you.
Authorized Capital Stock
Our authorized share capital consists of 500,000,000 shares of common stock, par value $0.001 per share, and 75,000,000 Class A Preferred Stock, par value of $0.001 per share. As of July 7, 2020, there were 320,853,412 shares of our common stock issued and outstanding, there were no shares of Class A Preferred Stock outstanding.
Common Stock
Each share of our common stock entitles its holder to one vote in the election of each director and on all other matters voted on generally by our stockholders, other than any matter that (1) solely relates to the terms of any outstanding series of preferred stock or the number of shares of that series and (2) does not affect the number of authorized shares of preferred stock or the powers, privileges and rights pertaining to the common stock. No share of our common stock affords any cumulative voting rights. This means that the holders of a majority of the voting power of the shares voting for the election of directors can elect all directors to be elected if they choose to do so.
Holders of our common stock will be entitled to dividends in such amounts and at such times as our Board of Directors in its discretion may declare out of funds legally available for the payment of dividends. We currently intend to retain our entire available discretionary cash flow to finance the growth, development and expansion of our business and do not anticipate paying any cash dividends on the common stock in the foreseeable future. Any future dividends will be paid at the discretion of our Board of Directors after taking into account various factors, including:
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| • | general business conditions; |
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| • | industry practice; |
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| • | our financial condition and performance; |
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| • | our future prospects; |
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| • | our cash needs and capital investment plans; |
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| • | income tax consequences; and |
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| • | the restrictions Nevada and other applicable laws and our credit arrangements then impose. |
If we liquidate or dissolve our business, the holders of our common stock will share ratably in all our assets that are available for distribution to our stockholders after our creditors are paid in full.
Our common stock has no preemptive rights and is not convertible or redeemable or entitled to the benefits of any sinking or repurchase fund.
Transfer Agent and Registrar
The transfer agent for our common stock is Action Stock Transfer Corporation, whose address is 2469 E. Fort Union Blvd., Suite 214, Salt Lake City, Utah, and whose telephone number is (801) 274-1088.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Subsection 7 of Section 78.138 of the Nevada Revised Statutes (the “Nevada Law”) provides that, subject to certain very limited statutory exceptions, a director or officer is not individually liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer, unless it is proven that the act or failure to act constituted a breach of his or her fiduciary duties as a director or officer and such breach of those duties involved intentional misconduct, fraud or a knowing violation of law. The statutory standard of liability established by Section 78.138 controls even if there is a provision in the corporation’s articles of incorporation unless a provision in the Company’s Articles of Incorporation provides for greater individual liability.
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Subsection 1 of Section 78.7502 of the Nevada Law empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (any such person, a “Covered Person”), against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the Covered Person in connection with such action, suit or proceeding if the Covered Person is not liable pursuant to Section 78.138 of the Nevada Law or the Covered Person acted in good faith and in a manner the Covered Person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceedings, had no reasonable cause to believe the Covered Person’s conduct was unlawful.
Subsection 2 of Section 78.7502 of the Nevada Law empowers a corporation to indemnify any Covered Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in the capacity of a Covered Person against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by the Covered Person in connection with the defense or settlement of such action or suit, if the Covered Person is not liable pursuant to Section 78.138 of the Nevada Law or the Covered Person acted in good faith and in a manner the Covered Person reasonably believed to be in or not opposed to the best interests of the Corporation. However, no indemnification may be made in respect of any claim, issue or matter as to which the Covered Person shall have been adjudged by a court of competent jurisdiction (after exhaustion of all appeals) to be liable to the corporation or for amounts paid in settlement to the corporation unless and only to the extent that the court in which such action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances the Covered Person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
Section 78.7502 of the Nevada Law further provides that to the extent a Covered Person has been successful on the merits or otherwise in the defense of any action, suit or proceeding referred to in Subsection 1 or 2, as described above, or in the defense of any claim, issue or matter therein, the corporation shall indemnify the Covered Person against expenses (including attorneys’ fees) actually and reasonably incurred by the Covered Person in connection with the defense.
Subsection 1 of Section 78.751 of the Nevada Law provides that any discretionary indemnification pursuant to Section 78.7502 of the Nevada Law, unless ordered by a court or advanced pursuant to Subsection 2 of Section 78.751, may be made by a corporation only as authorized in the specific case upon a determination that indemnification of the Covered Person is proper in the circumstances. Such determination must be made (a) by the stockholders, (b) by the board of directors of the corporation by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding, (c) if a majority vote of a quorum of such non-party directors so orders, by independent legal counsel in a written opinion, or (d) by independent legal counsel in a written opinion if a quorum of such non-party directors cannot be obtained.
Subsection 2 of Section 78.751 of the Nevada Law provides that a corporation’s articles of incorporation or bylaws or an agreement made by the corporation may require the corporation to pay as incurred and in advance of the final disposition of a criminal or civil action, suit or proceeding, the expenses of officers and directors in defending such action, suit or proceeding upon receipt by the corporation of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the corporation. Subsection 2 of Section 78.751 further provides that its provisions do not affect any rights to advancement of expenses to which corporate personnel other than officers and directors may be entitled under contract or otherwise by law.
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Subsection 3 of Section 78.751 of the Nevada Law provides that indemnification pursuant to Section 78.7502 of the Nevada Law and advancement of expenses authorized in or ordered by a court pursuant to Section 78.751 does not exclude any other rights to which the Covered Person may be entitled under the articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his or her official capacity or in another capacity while holding his or her office. However, indemnification, unless ordered by a court pursuant to Section 78.7502 or for the advancement of expenses under Subsection 2 of Section 78.751 of the Nevada Law, may not be made to or on behalf of any director or officer of the corporation if a final adjudication establishes that his or her acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and were material to the cause of action. Additionally, the scope of such indemnification and advancement of expenses shall continue for a Covered Person who has ceased to be a director, officer, employee or agent of the corporation, and shall inure to the benefit of his or her heirs, executors and administrators.
Section 78.752 of the Nevada Law empowers a corporation to purchase and maintain insurance or make other financial arrangements on behalf of a Covered Person for any liability asserted against such person and liabilities and expenses incurred by such person in his or her capacity as a Covered Person or arising out of such person’s status as a Covered Person whether or not the corporation has the authority to indemnify such person against such liability and expenses.
The Bylaws of the Company provide for indemnification of Covered Persons substantially identical in scope to that permitted under the Nevada Law. Such Bylaws provide that the expenses of directors and officers of the Company incurred in defending any action, suit or proceeding, whether civil, criminal, administrative or investigative, must be paid by the Company as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of such director or officer to repay all amounts so advanced if it is ultimately determined by a court of competent jurisdiction that the director or officer is not entitled to be indemnified by the Company.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
We have had no other changes to our independent registered public accountants within the past two fiscal years.
Item 3.02 Unregistered Sales of Equity Securities.
On July 6, 2020, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”), by and among the Company, Nemo Holding Corp., a British Virgin Islands corporation (“Nemo Holding”), and the holders of common shares of Nemo Holding. The holders of the common stock of Nemo Holding consisted of 29 holders of common shares.
Under the terms and conditions of the Share Exchange Agreement, the Company offered, sold and issued 10,000,000 shares of common stock in consideration for all the issued and outstanding shares in Nemo Holding. As a result of the share exchange, Nemo Holding is now a wholly-owned subsidiary of the Company.
The Company offered and sold the 10,000,000 shares of common stock in reliance on the exemption from registration provided Rule 903(b)(3) of Regulation S, promulgated pursuant to the Securities Act of 1933, as amended. The offering was made offshore of the US, solely to non-US persons, where no directed selling efforts were made in the US, and where offering restrictions were imposed.
Item 5.01 Changes in Control of Registrant.
As previously reported in Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 27, 2020, the Company’s then-sole director, Chu Kin Hon, appointed Leung Tin Lung David and the sole director and officer of the Company, and all of the Company’s officers and directors until such date resigned.
The Company is aware that on or about April 21, 2020, Leung Tin Lung David purchased 208,813,213 shares of common stock from the Company’s former sole director, Kin Hon Chu. Such 208,813,213 shares of common stock amounted to approximately of 75.2% of the issued and outstanding shares of common stock on April 21, 2020.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On June 18, 2020, we filed a Certificate of Amendment to our Articles of Incorporation, as amended, with the Secretary of State of the State of Nevada, effecting a change of the name of the Company to New Momentum Corporation. Under Rule 14c-2, promulgated pursuant to the Securities Exchange Act of 1934, as amended, we anticipate the effective date to be on or about July 24, 2020. The new CUSIP number of the common stock of the Company associated with the new name “New Momentum Corporation” will be 64754N103.
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Item 5.06 Change in Shell Company Status.
Reference is made to the disclosure set forth under Items 1.01 and 2.01 of this Form 8-K, which disclosure is incorporated herein by reference. On July 6, 2020, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”), by and among the Company, Nemo Holding Corp., a British Virgin Islands corporation (“Nemo Holding”), and the holders of common shares of Nemo Holding. The holders of the common stock of Nemo Holding consisted of 29 stockholders. As a result of the consummation of the transactions contemplated by the Share Exchange Agreement, Nemo Holding became our wholly-owned operating subsidiary and we are no longer a shell company as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
Filed herewith as Exhibit 99.1 to Current Report on Form 8-K and incorporated herein by reference are Consolidated Financial Statements of Nemo Holding Company Limited, a British Virgin Islands corporation, for the years ended December 31, 2019 and 2018.
Filed herewith as Exhibit 99.2 to Current Report on Form 8-K and incorporated herein by reference are Unaudited Condensed Consolidated Financial Statements of Nemo Holding Company Limited, a British Virgin Islands corporation, for the three months ended March 31, 2020 and 2019.
(b) Pro Forma Financial Information.
Filed herewith as Exhibit 99.3 to this Current Report on Form 8-K and incorporated herein by reference is Unaudited Pro Forma Condensed Combined Financial Information dated March 31, 2020, of New Momentum Corp. and its wholly owned subsidiary, Nemo Holding Company Limited, a British Virgin Islands corporation.
(c) Shell Company Transactions.
Reference is made to Items 9.01(a) and 9.01(b) and the exhibits referred to therein which are incorporated herein by reference.
(d) Exhibits:
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| New Momentum Corporation |
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| Date: July 8, 2020 | By: | /s/ Leung Tin Lung David |
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| Name: | Leung Tin Lung David |
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| Title: | President (principal executive officer, principal financial officer and principal accounting officer) |
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EXHIBIT 2.1
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the “Agreement”) dated as of July 6, 2020, is entered into by and among Eason Education Kingdom Holdings, Inc., a Nevada corporation (“Eason”), and Nemo Holding Company Limited, a British Virgin Island corporation (“Nemo Holding”), and the shareholders of Nemo Holding listed on Annex A to this Agreement (each, a “Shareholder” and, collectively, the “Shareholders”).
RECITALS
A. The Shareholders own the number of shares of capital stock of Nemo Holding (the “Shares”) set forth opposite each Shareholder’s name on Annex A, which Shares collectively constitute all of the issued and outstanding shares of capital stock in Nemo Holding
B. Eason desires to purchase from the Shareholders, and the Shareholders desire to sell to Eason, the Shares in exchange for shares of Eason Common Stock, all on the terms and subject to the conditions set forth in this Agreement (the “Exchange”).
D. As a result of the Exchange, Eason will become the sole shareholder of Nemo Holding.
E. Certain capitalized terms used in this Agreement are defined on Exhibit A hereto.
AGREEMENT
In consideration of the agreements, provisions and covenants set forth below, Eason, Nemo Holding and the Shareholders, hereby agree as follows:
ARTICLE I.
EXCHANGE OF SHARES
1.1 Agreement to Sell.
Upon the terms and subject to all of the conditions contained herein, each of the Shareholders hereby agrees to sell, assign, transfer and deliver to Eason, and Eason hereby agrees to purchase and accept from each of the Shareholders, on the Closing Date, the Shares.
1.2 Purchase Price.
As full consideration for the sale, assignment, transfer and delivery of the Shares by the Shareholders to Eason, and upon the terms and subject to all of the conditions contained herein, Eason shall issue to the Shareholders an aggregate of 10,000,000 shares of Eason common stock (the “Acquisition Shares”) on a pro rata basis based upon their respective beneficial ownership interest in Nemo Holding, as certified by the President of Nemo Holding, at the Closing.
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1.3 Mechanics of Exchange.
(a) At the Closing, each Shareholder shall be entitled to surrender the certificate or certificates that immediately prior to the Closing represented the Nemo Holding Shares of Common Stock and Preferred Stock (the “Certificates”) to the exchange agent designated by Eason in exchange for the Acquisition Shares.
(b) Promptly after the Closing, Eason or its designated exchange agent shall make available to each Shareholder a letter of transmittal and instructions for use in effecting the surrender of Certificates in exchange for the Acquisition Shares. Upon surrender of a Certificate to such exchange agent together with the letter of transmittal, duly executed, the Shareholder shall be entitled to receive in exchange therefore such number of Acquisition Shares as such Shareholder has the right to receive in respect of the Certificate so surrendered pursuant to the provisions of this Article I.
1.4 No Fractional Shares.
No fraction of a share of Eason Common Stock shall be issued in the Exchange. In lieu of fractional shares, the Shareholders upon surrender of their Certificates as set forth in Section 1.3 shall be issued that number of shares of common stock resulting by rounding up to the nearest whole number of shares of Acquisition Shares that each such Shareholder shall receive as a result of the Exchange.
1.5 Closing.
The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at 9:00 a.m., Hong Kong Time, at the principal administrative offices of Eason, or at a location mutually agreement upon by Eason and Nemo Holding, on or before July 31, 2020 (the “Closing Date”); provided, however, that if all of the other conditions set forth in articles VI and VII hereof are not satisfied or waived, unless this agreement has been terminated under Section 9 hereof, or at such date, the Closing Date shall be the business day following the day on which all such conditions have been satisfied or waived, or at such other date, time and place as Eason, Nemo Holding and the Shareholders shall agree.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF NEMO HOLDING
Except as set forth in the Disclosure Schedule, consisting of information about Nemo Holding provided by Nemo Holding to Eason in connection with this Agreement (the “Nemo Holding Disclosure Schedule”), each of Nemo Holding and the Shareholders represents and warrants jointly and severally to Eason as follows:
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2.1 Organization and Qualification.
Nemo Holding is duly incorporated, validly and in good standing existing under the laws of Hong Kong, has all requisite authority and power (corporate and other), governmental licenses, authorizations, consents and approvals to carry on its business as presently conducted and as contemplated to be conducted, to own, hold and operate its properties and assets as now owned, held and operated by it, to enter into this Agreement, to carry out the provisions hereof except where the failure to be in good standing or to have such governmental licenses, authorizations, consents and approvals will not, in the aggregate, either (i) have a Material Adverse Effect on the business, assets or financial condition of Nemo Holding, or (ii) impair the ability of Nemo Holding to perform its material obligations under this Agreement. Nemo Holding is duly qualified, licensed or domesticated as a foreign corporation in good standing in each jurisdiction wherein the nature of its activities or its properties owned or leased requires such qualification, licensing or domestication, except where the failure to be so qualified, licensed or domesticated will not have a Material Adverse Effect. Set forth as part of the Nemo Holding Disclosure Schedule is a list of those jurisdictions in which each of Nemo Holding presently conducts its business, owns, holds and operates its properties and assets.
2.2 Subsidiaries.
Nemo Holding holds 100% of Gagfare Limited, which is incorporated in Hong Kong.
Except as stated above, Nemo Holding does not own directly or indirectly, any equity or other ownership interest in any corporation, partnership, joint venture or other entity or enterprise. Nemo Holding does not have any direct or indirect interests of stock ownership or otherwise in any corporation, partnership, joint venture, firm, association or business enterprise, and is not party to any agreement to acquire such an interest.
2.3 Articles of Incorporation and Bylaws.
The copies of the charter document and corporate governance document of Nemo Holding (collectively, the “Organizational Documents”) that have been delivered to Eason prior to the execution of this Agreement are true and complete and have not been amended or repealed. Nemo Holding is not in violation or breach of any of the provisions of the Organizational Documents, except for such violations or breaches which, in the aggregate, will not have a Material Adverse Effect on Nemo Holding.
2.4 Authorization and Validity of this Agreement.
This Agreement and each of the Transaction Agreements constitute the legal, valid and binding obligation of each person or entity who is a party thereto (other than Eason), enforceable against each such person or entity in accordance with its terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors rights generally. Each Nemo Holding shareholder has all requisite legal capacity to execute and deliver this Agreement and the Transaction Agreements to which he or she is a party, and to perform its, his or her obligations hereunder and thereunder. The execution and delivery by each of Nemo Holding and each of the Shareholders of this Agreement and the Transaction Agreements (to the extent either is a party thereto), and the consummation of the transactions contemplated herein and therein (the “Transactions”) have been authorized by all necessary corporate or other action on the part of Nemo Holding and each of the Shareholders. This Agreement and the Transaction Agreements have been duly executed and delivered by the parties thereto (other than Eason).
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2.5 No Violation.
Neither the execution nor delivery of this Agreement or the Transaction Agreements, nor the consummation or performance of any of the Transactions by Nemo Holding or the Shareholders will directly or indirectly:
(i) violate or conflict with any provision of the Organizational Documents of Nemo Holding; (B) result in (with or without notice or lapse of time) a violation or breach of, or conflict with or constitute a default or result in the termination or in a right of termination or cancellation of, or accelerate the performance required by, or require notice under, any agreement, promissory note, lease, instrument or arrangement to which Nemo Holding or any of its assets are bound or result in the creation of any Liens upon Nemo Holding or any of its assets; (C) violate any order, writ, judgment, injunction, ruling, award or decree of any Governmental Body; (“Governmental Body”); (D) violate any statute, law or regulation of any jurisdiction as such statute, law or regulation that relates to the Shareholders or Nemo Holding or any of the assets of Nemo Holding; or (E) result in cancellation, modification, revocation or suspension of any permits, licenses, registrations, consents, approvals, authorizations or certificates issued or granted by any Governmental Body which are held by or granted to the Shareholders or Nemo Holding or which are necessary for the conduct of Nemo Holding’s business; or
(ii) to the knowledge of Nemo Holding or any of the Shareholders, cause Nemo Holding to become subject to, or to become liable for the payment of, any Tax (as hereinafter defined) or cause any of the assets owned by Nemo Holding to be reassessed or revalued by any taxing authority or other Governmental Body.
None of Nemo Holding or the Shareholders is or will be required to give any notice to or obtain any approval, consent, ratification, waiver or other authorization (a “Consent”) from any person or entity (including, without limitation, any Governmental Body) in connection with (i) the execution and delivery of this Agreement or any of the Transaction Agreements, or (ii) the consummation or performance of any of the Transactions.
2.6 Capitalization and Related Matters.
(a) Capitalization. Nemo Holding has issued and outstanding ten thousand shares of common stock and two thousand and six shares of preferred stock. Except as set forth in the preceding sentence, no other class of capital stock or other security of Nemo Holding is authorized, issued, reserved for issuance or outstanding. The Shareholders, as of the Closing Date, are the lawful, record and beneficial owners of the number of Nemo Holding Shares of Common Stock and Preferred Stock set forth opposite each Seller’s name on Annex A attached hereto. The Shareholders have, as of the date hereof and as of the Closing Date, valid and marketable title to their respective Shares, free and clear of all Liens (including, without limitation, any claims of spouses under applicable community property laws) and are the lawful, record and beneficial owners of all of the Shares. Except as is issued to and held by the Shareholders or Nemo Holding, no other class of capital stock or other security of Nemo Holding, as applicable, is authorized, issued, reserved for issuance or outstanding. At the Closing, Eason will be vested with good and marketable title to the Shares, free and clear of all Liens (including, without limitation, any claims of spouses under applicable community property laws). No legend or other reference to any purported Lien appears upon any certificate representing the Shares. Each of the Shares has been duly authorized and validly issued and is fully paid and nonassessable. None of the outstanding capital or other securities of Nemo Holding was issued, redeemed or repurchased in violation of the Securities Act of 1933, as amended (the “Securities Act”), or any other securities or “blue sky” laws.
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(b) No Redemption Requirements. There are no authorized or outstanding options, warrants, equity securities, calls, rights, commitments or agreements of any character by which Nemo Holding or any of the Shareholders is obligated to issue, deliver or sell, or cause to be issued, delivered or sold, any shares of capital stock or other securities of Nemo Holding There are no outstanding contractual obligations (contingent or otherwise) of Nemo Holding to retire, repurchase, redeem or otherwise acquire any outstanding shares of capital stock of, or other ownership interests in, Nemo Holding or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any other entity.
2.7 Compliance with Laws and Other Instruments.
Except as would not have a Material Adverse Effect, the business and operations of Nemo Holding has been and are being conducted in accordance with all applicable foreign, federal, provincial and local laws, rules and regulations and all applicable orders, injunctions, decrees, writs, judgments, determinations and awards of all courts and governmental agencies and instrumentalities. There are no permits, bonuses, registrations, consents, approvals, authorizations, certificates, or any waiver of the foregoing, which are required to be issued or granted by a Governmental Body for the conduct of the Business as presently conducted or the ownership of the assets of Nemo Holding Except as would not have a Material Adverse Effect, Nemo Holding is not, and has not received notice alleging that it is, in violation of, or (with or without notice or lapse of time or both) in default under, or in breach of, any term or provision of the Organizational Documents or of any indenture, loan or credit agreement, note, deed of trust, mortgage, security agreement or other material agreement, lease, license or other instrument, commitment, obligation or arrangement to which Nemo Holding is a party or by which any of Nemo Holding’s properties, assets or rights are bound or affected. To the knowledge of Nemo Holding, no other party to any material contract, agreement, lease, license, commitment, instrument or other obligation to which Nemo Holding is a party is (with or without notice or lapse of time or both) in default thereunder or in breach of any term thereof. Nemo Holding is not subject to any obligation or restriction of any kind or character, nor is there, to the knowledge of Nemo Holding, any event or circumstance relating to Nemo Holding that materially and adversely affects in any way its business, properties, assets or prospects or that prohibits Nemo Holding from entering into this Agreement and the Transaction Agreements or would prevent or make burdensome its performance of or compliance with all or any part of this Agreement, the Transaction Agreements or the consummation of the Transactions contemplated hereby or thereby.
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2.8 Certain Proceedings.
There are no outstanding or pending preceding that has been commenced against or involving Nemo Holding or any of its assets and, to the knowledge of Nemo Holding and the Shareholders, no matters of the foregoing nature are contemplated or threatened. None of Nemo Holding or the Shareholders have been charged with, and is not threatened with, or under any investigation with respect to, any allegation concerning any violation of any provision of any federal, provincial, local or foreign law, regulation, ordinance, order or administrative ruling, and is not in default with respect to any order, writ, injunction or decree of any Governmental Body.
2.9 No Brokers or Finders.
None of Nemo Holding, the Shareholders, or any officer, director, independent contractor, consultant, agent or employee of Nemo Holding has agreed to pay, or has taken any action that will result in any person or entity becoming obligated to pay or entitled to receive, any investment banking, brokerage, finder’s or similar fee or commission in connection with this Agreement or the Transactions. Nemo Holding and the Shareholders shall jointly and severally indemnify and hold Eason harmless against any liability or expense arising out of, or in connection with, any such claim.
2.10 Title to and Condition of Properties.
Nemo Holding has good, valid and marketable title to all of its properties and assets (whether real, personal or mixed, and whether tangible or intangible) reflected as owned in its books and records, free and clear of all Liens. Nemo Holding owns or holds under valid leases or other rights to use all real property, plants, machinery, equipment and all assets necessary for the conduct of its business as presently conducted, except where the failure to own or hold such property, plants, machinery, equipment and assets would not have a Material Adverse Effect on Nemo Holding No Person other than Nemo Holding owns or has any right to the use or possession of the assets used in Nemo Holding’s business. The material buildings, plants, machinery and equipment necessary for the conduct of the business of Nemo Holding as presently conducted are structurally sound, are in good operating condition and repair and are adequate for the uses to which they are being put or would be put in the Ordinary Course of Business, in each case, taken as a whole, and none of such buildings, plants, machinery or equipment is in need of maintenance or repairs, except for ordinary, routine maintenance and repairs that are not material in nature or cost.
2.11 Absence of Undisclosed Liabilities.
Nemo Holding has no debt, obligation or liability (whether accrued, absolute, contingent, liquidated or otherwise, whether asserted or unasserted, whether due or to become due, whether or not known to Nemo Holding) arising out of any transaction entered into prior to the Closing Date or any act or omission prior to the Closing Date which individually or taken together would constitute a Material Adverse Effect on Nemo Holding and have no debt, obligation or liability to each other or any of the Shareholders or their affiliates, except to the extent specifically set forth on or reserved against on the Balance Sheet of Nemo Holding
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The financial statements are consistent with the books and records of Nemo Holding and fairly present in all material respects the financial condition, assets and liabilities of Nemo Holding, as applicable, taken as a whole, as of the dates and periods indicated, and were prepared in accordance with GAAP (except as otherwise indicated therein or in the notes thereto).
2.12 Changes.
Nemo Holding has not, since the date of its incorporation:
(a) Ordinary Course of Business. Conducted its business or entered into any transaction other than in the Ordinary Course of Business, except for this Agreement.
(b) Adverse Changes. Suffered or experienced any change in, or affecting, its condition (financial or otherwise), properties, assets, liabilities, business, operations, results of operations or prospects which would have a Material Adverse Effect;
(c) Loans. Made any loans or advances to any Person other than travel advances and reimbursement of expenses made to employees, officers and directors in the Ordinary Course of Business;
(d) Compensation and Bonuses. Made any payments of any bonuses or compensation other than regular salary payments, or increase in the salaries, or payment on any of its debts in the Ordinary Course of Business, to any of its shareholders, directors, officers, employees, independent contractors or consultants or entry into by it of any employment, severance, or similar contract with any director, officer, or employee, independent contractor or consultant; Adopted, or increased in the payments to or benefits under, any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan for or with any of its employees;
(e) Liens. Created or permitted to exist any Lien on any of its properties or assets other than Permitted Liens;
(f) Capital Stock. Issued, sold, disposed of or encumbered, or authorized the issuance, sale, disposition or encumbrance of, or granted or issued any option to acquire any shares of its capital stock or any other of its securities or any Equity Security, or altered the term of any of its outstanding securities or made any change in its outstanding shares of capital stock or its capitalization, whether by reason of reclassification, recapitalization, stock split, combination, exchange or readjustment of shares, stock dividend or otherwise; changed its authorized or issued capital stock; granted any stock option or right to purchase shares of its capital stock; issued any security convertible into any of its capital stock; granted any registration rights with respect to shares of its capital stock; purchased, redeemed, retired, or otherwise acquired any shares of its capital stock; declared or paid any dividend or other distribution or payment in respect of shares of capital stock of any other entity;
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(g) Dividends. Declared, set aside, made or paid any dividend or other distribution to any of its shareholders;
(h) Material Contracts. Terminated or modified any of its Material Contract except for termination upon expiration in accordance with the terms of such agreements, a description of which is included in the Nemo Holding’s Disclosure Schedule;
(i) Claims. Released, waived or cancelled any claims or rights relating to or affecting Nemo Holding in excess of $1,000 in the aggregate or instituted or settled any Proceeding involving in excess of $10,000 in the aggregate;
(j) Discharged Liabilities. Paid, discharged, cancelled, waived or satisfied any claim, obligation or liability in excess of $1,000 in the aggregate, except for liabilities incurred prior to the date of this Agreement in the Ordinary Course of Business;
(k) Indebtedness. Created, incurred, assumed or otherwise become liable for any Indebtedness or commit to any endeavor involving a commitment in excess of $1,000 in the aggregate, other than contractual obligations incurred in the Ordinary Course of Business;
(l) Guarantees. Guaranteed or endorsed in a material amount any obligation or net worth of any Person;
(m) Acquisitions. Acquired the capital stock or other securities or any ownership interest in, or substantially all of the assets of, any other Person;
(n) Accounting. Changed its method of accounting or the accounting principles or practices utilized in the preparation of its financial statements, other than as required by GAAP;
(o) Agreements. Entered into any agreement, or otherwise obligated itself, to do any of the foregoing.
2.13 Material Contracts.
Nemo Holding has delivered to Eason, prior to the date of this Agreement, true, correct and complete copies of each of its Material Contracts.
(a) No Defaults. The Material Contracts of Nemo Holding are valid and binding agreements of Nemo Holding, as applicable, and are in full force and effect and are enforceable in accordance with their terms. Except as would not have a Material Adverse Effect, Nemo Holding is not in breach or default of any of its Material Contracts to which it is a party and, to the knowledge of Nemo Holding, no other party to any of its Material Contracts is in breach or default thereof. Except as would not have a Material Adverse Effect, no event has occurred or circumstance has existed that (with or without notice or lapse of time) would (a) contravene, conflict with or result in a violation or breach of, or become a default or event of default under, any provision of any of its Material Contracts or (b) permit Nemo Holding or any other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify any of its Material Contracts. Nemo Holding has not received any notice and has no knowledge of any pending or threatened cancellation, revocation or termination of any of its Material Contracts to which it is a party, and there are no renegotiations of, or attempts to renegotiate.
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2.14 Tax Returns and Audits.
(a) Tax Returns. (a) All material Tax Returns required to be filed by or on behalf of Nemo Holding have been timely filed and all such Tax Returns were (at the time they were filed) and are true, correct and complete in all material respects; (b) all Taxes of Nemo Holding required to have been paid (whether or not reflected on any Tax Return) have been fully and timely paid, except those Taxes which are presently being contested in good faith or for which an adequate reserve for the payment of such Taxes has been established on Nemo Holding’s balance sheet; (c) no waivers of statutes of limitation have been given or requested with respect to Nemo Holding in connection with any Tax Returns covering Nemo Holding or with respect to any Taxes payable by it; (d) no Governmental Body in a jurisdiction where Nemo Holding does not file Tax Returns has made a claim, assertion or threat to Nemo Holding that Nemo Holding is or may be subject to taxation by such jurisdiction; (e) Nemo Holding has duly and timely collected or withheld, paid over and reported to the appropriate Governmental Body all amounts required to be so collected or withheld for all periods under all applicable laws; (f) there are no Liens with respect to Taxes on the property or assets of Nemo Holding other than Permitted Liens; (g) there are no Tax rulings, requests for rulings, or closing agreements relating to Nemo Holding for any period (or portion of a period) that would affect any period after the date hereof; and (h) any adjustment of Taxes of Nemo Holding made by a Governmental Body in any examination that Nemo Holding is required to report to the appropriate provincial, local or foreign taxing authorities has been reported, and any additional Taxes due with respect thereto have been paid. No state of fact exists or has existed which would constitute ground for the assessment of any tax liability by any Governmental Body. All Tax Returns filed by Nemo Holding are true, correct and complete.
(b) No Adjustments, Changes. Neither Nemo Holding nor any other Person on behalf of Nemo Holding (a) has executed or entered into a closing agreement pursuant to Section 7121 of the Code or any predecessor provision thereof or any similar provision of provincial, local or foreign law; or (b) has agreed to or is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision of provincial, local or foreign law.
(c) No Disputes. There is no pending audit, examination, investigation, dispute, proceeding or claim with respect to any Taxes of or Tax Return filed or required to be filed by Nemo Holding, nor is any such claim or dispute pending or contemplated. Nemo Holding has made available to Eason true, correct and complete copies of all Tax Returns, examination reports and statements of deficiencies assessed or asserted against or agreed to by Nemo Holding since January 1, 2016, and any and all correspondence with respect to the foregoing. Nemo Holding does not have any outstanding closing agreement, ruling request, request for consent to change a method of accounting, subpoena or request for information to or from a Governmental Body in connection with any Tax matter.
(d) No Tax Allocation, Sharing. Nemo Holding is not a party to any Tax allocation or sharing agreement. Nemo Holding (a) has not been a member of a Tax Group filing a consolidated income Tax Return under Section 1501 of the Code (or any similar provision of provincial, local or foreign law), and (b) does not have any liability for Taxes for any Person under Treasury Regulations Section 1.1502-6 (or any similar provision of provincial, local or foreign law) as a transferee or successor, by contract or otherwise.
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2.15 Material Assets.
The financial statements of Nemo Holding reflect the material properties and assets (real and personal) owned or leased by them.
2.16 Insurance Coverage.
Nemo Holding has no insurance or general liability policies maintained by Nemo Holding on its properties and assets.
2.17 Litigation; Orders.
There is no Proceeding (whether federal, provincial, local or foreign) pending or, to the knowledge of Nemo Holding, threatened or appealable against or affecting Nemo Holding or any of its properties, assets, business or employees. To the knowledge of Nemo Holding, there is no fact that might result in or form the basis for any such Proceeding. Nemo Holding is not subject to any Orders and has not received any written opinion or memorandum or legal advice from their legal counsel to the effect that Nemo Holding is exposed, from a legal standpoint, to any liability which would be material to its business. Nemo Holding is not engaged in any legal action to recover monies due it or for damages sustained by any of them.
2.18 Licenses.
Except as would not have a Material Adverse Effect, Nemo Holding possesses from the appropriate Governmental Body all licenses, permits, authorizations, approvals, franchises and rights that are necessary for it to engage in its business as currently conducted and to permit it to own and use its properties and assets in the manner in which it currently owns and uses such properties and assets (collectively, “PERMITS”). Except as would not have a Material Adverse Effect, Nemo Holding has not received any written notice from any Governmental Body or other Person that there is lacking any license, permit, authorization, approval, franchise or right necessary for Nemo Holding to engage in its business as currently conducted and to permit Nemo Holding to own and use its properties and assets in the manner in which it currently owns and uses such properties and assets. Except as would not have a Material Adverse Effect, the Permits are valid and in full force and effect. Except as would not have a Material Adverse Effect, no event has occurred or circumstance exists that may (with or without notice or lapse of time): (a) constitute or result, directly or indirectly, in a violation of or a failure to comply with any Permit; or (b) result, directly or indirectly, in the revocation, withdrawal, suspension, cancellation or termination of, or any modification to, any Permit. Nemo Holding has not received any written notice from any Governmental Body or any other Person regarding: (a) any actual, alleged, possible or potential contravention of any Permit; or (b) any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to, any Permit. All applications required to have been filed for the renewal of such Permits have been duly filed on a timely basis with the appropriate Persons, and all other filings required to have been made with respect to such Permits have been duly made on a timely basis with the appropriate Persons. All Permits are renewable by their terms or in the Ordinary Course of Business without the need to comply with any special qualification procedures or to pay any amounts other than routine fees or similar charges, all of which have, to the extent due, been duly paid.
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2.19 Interested party Transactions.
No officer, director or shareholder of Nemo Holding or any Affiliate, Related Person or “associate” (as such term is defined in Rule 405 of the Commission under the Securities Act) of any such Person, either directly or indirectly, (1) has an interest in any Person which (a) furnishes or sells services or products which are furnished or sold or are proposed to be furnished or sold by Nemo Holding, or (b) purchases from or sells or furnishes to, or proposes to purchase from, sell to or furnish Nemo Holding any goods or services; (2) has a beneficial interest in any contract or agreement to which Nemo Holding is a party or by which it may be bound or affected; or (3) is a party to any material agreements, contracts or commitments in effect as of the date hereof with Nemo Holding “Related Person” means: (i) with respect to a particular individual, the individual’s immediate family which shall include the individual’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, and brothers and sisters-in-law; and (ii) with respect to a specified individual or entity, any entity or individual that, directly or indirectly, controls, is controlled by, or is under common control with such specified entity or individual.
2.20 Governmental Inquiries.
Nemo Holding has made available to Eason a copy of each material written inspection report, questionnaire, inquiry, demand or request for information received by Nemo Holding from (and the response of Nemo Holding thereto), and each material written statement, report or other document filed by Nemo Holding with, any Governmental Body since January 1, 2016.
2.21 Bank Accounts and Safe Deposit Boxes.
The Nemo Holding Disclosure Schedule discloses the title and number of each bank or other deposit or financial account, and each lock box and safety deposit box used by Nemo Holding, the financial institution at which that account or box is maintained and the names of the persons authorized to draw against the account or otherwise have access to the account or box, as the case may be.
2.22 Intellectual Property.
Any Intellectual Property Nemo Holding uses in its business as presently conducted is owned by Nemo Holding or properly licensed.
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2.23 Stock Option Plans; Employee Benefits.
(a) Nemo Holding does not have any employee benefit plans or arrangements covering their present and former employees or providing benefits to such persons in respect of services provided to Nemo Holding Nemo Holding has no commitment, whether formal or informal and whether legally binding or not, to create any additional plan, arrangement or practice similar to the Approved Plans.
2.24 Employee Matters.
(a) No former or current employee of Nemo Holding is a party to, or is otherwise bound by, any agreement or arrangement (including, without limitation, any confidentiality, non- competition or proprietary rights agreement) that in any way adversely affected, affects, or will affect (i) the performance of his, her or its duties to Nemo Holding, or (ii) the ability of Nemo Holding to conduct its business.
(b) Nemo Holding has no employees, directors, officers, consultants, independent contractors, representatives or agents whose contract of employment or engagement cannot be terminated by three months’ notice. (c) Nemo Holding is not required or obligated to pay, and since the date if its incorporation, have not paid any moneys to or for the benefit of, any director, officer, employee, consultant, independent contractor, representative or agent of Nemo Holding
(d) Nemo Holding is in compliance with all applicable laws respecting employment and employment practices, terms and conditions or employment and wages and hours, and is not engaged in any unfair labor practice. There is no labor strike, dispute, shutdown or stoppage actually pending or, to the knowledge of Nemo Holding or the Shareholders, threatened against or affecting Nemo Holding
2.25 Environmental and Safety Matters.
Except as would not have a Material Adverse Effect:
(a) Nemo Holding has at all times been and is in compliance with all Environmental Laws and Orders applicable to Nemo Holding, as applicable.
(b) There are no Proceedings pending or, to the knowledge of Nemo Holding, threatened against Nemo Holding alleging the violation of any Environmental Law or Environmental Permit applicable to Nemo Holding or alleging that Nemo Holding is a potentially responsible party for any environmental site contamination. None of Nemo Holding or the Shareholders are aware of, or has ever received notice of, any past, present or future events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent continued compliance, or which may give rise to any common law or legal liability, or otherwise form the basis of any claim, action, suit, proceeding, hearing or investigation, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling, or the emission, discharge, release or threatened release into the environment, of any pollutant, contaminant, or hazardous or toxic material or waste.
(c) Neither this Agreement nor the consummation of the transactions contemplated by this Agreement shall impose any obligations to notify or obtain the consent of any Governmental Body or third Persons under any Environmental Laws applicable to Nemo Holding
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2.26 Material Customers.
Since the date of its incorporation, none of the Material Customers (as hereinafter defined) of Nemo Holding has notified any of Nemo Holding or the Shareholders of their intent to terminate their business with Nemo Holding business because of any dissatisfaction on the part of any such person or entity. The Transactions have not caused any of the Material Customers of Nemo Holding to terminate or provide notice of their intent or threaten to terminate their business with Nemo Holding or to notify Nemo Holding or the Shareholders of their intent not to continue to do such business with Nemo Holding after the Closing. As used herein, “Material Customers” means those customers from whom Nemo Holding derives annual revenues in excess of US $5,000.
2.27 Inventories.
All inventories of Nemo Holding are of good, usable and merchantable quality in all material respects, and, except as set forth in the Nemo Holding Disclosure Schedule, do not include a material amount of obsolete or discontinued items. Except as set forth in the Nemo Holding Disclosure Schedule, (a) all such inventories are of such quality as to meet in all material respects the quality control standards of Nemo Holding, (b) all such inventories are recorded on the books at the lower of cost or market value determined in accordance with GAAP, and (c) no write-down in inventory has been made or should have been made pursuant to GAAP during the past two years.
2.28 Money Laundering Laws.
The operations of Nemo Holding are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the money laundering statutes of all U.S. and non-U.S. jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Body (collectively, the “Money Laundering Laws”) and no Proceeding involving Nemo Holding with respect to the Money Laundering Laws is pending or, to the knowledge of Nemo Holding, threatened.
2.29 Disclosure.
(a) Any information set forth in this Agreement, the Nemo Holding Disclosure Schedule, or the Transaction Agreements shall be true, correct and complete in all material respects.
(b) No statement, representation or warranty of Nemo Holding or the Shareholders in this Agreement (taken with the Schedules) or the Transaction Agreements or any exhibits or schedules thereto contain any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein, taken as a whole, in light of the circumstances in which they were made, not misleading.
(c) Except as set forth in the Nemo Holding Disclosure Schedule, the Shareholders and Nemo Holding have no knowledge of any fact that has specific application to Nemo Holding (other than general economic or industry conditions) and that adversely affects the assets or the business, prospects, financial condition, or results of operations of Nemo Holding.
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(d) In the event of any inconsistency between the statements in the body of this Agreement and those in the Schedules (other than an exception expressly set forth as such in the Schedules with respect to a specifically identified representation or warranty), the statements in the Schedules shall control.
(e) The books of account, minute books and stock record books of Nemo Holding, all of which have been made available to Eason, are complete and accurate and have been maintained in accordance with sound business practices. Without limiting the generality of the foregoing, the minute books of Nemo Holding contain complete and accurate records of all meetings held, and corporate action taken, by the shareholders, the boards of directors, and committees of the boards of directors of Nemo Holding, as applicable, and no meeting of any such shareholders, board of directors, or committee has been held for which minutes have not been prepared and are not contained in such minute books.
2.30 Finders and Brokers.
(a) None of Nemo Holding or the Shareholders or any Person acting on behalf of Nemo Holding or the Shareholders has engaged any finder, broker, intermediary or any similar Person in connection with the Exchange.
(b) None of Nemo Holding the Shareholders nor any Person acting on behalf of Nemo Holding or the Shareholders has entered into a contract or other agreement that provides that a fee shall be paid to any Person or Entity if the Exchange is consummated.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF EASON
Eason hereby represents and warrants to the Shareholders as of the date hereof:
3.1 Organization; Good Standing.
Eason is duly incorporated, validly and in good standing existing under the laws of Nevada, has all requisite authority and power (corporate and other), governmental licenses, authorizations, consents and approvals to carry on its business as presently conducted and as contemplated to be conducted, to own, hold and operate its properties and assets as now owned, held and operated by it, to enter into this Agreement, to carry out the provisions hereof except where the failure to be in good standing or to have such governmental licenses, authorizations, consents and approvals will not, in the aggregate, either (i) have a Material Adverse Effect on the business, assets or financial condition of Eason, or (ii) impair the ability of Eason to perform its material obligations under this Agreement. Eason is duly qualified, licensed or domesticated as a foreign corporation in good standing in each jurisdiction wherein the nature of its activities or its properties owned or leased requires such qualification, licensing or domestication, except where the failure to be so qualified, licensed or domesticated will not have a Material Adverse Effect.
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3.2 Eason Common Stock.
As of April 6, 2020, there were 4,697,620,787 shares of Eason’s common stock issued and outstanding. The Acquisition Shares, when issued in connection with this Agreement and the other Transactional Agreements, will be duly authorized, validly issued, fully paid and nonassessable. Eason will take all reasonable efforts subsequent to the Closing to effect and amendment to its Articles of Incorporation, as amended, to effect an increase in its authorized shares of common stock to issue and deliver to the Shareholders any portion of the Acquisition Shares not delivered at Closing to the Shareholders.
3.3 Authority; Binding Nature of Agreements.
(a) The execution, delivery and performance of this Agreement, the Transactional Agreements, and all other agreements and instruments contemplated to be executed and delivered by Eason in connection herewith have been duly authorized by all necessary corporate action on the part of Eason and its board of directors.
(b) This Agreement, the Transactional Agreements, and all other agreements and instruments contemplated to be executed and delivered by Eason constitute the legal, valid and binding obligation of Eason, enforceable against Eason in accordance with their terms, except to the extent that enforceability may be limited by applicable bankruptcy, Exchange, insolvency, moratorium or other laws affecting the enforcement of creditors’ rights generally and by general principles of equity regardless of whether such enforceability is considered in a proceeding in law or equity.
(c) There is no pending Proceeding, and, to Eason’s knowledge, no Person has threatened to commence any Proceeding that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the Exchange or Eason’s ability to comply with or perform its obligations and covenants under the Transactional Agreements, and, to the knowledge of Eason, no event has occurred, and no claim, dispute or other condition or circumstance exists, that might directly or indirectly give rise to or serve as a basis for the commencement of any such Proceeding.
3.4 Non-contravention; Consents.
The execution and delivery of this Agreement and the other Transactional Agreements, and the consummation of the Exchange, by Eason will not, directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a material violation of (i) Eason’s Certificate of Incorporation or Bylaws, or (ii) any resolution adopted by Eason Board or any committee thereof or the stockholders of Eason;
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(b) to the knowledge of Eason, contravene, conflict with or result in a material violation of, or give any Governmental Body the right to challenge the Exchange or to exercise any remedy or obtain any relief under, any legal requirement or any Order to which Eason or any material assets owned or used by it are subject;
(c) to the knowledge of Eason, cause any material assets owned or used by Eason to be reassessed or revalued by any taxing authority or other Governmental Body;
(d) to the knowledge of Eason, contravene, conflict with or result in a material violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by Eason or that otherwise relates to Eason’s business or to any of the material assets owned or used by Eason, where such contraventions, conflict, violation, revocation, withdrawal, suspension, cancellation, termination or modification would have a Material Adverse Effect on Eason;
(e) contravene, conflict with or result in a material violation or material breach of, or material default under, any Contract to which Eason is a party;
(f) give any Person the right to any payment by Eason or give rise to any acceleration or change in the award, grant, vesting or determination of options, warrants, rights, severance payments or other contingent obligations of any nature whatsoever of Eason in favor of any Person, in any such case as a result of the Exchange; or
(g) result in the imposition or creation of any material Lien upon or with respect to any material asset owned or used by Eason.
Except for Consents, filings or notices required under the state and federal securities laws or any other laws or regulations or as otherwise contemplated in this Agreement and the other Transactional Agreements, Eason will not be required to make any filing with or give any notice to, or obtain any Consent from, any Person in connection with the execution and delivery of this Agreement and the other Transactional Agreements or the consummation or performance of the Exchange.
3.5 Finders and Brokers.
(a) Neither Eason nor any Person acting on behalf of Eason has engaged any finder, broker, intermediary or any similar Person in connection with the Exchange.
(b) Eason has not entered into a contract or other agreement that provides that a fee shall be paid to any Person or Entity if the Exchange is consummated.
3.6 Reports and Financial Statements; Absence of Certain Changes.
(a) Eason has filed all reports required to be filed with the SEC pursuant to the Exchange Act since January 1, 2016 (all such reports, including those to be filed prior to the Closing Date and all registration statements and prospectuses filed by Eason with the SEC, are collectively referred to as the “Eason SEC Reports). All of the Eason SEC Reports, as of their respective dates of filing (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing): (i) complied in all material respects as to form with the applicable requirements of the Securities Act or Exchange Act and the rules and regulations thereunder, as the case may be, and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited financial statements of Eason included in the Eason SEC Reports comply in all material respects with the published rules and regulations of the SEC with respect thereto, and such audited financial statements (i) were prepared from the books and records of Eason, (ii) were prepared in accordance with GAAP applied on a consistent basis (except as may be indicated therein or in the notes or schedules thereto) and (iii) present fairly the financial position of Eason as of the dates thereof and the results of operations and cash flows for the periods then ended. The unaudited financial statements included in the Eason SEC Reports comply in all material respects with the published rules and regulations of the SEC with respect thereto; and such unaudited financial statements (i) were prepared from the books and records of Eason, (ii) were prepared in accordance with GAAP, except as otherwise permitted under the Exchange Act and the rules and regulations thereunder, on a consistent basis (except as may be indicated therein or in the notes or schedules thereto) and (iii) present fairly the financial position of Eason as of the dates thereof and the results of operations and cash flows (or changes in financial condition) for the periods then ended, subject to normal year-end adjustments and any other adjustments described therein or in the notes or schedules thereto.
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(b) Except as specifically contemplated by this Agreement or reflected in the Eason SEC Reports, since January 1, 2016, there has not been (i) any material adverse change in Eason’s business, assets, liabilities, operations, and, to the knowledge of Eason, no event has occurred that is likely to have a material adverse effect on Eason’s business, assets, liabilities or operations, (ii) any declarations setting aside or payment of any dividend or distribution with respect to the Eason Common Stock other than consistent with past practices, (iii) any material change in Eason’s accounting principles, procedures or methods, (iv) cancellation in writing of any material customer contract or (v) the loss of any customer relationship which would have a material adverse effect on Eason’s business, assets, liabilities or operations.
3.7 Compliance with Applicable Law.
Except as disclosed in the Eason SEC Reports filed prior to the date of this Agreement and except to the extent that the failure or violation would not in the aggregate have a Material Adverse Effect on the business, results of operations or financial condition of Eason, to Eason’s knowledge Eason holds all Governmental Authorizations necessary for the lawful conduct of its business under and pursuant to, and the business of Eason is not being conducted in violation of, any Governmental Authorization applicable to Eason.
3.8 Complete Copies of Requested Reports.
Eason has delivered or made available true and complete copies of each document that has been reasonably requested by Nemo Holding or the Shareholders.
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3.9 Full Disclosure.
(a) Neither this Agreement (including all Schedules and exhibits hereto) nor any of the Transactional Agreements contemplated to be executed and delivered by Eason in connection with this Agreement contains any untrue statement of material fact; and none of such documents omits to state any material fact necessary to make any of the representations, warranties or other statements or information contained therein not misleading.
(b) All of the information set forth in the prospectus and all other information regarding Eason and the business, condition, assets, liabilities, operations, financial performance, net income and prospects of either that has been furnished to Nemo Holding or the Shareholders by or on behalf of Eason or any of the Eason’s Representatives, is accurate and complete in all material respects.
ARTICLE IV.
COVENANTS OF NEMO HOLDING
4.1 Access and Investigation.
Nemo Holding shall ensure that, at all times during the Pre-Closing Period:
(a) Nemo Holding and their Representatives provide Eason and its Representatives access, at reasonable times and with twenty-four (24) hours’ notice from Eason to Nemo Holding, to all of the premises and assets of Nemo Holding, to all existing books, records, Tax Returns, work papers and other documents and information relating to Nemo Holding, and to responsible officers and employees of Nemo Holding, and Nemo Holding and its Representatives provide Eason and its Representatives with copies of such existing books, records, Tax Returns, work papers and other documents and information relating to Nemo Holding as Eason may request in good faith;
(b) Each of Nemo Holding and its Representatives confer regularly with Eason upon its request, concerning operational matters and otherwise report regularly (not less than semi-monthly and as Eason may otherwise request) to Eason and discuss with Eason and its Representatives concerning the status of the business, condition, assets, liabilities, operations, and financial performance of Nemo Holding, and promptly notify Eason of any material change in the business, condition, assets, liabilities, operations, and financial performance of Nemo Holding, or any event reasonably likely to lead to any such change.
4.2 Operation of the Business.
Nemo Holding shall ensure that, during the Pre-Closing Period:
(a) It conducts its operations in the Ordinary Course of Business and in the same manner as such operations have been conducted prior to the date of this Agreement;
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(b) It uses its commercially reasonable efforts to preserve intact its current business organization, keep available and not terminate the services of its current officers and employees and maintain its relations and goodwill with all suppliers, customers, landlords, creditors, licensors, licensees, employees and other Persons having business relationships with Nemo Holding;
(c) It does not declare, accrue, set aside or pay any dividend or make any other distribution in respect of any shares of its capital stock, and does not repurchase, redeem or otherwise reacquire any shares of its capital stock or other securities, except with respect to the repurchase of shares of Nemo Holding Common Stock upon termination of employees at the original purchase price pursuant to agreements existing at the date hereof;
(d) It does not sell or otherwise issue (or grant any warrants, options or other rights to purchase) any shares of capital stock or any other securities, except the issuance of Nemo Holding Shares of Common Stock pursuant to option grants to employees made under the Option Plan in the Ordinary Course of Business;
(e) It does not amend its charter document, corporate governance document or other Organizational Documents, and does not affect or become a party to any recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;
(f) It does not form any subsidiary or acquire any equity interest or other interest in any other Entity;
(g) It does not establish or adopt any Employee Benefit Plan, and does not pay any bonus or make any profit sharing or similar payment to, or increase the amount of the wages, salary, commissions, fringe benefits or other compensation or remuneration payable to, any of its directors, officers or employees;
(h) It does not change any of its methods of accounting or accounting practices in any respect;
(i) It does not make any Tax election;
(j) It does not commence or take any action or fail to take any action which would result in the commencement of any Proceeding;
(k) It does not (i) acquire, dispose of, transfer, lease, license, mortgage, pledge or encumber any fixed or other assets, other than in the Ordinary Course of Business; (ii) incur, assume or prepay any indebtedness, Indebtedness or obligation or any other liabilities or issue any debt securities, other than in the Ordinary Course of Business; (iii) assume, guarantee, endorse for the obligations of any other person, other than in the Ordinary Course of Business; (iv) make any loans, advances or capital contributions to, or investments in, any other Person, other than in the Ordinary Course of Business; or (v) fail to maintain insurance consistent with past practices for its business and property;
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(l) It pays all debts and Taxes, files all of its Tax Returns (as provided herein) and pays or performs all other obligations, when due;
(m) It does not enter into or amend any agreements pursuant to which any other Person is granted distribution, marketing or other rights of any type or scope with respect to any of its services, products or technology;
(n) It does not hire any new officer-level employee;
(o) It does not revalue any of its assets, including, without limitation, writing down the value of inventory or writing off notes or accounts receivable, except as required under GAAP and in the Ordinary Course of Business;
(p) Except as otherwise contemplated hereunder, it does not enter into any transaction or take any other action outside the Ordinary Course of Business; and
(q) It does not enter into any transaction or take any other action that likely would cause or constitute a Breach of any representation or warranty made by it in this Agreement.
4.3 Filings and Consents; Cooperation.
Nemo Holding shall ensure that:
(a) Each filing or notice required to be made or given (pursuant to any applicable Law, Order or contract, or otherwise) by Nemo Holding or the Shareholders in connection with the execution and delivery of any of the Transactional Agreements, or in connection with the consummation or performance of the Exchange, is made or given as soon as possible after the date of this Agreement;
(b) Each Consent required to be obtained (pursuant to any applicable Law, Order or contract, or otherwise) by Nemo Holding or the Shareholders in connection with the execution and delivery of any of the Transactional Agreements, or in connection with the consummation or performance of the Exchange, is obtained as soon as possible after the date of this Agreement and remains in full force and effect through the Closing Date;
(c) It promptly delivers to Eason a copy of each filing made, each notice given and each Consent obtained by Nemo Holding during the Pre-Closing Period; and
(d) During the Pre-Closing Period, it and its Representatives cooperate with Eason and Eason’s Representatives, and prepare and make available such documents and take such other actions as Eason may request in good faith, in connection with any filing, notice or Consent that Eason is required or elects to make, give or obtain.
4.4 Notification; Updates to Disclosure Schedules.
(a) During the Pre-Closing Period, Nemo Holding shall promptly notify Eason in writing of:
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(i) the discovery by it of any event, condition, fact or circumstance that occurred or existed on or prior to the date of this Agreement which is contrary to any representation or warranty made by it in this Agreement or in any of the other Transactional Agreements, or that would upon the giving of notice or lapse of time, result in any of its representations and warranties set forth in this agreement to become untrue or otherwise cause any of the conditions of Closing set forth in Article VI or Article VII not to be satisfied;
(ii) any event, condition, fact or circumstance that occurs, arises or exists after the date of this Agreement (except as a result of actions taken pursuant to the express written consent of Eason) and that is contrary to any representation or warranty made by it in this Agreement, or that would upon the giving of notice or lapse of time, result in any of its representations and warranties set forth in this agreement to become untrue or otherwise cause any of the conditions of Closing set forth in Article VI or Article VII not to be satisfied;
(b) If any event, condition, fact or circumstances that is required to be disclosed pursuant to Section 4.4(a) requires any material change in the Nemo Holding Disclosure Schedule, or if any such event, condition, fact or circumstance would require such a change assuming the Nemo Holding Disclosure Schedule were dated as of the date of the occurrence, existence or discovery of such event, condition, fact or circumstances, then Nemo Holding, as applicable, shall promptly deliver to Eason an update to the Nemo Holding Disclosure Schedule specifying such change (a “Disclosure Schedule Update”).
(c) It will promptly update any relevant and material information provided to Eason after the date hereof pursuant to the terms of this Agreement.
4.5 Commercially Reasonable Efforts.
During the Pre-Closing Period, Nemo Holding shall use its commercially reasonable efforts to cause the conditions set forth in Article VI and Article VII to be satisfied on a timely basis and so that the Closing can take place on or before June 21, 2020, in accordance with Section 1.5, and shall not take any action or omit to take any action, the taking or omission of which would or could reasonably be expected to result in any of the representations and warranties of Nemo Holding set forth in this Agreement becoming untrue, or in any of the conditions of Closing set forth in Article VI or Article VII not being satisfied.
4.6 Confidentiality; Publicity.
Nemo Holding shall ensure that:
(a) It and its Representatives keep strictly confidential the existence and terms of this Agreement prior to the issuance or dissemination of any mutually agreed upon press release or other disclosure of the Exchange; and
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(b) neither it nor any of its Representatives issues or disseminates any press release or other publicity or otherwise makes any disclosure of any nature (to any of its suppliers, customers, landlords, creditors or employees or to any other Person) regarding any of the Exchange; except in each case to the extent that it is required by law to make any such disclosure regarding such transactions or as separately agreed by the parties; provided, however, that if it is required by law to make any such disclosure, Nemo Holding advises Eason, at least five business days before making such disclosure, of the nature and content of the intended disclosure.
ARTICLE V.
COVENANTS OF EASON
5.1 Notification.
During the Pre-Closing Period, Eason shall promptly notify Nemo Holding in writing of:
(a) the discovery by Eason of any event, condition, fact or circumstance that occurred or existed on or prior to the date of this Agreement which is contrary to any representation or warranty made by Eason in this Agreement; and,
(b) any event, condition, fact or circumstance that occurs, arises or exists after the date of this Agreement (except as a result of actions taken pursuant to the written consent of Nemo Holding) and that is contrary to any representation or warranty made by Eason in this Agreement;
5.2 Filings and Consents; Cooperation.
Eason shall ensure that:
(a) Each filing or notice required to be made or given (pursuant to any applicable Law, Order or contract, or otherwise) by Eason in connection with the execution and delivery of any of the Transactional Agreements, or in connection with the consummation or performance of the Exchange, is made or given as soon as possible after the date of this Agreement;
(b) Each Consent required to be obtained (pursuant to any applicable Law, Order or contract, or otherwise) by Eason in connection with the execution and delivery of any of the Transactional Agreements, or in connection with the consummation or performance of the Exchange, is obtained as soon as possible after the date of this Agreement and remains in full force and effect through the Closing Date;
(c) Eason promptly delivers to Nemo Holding and a copy of each filing made, each notice given and each Consent obtained by Eason during the Pre-Closing Period; and
(d) During the Pre-Closing Period, Eason and its Representatives cooperate with Nemo Holding and their Representatives, and prepare and make available such documents and take such other actions as Nemo Holding may request in good faith, in connection with any filing, notice or Consent that Nemo Holding is required or elects to make, give or obtain.
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5.3 Commercially Reasonable Efforts.
During the Pre-Closing Period, Eason shall use its commercially reasonable efforts to cause the conditions set forth in Article VI and Article VII to be satisfied on a timely basis and so that the Closing can take place on or before January 31, 2020, or as soon thereafter as is reasonably practical, in accordance with Section 1.5, and shall not take any action or omit to take any action, the taking or omission of which would or could reasonably be expected to result in any of the representations and warranties or Eason set forth in this Agreement becoming untrue or in any of the conditions of closing set forth in Article VI or Article VII not being satisfied.
5.4 Disclosure of Confidential Information.
(a) Each of Eason and the Shareholders acknowledges and agrees that it may receive Confidential Information in connection with this Transaction including without limitation, the Nemo Holding Disclosure Schedule and any information disclosed during the due diligence process, the public disclosure of which will harm the disclosing party’s business. The Receiving Party may use Confidential Information only in connection with the Transaction. The results of the due diligence review may not be used for any other purpose other than in connection with the Transaction. Except as expressly provided in this Agreement, the Receiving Party shall not disclose Confidential Information to anyone without the Disclosing Party’s prior written consent. The Receiving Party shall take all reasonable measures to avoid disclosure, dissemination or unauthorized use of Confidential Information, including, at a minimum, those measures it takes to protect its own confidential information of a similar nature. The Receiving Party shall not export any Confidential Information in any manner contrary to the export regulations of the governmental jurisdiction to which it is subject.
(b) The Receiving Party may disclose Confidential Information as required to comply with binding orders of governmental entities that have jurisdiction over it, provided that the Receiving Party (i) gives the Disclosing Party reasonable notice (to the extent permitted by law) to allow the Disclosing Party to seek a protective order or other appropriate remedy, (ii) discloses only such information as is required by the governmental entity, and (iii) uses commercially reasonable efforts to obtain confidential treatment for any Confidential Information so disclosed.
(c) All Confidential Information shall remain the exclusive property of the Disclosing Party. The Disclosing Party’s disclosure of Confidential Information shall not constitute an express or implied grant to the Receiving Party of any rights to or under the Disclosing Party’s patents, copyrights, trade secrets, trademarks or other intellectual property rights.
(d) The Receiving Party shall notify the Disclosing Party immediately upon discovery of any unauthorized use or disclosure of Confidential Information or any other breach of this Agreement by the Receiving Party. The Receiving Party shall cooperate with the Disclosing Party in every reasonable way to help the Disclosing Party regain possession of such Confidential Information and prevent its further unauthorized use.
(e) The Receiving Party shall return or destroy all tangible materials embodying Confidential Information (in any form and including, without limitation, all summaries, copies and excerpts of Confidential Information) promptly following the Disclosing Party’s written request; provided, however, that, subject to the provisions of this Agreement, the Receiving Party may retain one copy of such materials in the confidential, restricted access files of its legal department for use only in the event a dispute arises between the parties related to the Transaction and only in connection with that dispute. At the Disclosing Party’s option, the Receiving Party shall provide written certification of its compliance with this Section.
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5.5 Indemnification.
(a) Each of Nemo Holding and the Shareholders, jointly and severally, each shall defend, indemnify and hold harmless Eason, and its respective employees, officers, directors, stockholders, controlling persons, affiliates, agents, successors and assigns (collectively, the “Eason Indemnified Persons”), and shall reimburse the Eason Indemnified Person, for, from and against any loss, liability, claim, damage, expense (including costs of investigation and defense and reasonable attorneys’ fees) or diminution of value, whether or not involving a third-party claim (collectively, “Damages”), directly or indirectly, relating to, resulting from or arising out of:
(i) any untrue representations, misrepresentations or breach of warranty by or of Nemo Holding or the Shareholders contained in or pursuant to this Agreement, and the Nemo Holding Disclosure Schedule; (ii) any breach or nonfulfillment of any covenant, agreement or other obligation by or of Nemo Holding or the Shareholders (only to the extent made or occurring prior to or at the Closing) contained in or pursuant to this Agreement, the Transaction Agreements executed by Nemo Holding or any of the Shareholders in their individual capacity, the Nemo Holding Disclosure Schedule, or any of the other agreements, documents, schedules or exhibits to be entered into by Nemo Holding or any of the Shareholders in their individual capacity pursuant to or in connection with this Agreement;
(iii) all of Pre-Closing liabilities of Nemo Holding or the Shareholders; and
(iv) any liability, claim, action or proceeding of any kind whatsoever, whether instituted or commenced prior to or after the Closing Date, which directly or indirectly relates to, arises or results from, or occurs in connection with facts or circumstances relating to the conduct of business of Nemo Holding or the assets of Nemo Holding, or events or circumstances existing on or prior to the Closing Date.
(b) Eason shall defend, indemnify and hold harmless Nemo Holding and its respective affiliates, agents, successors and assigns (collectively, the “Nemo Holding Indemnified Persons”), and shall reimburse the Nemo Holding Indemnified Persons, for, from and against any Damages, directly or indirectly, relating to, resulting from or arising out of:
(i) any untrue representation, misrepresentation or breach of warranty by or of Eason contained in or pursuant to this Agreement;
(ii) any breach or nonfulfillment of any covenant, agreement or other obligations by or of Eason contained in or pursuant to this Agreement, the Transaction Agreements or any other agreements, documents, schedules or exhibits to be entered into or delivered to pursuant to or in connection with this Agreement.
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(c) Promptly after receipt by an indemnified Party under Section 5.6 of this Agreement of notice of a claim against it (“Claim”), such indemnified Party shall, if a claim is to be made against an indemnifying Party under such Section, give notice to the indemnifying Party of such Claim, but the failure to so notify the indemnifying Party will not relieve the indemnifying Party of any liability that it may have to any indemnified Party, except to the extent that the indemnifying Party demonstrates that the defense of such action is prejudiced by the indemnified Party’s failure to give such notice.
(d) A claim for indemnification for any matter not involving a third-party claim may be asserted by notice to the Party from whom indemnification is sought.
ARTICLE VI.
CLOSING CONDITIONS OF EASON
Eason’s obligations to affect the Closing and consummate the Exchange are subject to the satisfaction of each of the following conditions:
6.1 Accuracy of Representations and Warranties.
The representations and warranties of Nemo Holding and the Shareholders in this Agreement shall have been true and correct as of the date of this Agreement and shall be true and correct on and as of the Closing. Nemo Holding and the Shareholders shall have performed all obligations in this Agreement required to be performed or observed by them on or prior to the Closing.
6.2 Additional Conditions to Closing.
(a) All necessary approvals under federal and state securities laws and other authorizations relating to the issuance of the Acquisition Shares and the transfer of the Shares shall have been received.
(b) Eason shall have obtained an opinion stating that the terms of the Exchange are fair, just and equitable to Eason and its shareholders.
(c) No preliminary or permanent injunction or other order by any federal, state or foreign court of competent jurisdiction which prohibits the consummation of the Exchange shall have been issued and remain in effect. No statute, rule, regulation, executive order, stay, decree, or judgment shall have been enacted, entered, issued, promulgated or enforced by any court or governmental authority which prohibits or restricts the consummation of the Exchange. All authorizations, consents, orders or approvals of, or declarations or filings with, and all expirations of waiting periods imposed by, any Governmental Body which are necessary for the consummation of the Exchange, other than those the failure to obtain which would not materially adversely affect the consummation of the Exchange or in the aggregate have a material adverse effect on Eason and its subsidiaries, taken as a whole, shall have been filed, occurred or been obtained (all such permits, approvals, filings and consents and the lapse of all such waiting periods being referred to as the “Requisite Regulatory Approvals”) and all such Requisite Regulatory Approvals shall be in full force and effect.
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(d) There shall not be any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the Exchange, by any Governmental Body which, in connection with the grant of a Requisite Regulatory Approval, imposes any material condition or material restriction upon Eason or its subsidiaries or Nemo Holding, including, without limitation, requirements relating to the disposition of assets, which in any such case would so materially adversely impact the economic or business benefits of the Exchange as to render inadvisable the consummation of the Exchange.
6.3 Performance of Agreements.
Nemo Holding or the Shareholders, as the case may be, shall have executed and delivered each of the agreements, instruments and documents required to be executed and delivered, and performed all actions required to be performed by Nemo Holding or any of the Shareholders, as the case may be, pursuant to this Agreement, except as Eason has otherwise consented in writing.
6.4 Consents.
Each of the Consents identified or required to have been identified in the Nemo Holding Disclosure Schedule shall have been obtained and shall be in full force and effect, other than those Consents, which have been expressly waived by Eason.
6.5 No Material Adverse Change and Satisfactory Due Diligence.
There shall not have been any material adverse change in the business, condition, assets, liabilities, operations or financial performance of Nemo Holding since the date of this Agreement as determined by Eason in its discretion. Eason shall be satisfied in all respects with the results of its due diligence review of Nemo Holding
6.6 Nemo Holding Closing Certificate.
In addition to the documents required to be received under this Agreement, Eason shall also have received the following documents:
(a) copies of resolutions of Nemo Holding, certified by a Secretary, Assistant Secretary or other appropriate officer of Nemo Holding, authorizing the execution, delivery and performance of this Agreement and other Transactional Agreements;
(b) good standing certificate of Nemo Holding; and
(c) such other documents as Eason may request in good faith for the purpose of (i) evidencing the accuracy of any representation or warranty made by Nemo Holding, (ii) evidencing the compliance by Nemo Holding, or the performance by Nemo Holding of, any covenant or obligation set forth in this Agreement or any of the other Transactional Agreements, (iii) evidencing the satisfaction of any condition set forth in Article VII or this Article VI, or (iv) otherwise facilitating the consummation or performance of the Exchange.
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6.7 Transactional Agreements.
Each Person (other than Eason) shall have executed and delivered prior to or on the Closing Date all Transactional Agreements to which it is to be a party.
6.8 Resignation of Directors and Officers.
Eason shall have received a written resignation from each of the directors and officers of Nemo Holding effective as of the Closing.
6.9 Delivery of Stock Certificates, Minute Book and Corporate Seal.
The Shareholders shall have delivered to Eason the stock books, stock ledgers, minute books and corporate seals of Nemo Holding
ARTICLE VII.
CLOSING CONDITIONS OF THE SHAREHOLDERS
The Shareholders’ obligations to affect the Closing and consummate the Exchange are subject to the satisfaction of each of the following conditions:
7.1 Accuracy of Representations and Warranties.
The representations and warranties of Eason in this Agreement shall have been true and correct as of the date of this Agreement and shall be true and correct on and as of the Closing and Eason shall have performed all obligations in this Agreement required to be performed or observed by them on or prior to the Closing.
7.2 Additional Conditions to Closing.
(a) All necessary approvals under federal and state securities laws and other authorizations relating to the issuance and transfer of the Acquisition Shares by Eason and the transfer of the Shares by Nemo Holding shall have been received.
(b) No preliminary or permanent injunction or other order by any federal, state or foreign court of competent jurisdiction which prohibits the consummation of the Exchange shall have been issued and remain in effect. No statute, rule, regulation, executive order, stay, decree, or judgment shall have been enacted, entered, issued, promulgated or enforced by any court or governmental authority which prohibits or restricts the consummation of the Exchange. All Requisite Regulatory Approvals shall have been filed, occurred or been obtained and all such Requisite Regulatory Approvals shall be in full force and effect.
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(c) There shall not be any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the Exchange, by any federal or state Governmental Body which, in connection with the grant of a Requisite Regulatory Approval, imposes any condition or restriction upon the Surviving Corporation or its subsidiaries (or, in the case of any disposition of assets required in connection with such Requisite Regulatory Approval, upon Eason, its subsidiaries, Nemo Holding or any of their subsidiaries), including, without limitation, requirements relating to the disposition of assets, which in any such case would so materially adversely impact the economic or business benefits of the Exchange as to render inadvisable the consummation of the Exchange.
7.3 Eason Closing Certificates.
The Shareholders shall have received the following documents:
(a) copies of resolutions of Eason, certified by a Secretary, Assistant Secretary or other appropriate officer of Eason, authorizing the execution, delivery and performance of the Transactional Agreements and the Exchange;
(b) good standing certificates for the State of Nevada; and
(c) such other documents as Nemo Holding may request in good faith for the purpose of (i) evidencing the accuracy of any representation or warranty made by Eason, (ii) evidencing the compliance by Eason with, or the performance by Eason of, any covenant or obligation set forth in this Agreement or any of the other Transactional Agreements, (iii) evidencing the satisfaction of any condition set forth in Article VI or this Article VII, or (iv) otherwise facilitating the consummation or performance of the Exchange.
7.4 No Material Adverse Change.
There shall not have been any material adverse change in Eason’s business, condition, assets, liabilities, operations or financial performance since the date of this Agreement.
7.5 Performance of Agreements.
Eason shall have executed and delivered each of the agreements, instruments and documents required to be executed and delivered, and performed all actions required by Eason pursuant to this Agreement, except as Nemo Holding and the Shareholders have otherwise consented in writing.
7.6 Consents.
Each of the Consents identified or required to have been identified in Section 3.4 shall have been obtained and shall be in full force and effect, other than those Consents the absence of which shall not have a material adverse effect on Eason.
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7.7 Eason Stock.
On the Closing Date, shares of Eason Common Stock shall be eligible for quotation on the OTC Markets.
ARTICLE VIII.
FURTHER ASSURANCES
Each of the parties hereto agrees that it will, from time to time after the date of the Agreement, execute and deliver such other certificates, documents and instruments and take such other action as may be reasonably requested by the other party to carry out the actions and transactions contemplated by this Agreement, including the closing conditions described in Articles VI and VII. Nemo Holding and the Shareholders shall reasonably cooperate with Eason in its obtaining of the books and records of Nemo Holding, or in preparing any solicitation materials to be sent to the shareholders of Eason in connection with the approval of the Exchange and the transactions contemplated by the Transactional Agreements.
ARTICLE IX.
TERMINATION
9.1 Termination.
This Agreement may be terminated and the Exchange abandoned at any time prior to the Closing Date:
(a) by mutual written consent of Eason, Nemo Holding and the Shareholders;
(b) by Eason if (i) there is a material Breach of any covenant or obligation of Nemo Holding or the Shareholders; provided however, that if such Breach or Breaches are capable of being cured prior to the Closing Date, such Breach or Breaches shall not have been cured within 10 days of delivery of the written notice of such Breach, or (ii) Eason reasonably determines that the timely satisfaction of any condition set forth in Article VI has become impossible or impractical (other than as a result of any failure on the part of Eason to comply with or perform its covenants and obligations under this Agreement or any of the other Transactional Agreements);
(b) by Nemo Holding if (i) there is a material Breach of any covenant or obligation of Eason; provided, however, that if such Breach or Breaches are capable of being cured prior to the Closing Date, such Breach or Breaches shall not have been cured within 10 days of delivery of the written notice of such Breach, or (ii) Nemo Holding reasonably determines that the timely satisfaction of any condition set forth in Article VII has become impossible or impractical (other than as a result of any failure on the part of Nemo Holding or any Shareholder to comply with or perform any covenant or obligation set forth in this Agreement or any of the other Transactional Agreements);
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(d) by Eason if the Closing has not taken place on or before January 31, 2020, (except if as a result of any failure on the part of Eason to comply with or perform its covenants and obligations under this Agreement or in any other Transactional Agreement);
(e) by Nemo Holding if the Closing has not taken place on or before January 31, 2020 (except if as a result of the failure on the part of Nemo Holding or the Shareholders to comply with or perform any covenant or obligation set forth in this Agreement or in any other Transactional Agreement);
(f) by any of Eason, on the one hand or Nemo Holding, on the other hand, if any court of competent jurisdiction in the United States or other United States governmental body shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the Exchange and such order, decree, ruling or any other action shall have become final and non-appealable; provided, however, that the party seeking to terminate this Agreement pursuant to this clause (f) shall have used all commercially reasonable efforts to remove such order, decree or ruling; or
(g) The parties hereby agree and acknowledge that a breach of the provisions of Articles 4.1, 4.2, 4.3, 4.4 and 4.6 are, without limitation, material Breaches of this Agreement.
9.2 Termination Procedures.
If Eason wishes to terminate this Agreement pursuant to Section 9.1, Eason shall deliver to the Shareholders and Nemo Holding a written notice stating that Eason is terminating this Agreement and setting forth a brief description of the basis on which Eason is terminating this Agreement. If Nemo Holding wishes to terminate this Agreement pursuant to Section 9.1, Nemo Holding shall deliver to Eason a written notice stating that Nemo Holding is terminating this Agreement and setting forth a brief description of the basis on which Nemo Holding is terminating this Agreement.
9.3 Effect of Termination.
In the event of termination of this Agreement as provided above, this Agreement shall forthwith have no further effect. Except for a termination resulting from a Breach by a party to this Agreement, there shall be no liability or obligation on the part of any party hereto. In the event of a breach, the remedies of the non-breaching party shall be to seek damages from the breaching party or to obtain an order for specific performance, in addition to or in lieu of other remedies provided herein. Upon request after termination, each party will redeliver or, at the option of the party receiving such request, destroy all reports, work papers and other material of any other party relating to the Exchange, whether obtained before or after the execution hereof, to the party furnishing same; provided, however, that Nemo Holding and the Shareholders shall, in all events, remain bound by and continue to be subject to Section 4.6 and all parties shall in all events remain bound by and continue to be subject to Section 5.4 and 5.5.
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Notwithstanding the above, both Eason, on the one hand, and Nemo Holding and the Shareholders, on the other hand, shall be entitled to announce the termination of this Agreement by means of a mutually acceptable press release.
ARTICLE X.
MISCELLANEOUS
10.1 Survival of Representations and Warranties.
All representations and warranties of Nemo Holding and the Shareholders in this Agreement and the Nemo Holding Disclosure Schedule shall survive shall survive indefinitely. The right to indemnification, reimbursement or other remedy based on such representations and warranties will not be affected by any investigation conducted by the parties.
10.2 Expenses.
Except as otherwise set forth herein, each of the parties to the Exchange shall bear its own expenses incurred in connection with the negotiation and consummation of the transactions contemplated by this Agreement.
10.3 Entire Agreement.
This Agreement and the other Transactional Agreements contain the entire agreement of the parties hereto, and supersede any prior written or oral agreements between them concerning the subject matter contained herein, or therein. There are no representations, agreements, arrangements or understandings, oral or written, between the parties to this Agreement, relating to the subject matter contained in this Agreement and the other Transaction Agreements, which are not fully expressed herein or therein. The schedules and each exhibit attached to this Agreement or delivered pursuant to this Agreement are incorporated herein by this reference and constitute a part of this Agreement.
10.4 Counterparts.
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.
10.5 Descriptive Headings.
The Article and Section headings in this Agreement are for convenience only and shall not affect the meanings or construction of any provision of this Agreement.
10.6 Notices.
Any notices required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficiently given on the earlier to occur of the date of personal delivery, the date of receipt or three (3) days after posting by overnight courier or registered or certified mail, postage prepaid, addressed as follows:
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If to Eason:
Eason Education Kingdom Holdings, Inc.
Unit 19, 35/F, Tower 1, Millennium City 1, 388 Kwun Tong Road, Kwun Tong,
Kowloon, Hong Kong.
If to Nemo Holding:
Nemo Holding Company Limited
1303, 13/F, Technology Plaza, 651 King’s Road, North Point, Hong Kong
If to the Shareholders:
c/o Nemo Holding Company Limited
1303, 13/F, Technology Plaza, 651 King’s Road, North Point, Hong Kong
To such address or addresses as a party shall have previously designated by notice to the sender given in accordance with this section.
10.7 Choice of Law.
This Agreement shall be construed in accordance with and governed by the laws of the State of Nevada without regard to choice of law principles. Each of the parties hereto consents to the jurisdiction of the courts of the State of California, County of Los Angeles and to the federal courts located in the County of Los Angeles, State of California.
10.8 Binding Effect; Benefits.
This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer on any Person other than the parties or their respective successors and permitted assigns, the Shareholders and other Persons expressly referred to herein, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
10.9 Assignability.
Neither this Agreement nor any of the parties’ rights hereunder shall be assignable by any party without the prior written consent of the other parties and any attempted assignment without such consent shall be void.
10.10 Waiver and Amendment.
Any term or provision of this Agreement may be waived at any time by the party, which is entitled to the benefits thereof. The waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. The parties may, by mutual agreement in writing, amend this Agreement in any respect. Nemo Holding and the Shareholders hereby acknowledge their intent that this Agreement includes as a party any holder of capital stock in Nemo Holding at the time of Closing. Eason, Nemo Holding and the Shareholders therefore agree that this Agreement may be amended, without the further consent of any party to this Agreement, (i) to add as a new Shareholder any existing shareholder of Nemo Holding and (ii) to modify Annex A to reflect the addition of such shareholder.
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10.11 Attorney’ Fees.
In the event of any action or proceeding to enforce the terms and conditions of this Agreement, the prevailing party shall be entitled to an award of reasonable attorneys’ and experts’ fees and costs, in addition to such other relief as may be granted.
10.12 Severability.
If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.
10.13 Construction.
In executing this Agreement, the parties severally acknowledge and represent that each: (a) has fully and carefully read and considered this Agreement; (b) has or has had the opportunity to consult independent legal counsel regarding the legal effect and meaning of this document and all terms and conditions hereof; (c) has been afforded the opportunity to negotiate as to any and all terms hereof; and (d) is executing this Agreement voluntarily, free from any influence, coercion or duress of any kind. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party.
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[signature page follows]
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IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the day and year first above written.
| Eason: |
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| EASON EDUCATION KINGDOM HOLDINGS, INC. |
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| By: |
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| Name: Leung Tin Lung David |
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| Title: Executive Director |
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| Nemo Holding: |
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| NEMO HOLDING COMPANY LIMITED |
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| By: |
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| Namc: Leung Tin Lung David |
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| Title: Director |
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| NEMO HOLDING SHAREHOLDER: |
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| Leung Tin Lung David |
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| Number of shares of Nemo Holding to be selling: 6000 |
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| Number of common stock of Eason to be receiving: 6,000,000 |
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| NEMO HOLDING SHAREHOLDER: |
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| Chak Wan Ling Margaret |
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| Number of shares of Nemo Holding to be selling: 2,763 |
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| Number of common stock of Eason to be receiving: 2,763,000 |
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| NEMO HOLDING SHAREHOLDER: |
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| Chu Yuen Kwan Heidi |
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| Number of share of Nemo Holding to be selling: 300 |
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| Number of common stock of Eason to be receiving: 300,000 |
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| NEMO HOLDING SHAREHOLDER: |
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| Lau Hin Yan |
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| Number of shares of Nemo Holding to be selling: 180 |
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| Number of common stock of Eason to be receiving: 180,000 |
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| NEMO HOLDING SHAREHOLDER: |
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| Pang Ping Kwok Samson |
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| Number of shares of Nemo Holding to be selling: 150 |
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| Number of common stock of Eason to be receiving: 150,000 |
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| NEMO HOLDING SHAREHOLDER: |
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| Chan Wai Ling |
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| Number of shares of Nemo Holding to be selling: 100 |
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| Number of common stock of Eason to be receiving: 100,000 |
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| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Tam Yee Ping Amii |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 45 |
|
|
|
|
| Number of common stock of Eason to be receiving: 45,000 |
|
| 42 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Emmanuel Daniel |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 30 |
|
|
|
|
| Number of common stock of Eason to be receiving: 30,000 |
|
| 43 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Qiu Feng |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 30 |
|
|
|
|
| Number of common stock of Eason to be receiving: 30,000 |
|
| 44 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Lam Kai Fat Henry |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 30 |
|
|
|
|
| Number of common stock of Eason to be receiving: 30,000 |
|
| 45 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Tam Oi Lin Irene |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 30 |
|
|
|
|
| Number of common stock of Eason to be receiving: 30,000 |
|
| 46 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Hirofumi Takaku |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 30 |
|
|
|
|
| Number of common stock of Eason to be receiving: 30,000 |
|
| 47 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Koki Tachino |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 30 |
|
|
|
|
| Number of common stock of Eason to be receiving: 30,000 |
|
| 48 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Nago Tri Hung |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 30 |
|
|
|
|
| Number of common stock of Eason to be receiving: 30,000 |
|
| 49 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Vanessa Fong |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 30 |
|
|
|
|
| Number of common stock of Eason to be receiving: 30,000 |
|
| 50 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Pun Yin Wan |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 30 |
|
|
|
|
| Number of common stock of Eason to be receiving: 30,000 |
|
| 51 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Cheung Sau Mui |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 30 |
|
|
|
|
| Number of common stock of Eason to be receiving: 30,000 |
|
| 52 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Patrick Douglas Sherriff |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 30 |
|
|
|
|
| Number of common stock of Eason to be receiving: 30,000 |
|
| 53 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Chan Ming Kay |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 30 |
|
|
|
|
| Number of common stock of Eason to be receiving: 30,000 |
|
| 54 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Bradley Miles Emery |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 15 |
|
|
|
|
| Number of common stock of Eason to be receiving: 15,000 |
|
| 55 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Kim Eunjong |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 10 |
|
|
|
|
| Number of common stock of Eason to be receiving: 10,000 |
|
| 56 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Nicolas Spencer Walton |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 10 |
|
|
|
|
| Number of common stock of Eason to be receiving: 10,000 |
|
| 57 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Paul Lance Haggart |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 10 |
|
|
|
|
| Number of common stock of Eason to be receiving: 10,000 |
|
| 58 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Jun Haggart |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 10 |
|
|
|
|
| Number of common stock of Eason to be receiving: 10,000 |
|
| 59 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Arman Grigoriants |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 10 |
|
|
|
|
| Number of common stock of Eason to be receiving: 10,000 |
|
| 60 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Tigran Egiazarov |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 10 |
|
|
|
|
| Number of common stock of Eason to be receiving: 10,000 |
|
| 61 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Chan Mei Yi |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 7 |
|
|
|
|
| Number of common stock of Eason to be receiving: 7,000 |
|
| 62 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Kurt Henry Greniger |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 10 |
|
|
|
|
| Number of common stock of Eason to be receiving: 10,000 |
|
| 63 |
| NEMO HOLDING SHAREHOLDER: |
|
|
|
|
|
|
|
| Teresa Louise Greniger |
|
|
|
|
| Number of shares of Nemo Holding to be selling: 10 |
|
|
|
|
| Number of common stock of Eason to be receiving: 10,000 |
|
| 64 |
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Agreement. “Agreement” shall mean the Share Exchange Agreement to which this Exhibit A is attached (including all Disclosure Schedules and all Exhibits), as it may be amended from time to time.
Approved Plans. “Approved Plans” shall mean a stock option or similar plan for the benefit of employees or others, which has been approved by the shareholders of Nemo Holding
Nemo Holding Shares of Common Stock. “Nemo Holding Shares of Common Stock” shall mean the shares of common stock of Nemo Holding
Breach. There shall be deemed to be a “Breach” of a representation, warranty, covenant, obligation or other provision if there is or has been any inaccuracy in or breach of, or any failure to comply with or perform, such representation, warranty, covenant, obligation or other provision.
Certificates. “Certificates” shall have the meaning specified in Section 1.3 of the Agreement.
Eason. “Eason” shall have the meaning specified in the first paragraph of the Agreement.
Eason Common Stock. “Eason Common Stock” shall mean the shares of common stock of Eason.
Eason SEC Reports. “Eason SEC Reports” shall have the meaning specified in Section 4.6 of the Agreement.
Closing. “Closing” shall have the meaning specified in Section 1.5 of the Agreement.
Closing Date. “Closing Date” shall have the meaning specified in Section 1.5 of the Agreement.
Code. “Code” shall mean the Internal Revenue Code of 1986 or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code or any successor law.
Confidential Information. “Confidential Information” shall mean all nonpublic information disclosed by one party or its agents (the “Disclosing Party”) to the other party or its agents (the “Receiving Party”) that is designated as confidential or that, given the nature of the information or the circumstances surrounding its disclosure, reasonably should be considered as confidential. Confidential Information includes, without limitation (i) nonpublic information relating to the Disclosing Party’s technology, customers, vendors, suppliers, business plans, intellectual property, promotional and marketing activities, finances, agreements, transactions, financial information and other business affairs, and (ii) third-party information that the Disclosing Party is obligated to keep confidential.
| 65 |
Confidential Information does not include any information that (i) is or becomes publicly available without breach of this Agreement, (ii) can be shown by documentation to have been known to the Receiving Party at the time of its receipt from the Disclosing Party, (iii) is received from a third party who, to the knowledge of the Receiving Party, did not acquire or disclose such information by a wrongful or tortious act, or (iv) can be shown by documentation to have been independently developed by the Receiving Party without reference to any Confidential Information.
Consent. “Consent” shall mean any approval, consent, ratification, permission, waiver or authorization (including any Governmental Authorization).
Disclosure Schedule Update. “Disclosure Schedule Update” shall have the meaning specified in Section 4.4 of the Agreement.
Nemo Holding Disclosure Schedule. “Nemo Holding Disclosure Schedule” shall have the meaning specified in introduction to Article II of the Agreement.
Entity. “Entity” shall mean any corporation (including any nonprofit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, cooperative, foundation, society, political party, union, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity.
Environmental Laws. “Environmental Laws” shall mean any Law or other requirement relating to the protection of the environment, health, or safety from the release or disposal of hazardous materials.
Environmental Permit. “Environmental Permit” means all licenses, permits, authorizations, approvals, franchises and rights required under any applicable Environmental Law or Order.
Equity Securities. “Equity Security” shall mean any stock or similar security, including, without limitation, securities containing equity features and securities containing profit participation features, or any security convertible into or exchangeable for, with or without consideration, any stock or similar security, or any security carrying any warrant, right or option to subscribe to or purchase any shares of capital stock, or any such warrant or right.
Exchange Act. “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.
GAAP. “GAAP” shall mean United States Generally Accepted Accounting Principles, applied on a consistent basis.
Governmental Authorization. “Governmental Authorization” shall mean any:
(F) permit, license, certificate, franchise, concession, approval, consent, ratification, permission, clearance, confirmation, endorsement, waiver, certification, designation, rating, registration, qualification or authorization that is issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Law; or
| 66 |
(b) right under any contract with any Governmental Body.
Governmental Body. “Governmental Body” shall mean any:
(F) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body or Entity and any court or other tribunal); or
(d) individual, Entity or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature, including any court, arbitrator, administrative agency or commissioner, or other governmental authority or instrumentality.
Indebtedness. “Indebtedness” shall mean any obligation, contingent or otherwise. Any obligation secured by a Lien on, or payable out of the proceeds of, or production from, property of the relevant party will be deemed to be Indebtedness.
Intellectual Property. “Intellectual Property” means all industrial and intellectual property, including, without limitation, all U.S. and non-U.S. patents, patent applications, patent rights, trademarks, trademark applications, common law trademarks, Internet domain names, trade names, service marks, service mark applications, common law service marks, and the goodwill associated therewith, copyrights, in both published and unpublished works, whether registered or unregistered, copyright applications, franchises, licenses, know-how, trade secrets, technical data, designs, customer lists, confidential and proprietary information, processes and formulae, all computer software programs or applications, layouts, inventions, development tools and all documentation and media constituting, describing or relating to the above, including manuals, memoranda, and records, whether such intellectual property has been created, applied for or obtained anywhere throughout the world.
Knowledge. A corporation shall be deemed to have “knowledge” of a particular fact or matter only if a director or officer of such corporation has, had or should have had knowledge of such fact or matter.
Laws. “Laws” means, with respect to any Person, any U.S. or non-U.S. federal, national, state, provincial, local, municipal, international, multinational or other law (including common law), constitution, statute, code, ordinance, rule, regulation or treaty applicable to such Person.
| 67 |
Lien. “Lien” shall mean any mortgage, pledge, security interest, encumbrance, lien or charge, right of first refusal, encumbrance or other adverse claim or interest of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction and including any lien or charge arising by Law.
Material Adverse Effect. “Material Adverse Effect” means any change, effect or circumstance which, individually or in the aggregate, would reasonably be expected to (a) have a material adverse effect on the business, assets, financial condition or results of operations of the affected party, in each case taken as a whole or (b) materially impair the ability of the affected party to perform its obligations under this Agreement and the Transaction Agreements, excluding any change, effect or circumstance resulting from (i) the announcement, pendency or consummation of the transactions contemplated by this Agreement, (ii) changes in the United States securities markets generally, or (iii) changes in general economic, currency exchange rate, political or regulatory conditions in industries in which the affected party operates.
Material Contract. “Material Contract” means any and all agreements, contracts, arrangements, understandings, leases, commitments or otherwise, providing for potential payments by or to the company in excess of $1,000, and the amendments, supplements and modifications thereto.
Order. “Order” shall mean any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any Governmental Body.
Ordinary Course of Business. “Ordinary Course of Business” shall mean an action taken by Nemo Holding if (i) such action is taken in normal operation, consistent with past practices, (ii) such action is not required to be authorized by the Shareholders, Board of Directors or any committee of the Board of the Directors or other governing body of Nemo Holding and (iii) does not require any separate or special authorization or consent of any nature by any Governmental Body or third party.
Permitted Liens. “Permitted Liens” shall mean (a) Liens for Taxes not yet payable or in respect of which the validity thereof is being contested in good faith by appropriate proceedings and for the payment of which the relevant party has made adequate reserves; (b) Liens in respect of pledges or deposits under workmen’s compensation laws or similar legislation, carriers, warehousemen, mechanics, laborers and materialmen and similar Liens, if the obligations secured by such Liens are not then delinquent or are being contested in good faith by appropriate proceedings conducted and for the payment of which the relevant party has made adequate reserves; and (c) statutory Liens incidental to the conduct of the business of the relevant party which were not incurred in connection with the borrowing of money or the obtaining of advances or credits and that do not in the aggregate materially detract from the value of its property or materially impair the use thereof in the operation of its business.
Person. “Person” shall mean any individual, Entity or Governmental Body.
| 68 |
Pre-Closing Period. “Pre-Closing Period” shall mean the period commencing as of the date of the Agreement and ending on the Closing Date.
Proceeding. “Proceeding” shall mean any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding and any informal proceeding), prosecution, contest, hearing, inquiry, inquest, audit, examination or investigation, commenced, brought, conducted or heard by or before, or otherwise has involved, any Governmental Body or any arbitrator or arbitration panel.
Representatives. “Representatives” of a specified party shall mean officers, directors, employees, attorneys, accountants, advisors and representatives of such party, including, without limitation, all subsidiaries of such specified party, and all such Persons with respect to such subsidiaries. The Related Persons of Nemo Holding shall be deemed to be “Representatives” of Nemo Holding, as applicable.
SEC. “SEC” shall mean the United States Securities and Exchange Commission.
Securities Act. “Securities Act” shall mean the United States Securities Act of 1933, as amended.
Taxes. “Taxes” shall mean all foreign, federal, state or local taxes, charges, fees, levies, imposts, duties and other assessments, as applicable, including, but not limited to, any income, alternative minimum or add-on, estimated, gross income, gross receipts, sales, use, transfer, transactions, intangibles, ad valorem, value-added, franchise, registration, title, license, capital, paid-up capital, profits, withholding, payroll, employment, unemployment, excise, severance, stamp, occupation, premium, real property, recording, personal property, federal highway use, commercial rent, environmental (including, but not limited to, taxes under Section 59A of the Code) or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest, penalties or additions to tax with respect to any of the foregoing; and “Tax” means any of the foregoing Taxes.
Tax Group. “Tax Group” shall mean any federal, state, local or foreign consolidated, affiliated, combined, unitary or other similar group of which Nemo Holding is now or was formerly a member.
Tax Return. “Tax Return” shall mean any return, declaration, report, claim for refund or credit, information return, statement or other similar document filed with any Governmental Body with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
Transaction Agreements. “Transactional Agreements” shall mean this Agreement and any agreement or document to be executed pursuant to this Agreement.
| 69 |
ANNEX A
| Stockholder |
| Number of Shares of Common Stock of Nemo Holding Held |
|
| Number of Shares of Common Stock of Nemo Holding To Be Selling |
|
| Number of Shares of Common Stock of Eason To Be Issuing |
| |||
| Leung Tin Lung David |
|
| 6,000 |
|
|
| 6,000 |
|
|
| 6,000,000 |
|
| Chak Wan Ling Margaret |
|
| 2,763 |
|
|
| 2,763 |
|
|
| 2,763,000 |
|
| Chiu Yuen Kwan Hiedi |
|
| 300 |
|
|
| 300 |
|
|
| 300,000 |
|
| Lau Hin Yan |
|
| 180 |
|
|
| 180 |
|
|
| 180,000 |
|
| Pang Ping Kwok Samson |
|
| 150 |
|
|
| 150 |
|
|
| 150,000 |
|
| Chan Wai Ling |
|
| 100 |
|
|
| 100 |
|
|
| 100,000 |
|
| Tam Yee Ping Amii |
|
| 45 |
|
|
| 45 |
|
|
| 45,000 |
|
| Emmanuel Daniel |
|
| 30 |
|
|
| 30 |
|
|
| 30,000 |
|
| Qiu Feng |
|
| 30 |
|
|
| 30 |
|
|
| 30,000 |
|
| Lam Kai Fat Henry |
|
| 30 |
|
|
| 30 |
|
|
| 30,000 |
|
| Tam Oi Lin Irene |
|
| 30 |
|
|
| 30 |
|
|
| 30,000 |
|
| Hirofumi Takaku |
|
| 30 |
|
|
| 30 |
|
|
| 30,000 |
|
| Koki Tachino |
|
| 30 |
|
|
| 30 |
|
|
| 30,000 |
|
| Ngo Tri Hung |
|
| 30 |
|
|
| 30 |
|
|
| 30,000 |
|
| Vanessa Fong |
|
| 30 |
|
|
| 30 |
|
|
| 30,000 |
|
| Pun Yin Wan |
|
| 30 |
|
|
| 30 |
|
|
| 30,000 |
|
| Cheung Sau Mui |
|
| 30 |
|
|
| 30 |
|
|
| 30,000 |
|
| Patrick Douglas Sherriff |
|
| 30 |
|
|
| 30 |
|
|
| 30,000 |
|
| Chan Ming Kay |
|
| 30 |
|
|
| 30 |
|
|
| 30,000 |
|
| Bradley Miles Emery |
|
| 15 |
|
|
| 15 |
|
|
| 15,000 |
|
| Kim Eunjong |
|
| 10 |
|
|
| 10 |
|
|
| 10,000 |
|
| Nicholas Spencer Walton |
|
| 10 |
|
|
| 10 |
|
|
| 10,000 |
|
| Paul Lance Haggart |
|
| 10 |
|
|
| 10 |
|
|
| 10,000 |
|
| Jun Haggart |
|
| 10 |
|
|
| 10 |
|
|
| 10,000 |
|
| Arman Grigoriants |
|
| 10 |
|
|
| 10 |
|
|
| 10,000 |
|
| Tigeran Egiazarov |
|
| 10 |
|
|
| 10 |
|
|
| 10,000 |
|
| Chan Mei Yi |
|
| 7 |
|
|
| 7 |
|
|
| 7,000 |
|
| Kurt Henry Greniger |
|
| 10 |
|
|
| 10 |
|
|
| 10,000 |
|
| Teresa Louise Greniger |
|
| 10 |
|
|
| 10 |
|
|
| 10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| TOTAL |
|
| 10,000 |
|
|
| 10,000 |
|
|
| 10,000,000 |
|
| 70 |
EXHIBIT 3.1
EXHIBIT 10.1
COOPERATION AGREEMENT
This Cooperation Agreement is entered into as of February 1st, 2016 (the EFFECTIVE DATE”) between JJ Explorer Tours Limited (“hereinafter refer as JJ”) a Hong Kong corporation, with a registered office located at 1303 Technology Plaza, 651 King’s Road, Hong Kong SAR and Gagfare Limited (hereinafter “Gagare”), a Hong Kong corporation, with a registered office located at 1101, 11/F, Technology Plaza, 651 King’s Road, North Point, Hong Kong SAR. Both parties will be referred as partner in this Agreement.
RECITAS
WHEREAS, “JJ” is in the licensed travel agency businesses, and
WHEREAS, “Gagfare” is in the business of online flight ticketing, and
WHEREAS, the parties desire to establish between them a business cooperation in order to engage in the development, deployment and maintenance of the online web site and mobile application platforms for Gagfare. Notwithstanding the foregoing, the online web site and mobile application platforns (hereinafter “the Platforms”) may be deployed and operates globally, as necessary.
NOW THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:
Article 1. Definitions
1.1 “Government Approvals” of any action to be taken by a Party hereunder shall mean such approval, authorization or confirmation of, consent to, or acceptance of report on the action, together with such licenses, permits or other permissions reasonably required for the action, all as the applicable statutes, decrees, regulations and rulings of governmental authority may require to be obtained in connection with the action from such governmental authority or from political subdivisions thereof.
| 1 |
Article 2. Organization and Capitalization of the Platforms
2.1 Cooperation. On the day of February 1st, 2016 or as soon as practicable thereafter, JJ and Gagfare shall establish a cooperative partnership to develop, deploy and maintain the Platforms covering the global markets.
2.2 Business Objective. The business objective of the Platforms shall engage users to book and issue flight tickets through Gagfare.
2.4 Capital Contribution and Ownership
(a) The Platforms will be developed, deployed and maintained by JJ at JJ’s costs.
(b) Gagfare grants the brand and business knowhow to JJ to develop the Platforms.
(b) Neither Party may change or transfer any of its interest in the Platforms without the prior written consent of the other Party.
Article 3. Confidentiality of Information
3.1 Confidentiality. Each Party agrees to keep in strict confidence (i) the terms and conditions of this Agreement and (ii) any non-public information obtained from the other Party in connection with or pursuant to this Agreement or the transactions contemplated hereby (collectively, “Confidential Information”) and to protect the Confidential Information with the same degree of care normally used to protect its own confidential information of a similar nature. Each Party agrees not to disclose or allow disclosure of any Confidential Information to any third party and not to use any Confidential Information, except, in each case, for the purposes of implementing and enforcing this Agreement, without the prior written consent of the other Party.
3.2 Exceptions. The restrictions set forth in Section 3.1 shall not apply to any Confidential Information:
| (a) | which is or becomes generally available to the public through no fault on the part of the receiving Party; |
| (b) | which is lawfully in the possession of the receiving Party prior to the disclosure of such information by or on behalf of the other Party as can be reasonably evidenced by appropriate documentation; |
| (c) | which lawfully becomes available to the receiving Party from a source other than the other Party without any duty as to confidentiality or non-use; or |
| (d) | which is required to be disclosed or provided to any court, government or regulatory body of competent jurisdiction pursuant to any law, rule, regulation, judgment, decree or order; provided, however, that the receiving Party shall give the other Party prompt written notice of such requirement and fully cooperate with the other Party so that the other Party (as the case may be) may obtain assurances that confidential treatment will be accorded to such information. |
| 2 |
3.3 Measures to Keep Confidentiality. Each Party agrees that, prior to giving access to any Confidential Information to any of its Affiliates or any of its or such Affiliates’ respective directors, officers, employees, advisors, consultants and agents pursuant to the exception provided in the Section 3.2, it shall require each such Person to agree to be bound by all obligations of confidentiality and non-use under this Article 3, and shall take all reasonable steps to ensure that each such Person will comply with and perform such obligations, in each case to the same extent as if they were direct parties to this Agreement.
3.4 Survival of Termination. The obligations undertaken by the Parties under this Article 3 shall survive the termination of this Agreement for any reason and shall remain in effect and be binding on the Parties for a period of three (3) years after the termination of this Agreement.
Article 4. Representations and Warranties of the Parties
Each Party represents and warrants to the other Party as of the date of this Agreement:
4.1 Corporate Existence and Authority. It is a company duly organized and validly existing under the laws of its jurisdiction of incorporation. It has all requisite corporate or other applicable power and authority to enter into and perform its obligations under this Agreement, all consents, permits, licenses, approvals and authorizations of, and registrations, declarations and other filings with, any governmental agency, official or authority required in connection with the execution, delivery and performance of this Agreement by such Party have been duly obtained or made and are in full force and effect.
4.2 Due Authorization and Execution. Its execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on its part. This Agreement has been duly and validly executed and delivered by it and, assuming due and valid authorization, execution and delivery of this Agreement by the other Party, constitutes legally binding obligations enforceable against it in accordance with the terms of this Agreement, except as the enforceability hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and equitable principles of general application.
| 3 |
4.3 No Violation. Its execution, delivery and performance of this Agreement do not and will not violate, breach or conflict with (i) its organizational documents, (ii) any law, rule, regulation, judgment, order or decree applicable to it or (iii) any agreement or instrument by which it is bound or to which any of its assets or properties are subject.
4.4 No Litigation. There is no suit, action or other legal proceeding pending or, to the best of its knowledge, threatened against it, which could reasonably be expected to have a material adverse effect on its ability to enter into and perform its obligations under this Agreement.
Article 5. Responsibilities of the Parties.
5.1 Responsibilities of JJ
Development, Deployment and Maintenance of the Gagfare online web and mobile application platforms.
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| 1. | Source code development of the Gagfare online web site and mobile applications covering iOS and Android mobile platforms. |
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| 2. | Deployment of online Gagfare web server. |
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| 3. | Register and deployment of Gagfare mobile applications to Apple AppStore and Google Play Store. |
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| 4. | Daily server and application maintenance and bug fixing. |
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| 5. | Implement enhancements when Gagfare business operation change. |
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| 6. | JJ will fully transfer the code ownership and rights to Gagfare by the end of the Fifth year of this Agreement. |
5.2 Responsibilities of Gagfare
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| 1. | Grant JJ with the right to use Gagfare name and logo in the development and operation of the Gagfare online web site and mobile applications. |
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| 2. | Provide and allow the use of business knowhow in the Gagfare business models to be applied in the Platforms. |
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| 3. | Develop global marketing and business operations of Gagfare. |
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| 4. | By the end of the Fifth year of this Agreement, Gagfare will share 50% of the net earning through the Platforms during the first five years period to JJ. |
Article 6. Term and Termination
6.1 Term of Agreement. The term of this Agreement shall begin upon the execution hereof by the Parties and shall continue for a FIVE (5) year period or (ii) this Agreement is sooner terminated by the mutual agreement of the Parties.
6.2 Neither Party shall have the right to terminate this Agreement at any other time, unless such termination is mutually agreed to by the Parties hereto. If termination is mutually agreed by both parties, either Party shall have the right to terminate this Agreement, effective as of the signing date, by providing the other with written notice of termination at least thirty (30) days in advance.
| 4 |
Article 7. Governing Law and Dispute Resolution
7.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of HONG KONG Special Administrative Region without giving effect to the conflict of laws rules thereof.
7.2 Dispute Resolution. Any dispute or controversy which may arise out of or in connection to this Agreement shall be finally settled by arbitration in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce in effect at the time of arbitration. Arbitration shall take place in HONG KONG before a tribunal of three (3) arbitrators selected in accordance with the aforesaid rules. The award or decision of the arbitrators shall be final and binding upon the Parties and shall be enforceable in any court having jurisdiction over the Party against whom such award or decision is sought to be enforced.
Article 8. Notice
8.1 Notices. All notices, requests, demands and other communications under this Agreement must be in writing and will be deemed duly given, unless otherwise expressly indicated to the contrary in this Agreement: (i) when personally delivered; (ii) upon receipt of a telephone facsimile transmission with a confirmed telephonic transmission answer back; (iii) three (3) days after having been deposited in the mail, certified or registered, return receipt requested, postage prepaid; or (iv) one (1) business day after having been dispatched by a nationally recognized overnight courier service, addressed to a Party or their permitted assigns at the addresses written below:
If to JJ:
1303 Technology Plaza, 651 King’s Road, Hong Kong SAR
If to Gagfare:
1101, 11/F, Technology Plaza, 651 King’s Road, North Point, Hong Kong SAR
| 5 |
Article 9. Miscellaneous Provisions
9.1 Assignment. Neither Party shall assign or transfer any of its rights or obligations hereunder without the prior written consent of the other Party, even to a successor in ownership of all or substantially all of the assets of the assigning Party if the successor in ownership expressly assumes in writing the terms and conditions of this Agreement. Any such attempted assignment without written consent will be void. This Agreement shall ensure to the benefit of and shall be binding upon the valid successors and assigns of the Parties.
9.2 Entire Agreement. This Agreement embodies the entire agreement of the Parties with respect to the subject matter hereof and supersedes and cancels any and all prior understandings or agreements, oral or written, in relation hereto, which may exist between the Parties. No oral explanation or oral information provided by either Party shall alter the meaning or interpretation of this Agreement.
9.3 Taxes. Each Party shall be solely responsible for the payment of any taxes assessed by any governmental authority on such Party in connection with or arising out of this Agreement or the transactions contemplated hereby.
9.4 Amendment. No amendment or change hereof or addition hereto shall be effective or binding on the Parties unless reduced to writing and executed by the duly authorized representatives of the Parties.
9.7 Unenforceable Terms. If any of the provisions of this Agreement is held invalid or unenforceable under the applicable law of any jurisdiction, the remaining provisions of this Agreement shall not be affected thereby, and such invalidity or unenforceability shall not invalidate or render unenforceable that provision in any other jurisdiction. In such event, the Parties agree that the provisions of this Agreement shall be modified and reformed so as to give effect to the original intent of the Parties as closely as possible with respect to the provision that was held invalid or unenforceable.
9.8 Non-Waiver. The failure or delay of a Party to require performance by the other Party of any provision of, or any obligation under, this Agreement shall not constitute a waiver thereof, nor shall such failure or delay affect that Party’s right to require performance of such or any other provision or obligation at a later time.
9.9 Further Assurances. Each Party shall, at the request and cost of the other Party, execute or procure the execution of such documents and do or procure the doing of such other acts and things as such other Party may reasonably request for the purpose of giving effect to the terms of this Agreement or giving such other Party the full benefit of the provisions of this Agreement.
9.10 Disclaimer of Agency. This Agreement shall not be deemed to constitute either Party the agent of the other Party.
9.11 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which, taken together, shall constitute one and the same instrument, it being understood that the Parties need not sign the same counterpart.
| 6 |
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
For and on behalf of JJ Explorer Tours Limited
| /s/ Leung Tin Lung David |
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| Mr Leung Tin Lung David, Director |
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| Date: 1 February, 2016 |
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| For and on behalf of Gagfare Limited |
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| /s/ Leung Tin Lung David |
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| Mr Leung Tin Lung David, Director |
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| Date: 1 February, 2016 |
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| 7 |
EXHIBIT 99.1
|
NEMO HOLDING COMPANY LIMITED
Consolidated Financial Statements For The Years Ended December 31, 2019 And 2018
(With Report of Independent Registered Public Accounting Firm Thereon)
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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| Page |
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| F-2 |
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| F-3 |
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| Consolidated Statements of Operations and Comprehensive Loss |
| F-4 |
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| F-5 |
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| F-6 |
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| F-7 – F-18 |
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| F-1 |
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| TOTAL ASIA ASSOCIATES PLT (AF002128 & LLP0016837-LCA) A Firm registered with US PCAOB and Malaysian MIA
Block C-3-1, Megan Avenue 1, 189, Off Jalan Tun Razak, 50400, Kuala Lumpur, Malaysia Tel: (603) 2733 9989 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Director and Shareholder of
NEMO HOLDING COMPANY LIMITED
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of NEMO Holding Company Limited and its subsidiary (the ‘Company’) as of December 31, 2019 and 2018, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ deficit and cash flows for the years ended December 31, 2019 and 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years ended December 31, 2019 and 2018, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 2 to the consolidated financial statements, the Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. These factors create an uncertainty as to the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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 audits. 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 audits 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 audits 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 audits 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 audits 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 audits provide a reasonable basis for our opinion.
/s/ TOTAL ASIA ASSOCIATES PLT
TOTAL ASIA ASSOCIATES PLT
July 8, 2020
We have served as the Company’s auditor since 2020.
Kuala Lumpur, Malaysia
| F-2 |
| Table of Contents |
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
|
|
| As of December 31, |
| |||||
|
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| 2019 |
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| 2018 |
| ||
| ASSETS |
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| ||
| Current asset: |
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|
| ||
| Cash and cash equivalents |
| $ | 9,343 |
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| $ | 5,111 |
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| Accounts receivable |
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| 503 |
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|
| 8,175 |
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| Deposits, prepayments and other receivables |
|
| 11,471 |
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|
| 18,828 |
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|
|
|
|
|
|
|
|
|
|
| Total current assets |
|
| 21,317 |
|
|
| 32,114 |
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|
|
|
|
|
|
|
|
|
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| TOTAL ASSETS |
| $ | 21,317 |
|
| $ | 32,114 |
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|
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| LIABILTIES AND SHAREHOLDERS’ DEFICIT |
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| Current liabilities: |
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| Accrued liabilities and other payables |
| $ | 682 |
|
| $ | 8,657 |
|
| Amount due to a related company |
|
| 22,840 |
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|
| 60,232 |
|
| Amounts due to directors |
|
| 83,377 |
|
|
| 29,114 |
|
|
|
|
|
|
|
|
|
|
|
| Total current liabilities |
|
| 106,899 |
|
|
| 98,003 |
|
|
|
|
|
|
|
|
|
|
|
| TOTAL LIABILITIES |
|
| 106,899 |
|
|
| 98,003 |
|
|
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| Commitments and contingencies |
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| SHAREHOLDERS’ DEFICIT |
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| Ordinary shares, $1 par value; 50,000 shares authorized; 10,000 shares issued and outstanding |
|
| 10,000 |
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| 10,000 |
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| Accumulated other comprehensive losses |
|
| (553 | ) |
|
| (371 | ) |
| Accumulated losses |
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| (95,029 | ) |
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| (75,518 | ) |
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| Shareholders’ deficit |
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| (85,582 | ) |
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| (65,889 | ) |
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| TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT |
| $ | 21,317 |
|
| $ | 32,114 |
|
See accompanying notes to consolidated financial statements.
| F-3 |
| Table of Contents |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”))
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|
| Years ended December 31, |
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| 2019 |
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| 2018 |
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| Revenue, net |
| $ | 183 |
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| $ | 11,636 |
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| Cost of revenue |
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| - |
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| (11,018 | ) |
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| Gross profit |
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| 183 |
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| 618 |
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| Operating expenses: |
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| General and administrative expenses |
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| (23,066 | ) |
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| (41,210 | ) |
| Total operating expenses |
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| (23,066 | ) |
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| (41,210 | ) |
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| Loss from operations |
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| (22,883 | ) |
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| (40,592 | ) |
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| Other income: |
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| Government subsidy |
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| 3,367 |
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| - |
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| Interest income |
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| 5 |
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| 2 |
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| Total other income |
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| 3,372 |
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| 2 |
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| LOSS BEFORE INCOME TAXES |
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| (19,511 | ) |
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| (40,590 | ) |
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| Income tax expense |
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| - |
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| - |
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| NET LOSS |
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| (19,511 | ) |
|
| (40,590 | ) |
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| Other comprehensive loss : |
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| Foreign currency translation loss |
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| (182 | ) |
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| (92 | ) |
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| COMPREHENSIVE LOSS |
| $ | (19,693 | ) |
| $ | (40,682 | ) |
See accompanying notes to consolidated financial statements.
| F-4 |
| Table of Contents |
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”))
|
|
| Years ended December 31, |
| |||||
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| 2019 |
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| 2018 |
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| Cash flow from operating activities: |
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|
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| Net loss |
| $ | (19,511 | ) |
| $ | (40,590 | ) |
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|
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| Change in operating assets and liabilities: |
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|
|
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|
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| Accounts receivable |
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| 7,672 |
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|
| (3,238 | ) |
| Deposits, prepayments and other receivables |
|
| 7,357 |
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|
| 12,805 |
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| Accrued expenses and other payables |
|
| (7,975 | ) |
|
| 3,116 |
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| Net cash used in operating activities |
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| (12,457 | ) |
|
| (27,907 | ) |
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|
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|
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| Csah flow from financing activities: |
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|
|
|
|
|
|
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| Advance from (repayment to) a director |
|
| 54,263 |
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|
| (97,756 | ) |
| (Repayment to) advance from related companies |
|
| (37,392 | ) |
|
| 67,930 |
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|
|
|
|
|
|
|
|
|
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| Net cash generated from (used in) financing activities |
|
| 16,871 |
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| (29,826 | ) |
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|
|
|
|
|
|
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|
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| Effect on exchange rate change on cash and cash equivalents |
|
| (182 | ) |
|
| 3,254 |
|
|
|
|
|
|
|
|
|
|
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| Net change in cash and cash equivalents |
|
| 4,232 |
|
|
| (54,479 | ) |
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|
|
|
|
|
|
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|
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| CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR |
|
| 5,111 |
|
|
| 59,590 |
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|
|
|
|
|
|
|
|
|
|
| CASH AND CASH EQUIVALENTS, END OF YEAR |
| $ | 9,343 |
|
| $ | 5,111 |
|
|
|
|
|
|
|
|
|
|
|
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
|
|
|
| Cash paid for tax |
| $ | - |
|
| $ | - |
|
| Cash paid for interest |
| $ | - |
|
| $ | - |
|
See accompanying notes to consolidated financial statements.
| F-5 |
| Table of Contents |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
|
|
| Common stock |
|
| Accumulated other |
|
|
|
| Total |
| |||||||||
|
|
| No. of shares |
|
| Amount |
|
| comprehensive losses |
|
| Accumulated losses |
|
| shareholders’ deficit |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
| Balance as at January 1, 2018 |
|
| 10,000 |
|
| $ | 10,000 |
|
| $ | (279 | ) |
| $ | (34,928 | ) |
| $ | (25,207 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| (92 | ) |
|
| - |
|
|
| (92 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss for the year |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (40,590 | ) |
|
| (40,590 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance as at December 31, 2018 |
|
| 10,000 |
|
| $ | 10,000 |
|
| $ | (371 | ) |
| $ | (75,518 | ) |
| $ | (65,889 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance as at January 1, 2019 |
|
| 10,000 |
|
| $ | 10,000 |
|
| $ | (371 | ) |
| $ | (75,518 | ) |
| $ | (65,889 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| (182 | ) |
|
| - |
|
|
| (182 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss for the year |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (19,511 | ) |
|
| (19,511 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance as at December 31, 2019 |
|
| 10,000 |
|
| $ | 10,000 |
|
| $ | (553 | ) |
| $ | (95,029 | ) |
| $ | (85,582 | ) |
See accompanying notes to consolidated financial statements.
| F-6 |
| Table of Contents |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| 1. | DESCRIPTION OF BUSINESS AND ORGANIZATION |
NEMO Holding Company Limited (the “Company”or “NHCL”) is incorporated as a BVI Business Company with limited liability on April 24, 2020 in the British Virgin Islands (the “BVI”). The Company through its subsidiary, mainly operates a smartphone application to provide the online platform with “Book Now, Pay Later” flight booking service for travelers among over 500 airlines worldwide to search and secured their tickets. With a simple, user-friendly interface, the Company enables customers to arrange and book the multiple-stop itineraries, and to check their bookings through official airline websites using the Gagfare booking reference number on http://presscentre.asia/gagfare.html.
Pursuant to its Memorandom of Association, the authorized capital is amounted to US$50,000 representing 50,000 ordinary shares with a par value of $1 at its inception.
On June 29, 2020, the Company consummated the Share Exchange Transaction among Gagfare Limited (“GL”) and its shareholders. Both the Company and GL are controlled by the same management team. Upon completion of the Share Exchange Transaction, GL became a 100% owed subsidiary of the Company.
Because the Company is a shell company, GL will comprise the ongoing operations of the combined entity and its senior management will serve as the senior management of the combined entity, GL is deemed to be the accounting acquirer for accounting purposes. The transaction will be treated as a recapitalization of the Company. Accordingly, the consolidated assets, liabilities and results of operations of the Company will become the historical financial statements of GL, and the Company’s assets, liabilities and results of operations will be consolidated with GL beginning on the acquisition date. GL was the legal acquiree but deemed to be the accounting acquirer. The Company was the legal acquirer but deemed to be the accounting acquiree in the reverse merger. The historical financial statements prior to the acquisition are those of the accounting acquirer (GL). After completion of the Share Exchange Transaction, the Company’s consolidated financial statements include the assets and liabilities, the operations and cash flow of the accounting acquirer.
Description of subsidiary
| Name |
| Place of incorporation and kind of legal entity |
| Principal activities |
| Particulars of registered/ paid up share capital |
| Effective interest held |
| |
|
|
|
|
|
|
|
|
|
|
| |
| Gagfare Limited |
| Hong Kong |
| Travel agency |
| 500,000 ordinary shares at par value of HK$1 |
|
| 100 | % |
The Company and its subsidiary are hereinafter referred to as (the “Company”).
| 2. | GOING CONCERN UNCERTAINTIES |
The accompanying consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
| F-7 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The Company has suffered from continuous loss from its inception and shareholders’ deficit and net current liabilities of $85,582 at December 31, 2019. In addition, with respect to the ongoing and evolving coronavirus (COVID-19) outbreak, which was designated as a pandemic by the World Health Organization on March 11, 2020, the outbreak has caused substantial disruption in international economies and global trades and if repercussions of the outbreak are prolonged, could have a significant adverse impact on the Company’s business.
The continuation of the Company as a going concern through December 31, 2020 is dependent upon the continued financial support from its shareholders. Management believes the Company is currently pursuing additional financing for its operations. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations.
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The accompanying consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying consolidated financial statements and notes.
| · | Basis of presentation |
These accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
| · | Use of estimates and assumptions |
In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates.
| · | Basis of consolidation |
The consolidated financial statements include the financial statements of the Company and its subsidiary. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
| · | Cash and cash equivalents |
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
| F-8 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| · | Accounts receivable |
Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer's financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. At the end of fiscal year, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of December 31, 2019 and 2018, there was no allowance for doubtful accounts.
| · | Revenue recognition |
The Company adopted Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers” (“ASC 606”) as of January 1, 2019 using the modified retrospective method. This method allows the Company to apply ASC 606 to new contracts entered into after January 1, 2019, and to its existing contracts for which revenue earned through December 31, 2018 has been recognized under the guidance in effect prior to the effective date of ASC 606. The revenue recognition processes the Company applied prior to adoption of ASC 606 align with the recognition and measurement guidance of the new standard, therefore adoption of ASC 606 did not require a cumulative adjustment to opening equity.
Under ASC 606, a performance obligation is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services. Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:
|
| • | identify the contract with a customer; |
|
| • | identify the performance obligations in the contract; |
|
| • | determine the transaction price; |
|
| • | allocate the transaction price to performance obligations in the contract; and |
|
| • | recognize revenue as the performance obligation is satisfied. |
The Company records its revenue from booking income upon the ticket booking service is rendered to travelers. The Company also records its revene from the sale of air tickets upon the confirmation and issuance of tickets to the travelers.
| · | Income taxes |
The Company adopted the ASC 740 Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
| F-9 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
| · | Uncertain tax positions |
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the years ended December 31, 2019 and 2018.
| · | Foreign currencies translation |
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations.
The reporting currency of the Company is United States Dollar ("US$") and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company is operating in Hong Kong and maintain its books and record in its local currency, Hong Kong Dollars (“HKD”), which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “ Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of changes in shareholders’ equity.
Translation of amounts from HKD into US$ has been made at the following exchange rates for the years ended December 31, 2019 and 2018:
|
|
| December 31, 2019 |
|
| December 31, 2018 |
| ||
| Period-end HKD:US$ exchange rate |
|
| 0.12842 |
|
|
| 0.12769 |
|
| Period average HKD:US$ exchange rate |
|
| 0.12764 |
|
|
| 0.12760 |
|
| · | Comprehensive income |
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
| F-10 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| · | Leases |
The Company adopted Topic 842, Leases (“ASC 842”), using the modified retrospective approach through a cumulative-effect adjustment and utilizing the effective date of January 1, 2019 as its date of initial application, with prior periods unchanged and presented in accordance with the previous guidance in Topic 840, Leases (“ASC 840”).
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Leases with a term greater than one year are recognized on the balance sheet as right-of-use (“ROU”) assets, lease liabilities and long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain adjustments to the right-of-use asset may be required for items such as prepaid or accrued lease payments. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
Lease expense is recognized on a straight-line basis over the lease terms. Lease expense includes amortization of the ROU assets and accretion of the lease liabilities. Amortization of ROU assets is calculated as the periodic lease cost less accretion of the lease liability. The amortized period for ROU assets is limited to the expected lease term.
The Company has elected a practical expedient to combine the lease and non-lease components into a single lease component. The Company also elected the short-term lease measurement and recognition exemption and does not establish ROU assets or lease liabilities for operating leases with terms of 12 months or less.
| · | Related parties |
The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
| F-11 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
| · | Commitments and contingencies |
The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
| · | Fair value of financial instruments |
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
| F-12 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| Level 1 |
| Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
|
|
|
|
| Level 2 |
| Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
|
|
|
|
| Level 3 |
| Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, deposits, prepayment and other receivables, amount due from a director and operating lease right-of-use assets, approximate their fair values because of the short maturity of these instruments.
| · | Recent accounting pronouncements |
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
Accounting Standards Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”) in order to increase transparency and comparability among organizations by recognizing right-of-use assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous generally accepted accounting principles. ASU 2016-02 requires a lessee to recognize a lease liability for future lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term on the balance sheet for most lease arrangements. The new standard also changes many key definitions, including the definition of a lease. The new standard includes a short-term lease exception for leases with a term of 12 months or less, as part of which a lessee can make an accounting policy election not to recognize right-of-use assets and lease liabilities. Lessees will continue to differentiate between finance leases (previously referred to as capital leases) and operating leases using classification criteria that are substantially similar to the previous guidance in ASC 840.
| F-13 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) and early adoption is permitted. In August 2018, the FASB issued ASU 2018-11, Leases, Targeted Improvements, which provides a new transition option in which an entity initially applies ASU 2016-02 at the adoption date and recognizes a cumulative-effect adjustment in the period of adoption. Prior period comparative balances will not be adjusted. The Company used the new transition option and was also utilizing the package of practical expedients that allows it to not reassess: (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases, and (3) initial direct costs for any existing leases. We also used the short-term lease exception for leases with a term of 12 months or less. Additionally, the Company used the practical expedient that allowed each separate lease component of a contract and the associated non-lease components to be treated as a single lease component. The exercise of lease renewal options is at our discretion and the renewal to extend the lease terms are not included in the Company’s Right-Of-Use assets and lease liabilities as they are not reasonably certain of exercise. The Company will evaluate the renewal options and when they are reasonably certain of exercise, the Company will include the renewal period in its lease term. As of the January 1, 2019, effective date the Company identified one finance lease arrangement in which it is a lessee.
In calculating the present value of the lease payments, the Company applied an individual discount rate for each of its leases, and determined the appropriate discount rate based on the remaining lease terms at the date of adoption. As the lessee to several lease agreements, the Company did not have insight into the relevant information that would be required to arrive at the rate implicit in the lease. Therefore, the Company utilized its outstanding borrowings as a benchmark to determine the incremental borrowing rate for its leases. The benchmark rate was adjusted to arrive at an appropriate discount rate for each lease.
In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which expands the scope of Compensation – Stock Compensation (“Topic 718”) to include share-based payment transactions for acquiring goods and services from nonemployees. This amendment applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The Company adopted ASU 2018-07 on January 1, 2019. The impact was immaterial to the financial statements.
In June 2018, the FASB issued ASU No. 2018-08, Not-For-Profit Entities – Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made (“ASU 2018-08”). ASU 2018-08 clarifies how an entity determines whether a resource provider is participating in an exchange transaction by evaluating whether the resource provider is receiving commensurate value in return for the resources transferred. The guidance is effective for annual periods beginning after June 15, 2018, including interim periods within those annual periods, and has been adopted on a modified prospective basis. The modified prospective adoption is applied to agreements that are not completed as of the effective date, or entered into after the effective date. Under the modified prospective adoption approach, prior period results have not been restated and no cumulative-effect adjustment has been recorded. The Company does not expect this standard to have a material impact on its financial statements.
Accounting Standards Issued, Not Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU requires measurement and recognition of expected credit losses for financial assets. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. ASU 2016-13 is effective for the Company beginning January 1, 2023. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently evaluating the potential effect of this standard on its financial statements. The Company does not expect this standard to have a material impact on its financial statements.
| F-14 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (“ASU 2018-13”), which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The amendment is effective for interim and annual reporting periods beginning after December 15, 2019. The Company is currently assessing the impact this will have on the financial statements.
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (“ASU 2018-18”), which clarifies the interaction between ASC 808, Collaborative Arrangements and ASC 606, Revenue from Contracts with Customers. Certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, ASU 2018-18 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue if the counterparty is not a customer for that transaction. ASU 2018-18 should be applied retrospectively to the date of initial application of ASC 606. This guidance is effective for interim and fiscal periods beginning after December 15, 2019. The Company is currently assessing the impact this will have on the financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. The Company does not expect the adoption of this standard to have a material impact on its financial position, results of operations or cash flows.
| 4. | AMOUNTS DUE TO RELATED COMPANIES AND DIRECTORS |
The amounts represented temporary advances to the Company by its related companies and directors, which were unsecured, interest-free and had no fixed terms of repayments.
| 5. | SHAREHOLDERS’ DEFICIT |
Authorized shares
At inception, the Company’s authorized shares were 50,000 ordinary shares, with a par value of $1.
Issued and outstanding shares
At inception, the Company had 10,000 ordinary shares issued and outstanding.
| F-15 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| 6. | INCOME TAX |
The Company mainly operates in Hong Kong that is subject to taxes in the governing jurisdictions in which it operates. The effective tax rate in the years presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate, as follows:
BVI
Under the current BVI law, the Company is not subject to tax on income.
Hong Kong
The Company’s subsidiary operating in Hong Kong is subject to the Hong Kong Profits Tax at the two-tiered profits tax rates from 8.25% to 16.5% on the estimated assessable profits arising in Hong Kong during the current year, after deducting a tax concession for the tax year. The reconciliation of income tax rate to the effective income tax rate for the years ended December 31, 2019 and 2018 is as follows:
|
|
| Years ended December 31, |
| |||||
|
|
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
|
| ||
| Loss before income taxes |
| $ | (19,511 | ) |
| $ | (40,590 | ) |
| Statutory income tax rate |
|
| 16.5 | % |
|
| 16.5 | % |
| Income tax expense at statutory rate |
|
| (3,219 | ) |
|
| (6,697 | ) |
| Tax effect of non-taxable items |
|
| 555 |
|
|
| - |
|
| Net operating loss |
|
| 2,664 |
|
|
| 6,697 |
|
| Income tax expense |
| $ | - |
|
| $ | - |
|
The following table sets forth the significant components of the deferred tax assets of the Company as of December 31, 2019 and 2018:
|
|
| As of December 31, |
| |||||
|
|
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
|
| ||
| Deferred tax assets: |
|
|
|
|
|
| ||
| Net operating loss carryforwards |
| $ | 15,753 |
|
| $ | 11,977 |
|
| Less: valuation allowance |
|
| (15,753 | ) |
|
| (11,977 | ) |
| Deferred tax assets, net |
| $ | - |
|
| $ | - |
|
As of December 31, 2019 and 2018, the operation in Hong Kong incurred $95,473 and $72,590 of cumulative net operating losses which can be carried forward to offset future taxable income at no expiry. The Company has provided for a full valuation allowance against the deferred tax assets of $15,753 and $11,977 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.
| F-16 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| 7. | RELATED PARTY TRANSACTIONS |
From time to time, the directors of the Company advanced funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and had no fixed terms of repayment.
During the years ended December 31, 2019 and 2018, the Company has been provided free office space by its shareholder. The management determined that such cost is nominal and did not recognize the rent expense in its consolidated financial statements.
Since February 1, 2016, the Company was granted with the right of use to the website and mobile application platforms by JJ Explorer Tours Limited (“JJ Explorer”), which was also controlled by the directors of the Company. Also, the Company formed a cooperation partnership with JJ Explorer whereas JJ Explorer invested to develop and maintained the operations of the Gagfare web and mobile application platforms in a term of 5 years, to be expired on January 31, 2021. In return, JJ Explorer would share 50% of the net earnings generated by the Company in the use of its web and mobile application platforms during the cooperation period. For the years ended December 31, 2019 and 2018, the Company did not record the service charges and paid to JJ Explorer.
As of December 31, 2019 and 2018, the Company owed to directors $83,377 and $29,114, respectively. The amounts due to the related parties are unsecured, non-interest bearing and have no fixed terms of repayment. Imputed interest from related party loans is not significant.
Apart from the transactions and balances detailed elsewhere in these accompanying consolidated financial statements, the Company has no other significant or material related party transactions during the years presented.
| 8. | CONCENTRATIONS OF RISK |
The Company is exposed to the following concentrations of risk:
| (a) | Major customers |
For the years ended December 31, 2019 and 2018, there was no single customer exceeding 10% of the Company’s revenue.
| (b) | Economic and political risk |
The Company’s major operations are conducted in Hong Kong. Accordingly, the political, economic, and legal environments in Hong Kong, as well as the general state of Hong Kong’s economy may influence the Company’s business, financial condition, and results of operations.
| (c) | Exchange rate risk |
The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
| F-17 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| 9. | COMMITMENTS AND CONTINGENCIES |
As of December 31, 2019 and 2018, the Company has no material commitments or contingencies.
| 10. | SUBSEQUENT EVENTS |
On June 24, 2020, the Company consummated the Share Exchange Transaction among Gagfare Limited (“GL”) and its shareholders. Both the Company and GL are controlled by the same management team. Upon completion of the Share Exchange Transaction, GL became a 100% owed subsidiary of the Company.
On July 6, 2020, the Company and its shareholders executed a Share Exchange Agreement (“the “Share Exchange Agreement”) with Eason Education Kingdom Holdings Inc. (“EKKH”), a limited company organized under the laws of the State of Nevada. Pursuant to the Share Exchange Agreement, the Company agreed to sell its aggregate of 10,000 ordinary shares representing 100% of the issued and outstanding ordinary shares of the Company. As consideration, the Company’s Shareholders were received 10,000,000 shares of EKKH’s common stock, at a value of $0.60 per share, for an aggregate value of $6,000,000 (the “Shares”). The parties are entitled to terminate the Share Exchange Agreement if closing has not occurred on or prior to July 31, 2020. The consummation of the transactions contemplated in the Share Exchange Agreement is subject to normal and customary conditions precedent including, without limitation, satisfactory due diligence of the Company by EKKH.
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after December 31, 2019, up through July 8, 2020, the Company issued the audited consolidated financial statements. The Company determined that there are no further events to disclose.
| F-18 |
EXHIBIT 99.2
|
NEMO HOLDING COMPANY LIMITED
Condensed Consolidated Financial Statements For The Three Months Ended March 31, 2020 And 2019 (Unaudited)
|
NEMO HOLDING COMPANY LIMITED
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
| Page |
|
|
|
|
|
|
|
| F-2 |
| |
|
|
|
|
|
| Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) |
| F-3 |
|
|
|
|
|
|
|
| F-4 |
| |
|
|
|
|
|
| Condensed Consolidated Statements of Changes in Shareholders’ Deficit |
| F-5 |
|
|
|
|
|
|
|
| F-6 – F-17 |
|
| F-1 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2020 AND DECEMBER 31, 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
|
|
| March 31, 2020 |
|
| December 31, 2019 |
| ||
|
|
| (Unaudited) |
|
| (Audited) |
| ||
| ASSETS |
|
|
|
|
|
| ||
| Current asset: |
|
|
|
|
|
| ||
| Cash and cash equivalents |
| $ | 16,429 |
|
| $ | 9,343 |
|
| Accounts receivable |
|
| 524 |
|
|
| 503 |
|
| Deposits, prepayments and other receivables |
|
| 11,523 |
|
|
| 11,471 |
|
|
|
|
|
|
|
|
|
|
|
| Total current assets |
|
| 28,476 |
|
|
| 21,317 |
|
|
|
|
|
|
|
|
|
|
|
| TOTAL ASSETS |
| $ | 28,476 |
|
| $ | 21,317 |
|
|
|
|
|
|
|
|
|
|
|
| LIABILTIES AND SHAREHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accrued liabilities and other payables |
| $ | 967 |
|
| $ | 682 |
|
| Amount due to a related company |
|
| 25,624 |
|
|
| 22,840 |
|
| Amounts due to directors |
|
| 80,813 |
|
|
| 83,377 |
|
|
|
|
|
|
|
|
|
|
|
| Total current liabilities |
|
| 107,404 |
|
|
| 106,899 |
|
|
|
|
|
|
|
|
|
|
|
| TOTAL LIABILITIES |
|
| 107,404 |
|
|
| 106,899 |
|
|
|
|
|
|
|
|
|
|
|
| Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| SHAREHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
| Ordinary shares, $1 par value; 50,000 shares authorized; 10,000 shares issued and outstanding |
|
| 10,000 |
|
|
| 10,000 |
|
| Accumulated other comprehensive losses |
|
| (676 | ) |
|
| (553 | ) |
| Accumulated losses |
|
| (88,252 | ) |
|
| (95,029 | ) |
|
|
|
|
|
|
|
|
|
|
| Shareholders’ deficit |
|
| (78,928 | ) |
|
| (85,582 | ) |
|
|
|
|
|
|
|
|
|
|
| TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT |
| $ | 28,476 |
|
| $ | 21,317 |
|
See accompanying notes to condensed consolidated financial statements.
| F-2 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
|
|
| Three months ended March 31, |
| |||||
|
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
|
| ||
| Revenue, net |
| $ | 20 |
|
| $ | 37 |
|
|
|
|
|
|
|
|
|
|
|
| Cost of revenue |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Gross profit |
|
| 20 |
|
|
| 37 |
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
| General and administrative expenses |
|
| (3,538 | ) |
|
| (7,339 | ) |
| Total operating expenses |
|
| (3,538 | ) |
|
| (7,339 | ) |
|
|
|
|
|
|
|
|
|
|
| Loss from operations |
|
| (3,518 | ) |
|
| (7,302 | ) |
|
|
|
|
|
|
|
|
|
|
| Other income: |
|
|
|
|
|
|
|
|
| Government subsidy |
|
| 10,295 |
|
|
| - |
|
| Interest income |
|
| - |
|
|
| 1 |
|
|
|
|
|
|
|
|
|
|
|
| Total other income |
|
| 10,295 |
|
|
| 1 |
|
|
|
|
|
|
|
|
|
|
|
| INCOME (LOSS) BEFORE INCOME TAXES |
|
| 6,777 |
|
|
| (7,301 | ) |
|
|
|
|
|
|
|
|
|
|
| Income tax expense |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| NET INCOME (LOSS) |
|
| 6,777 |
|
|
| (7,301 | ) |
|
|
|
|
|
|
|
|
|
|
| Other comprehensive (loss) income : |
|
|
|
|
|
|
|
|
| Foreign currency translation (loss) income |
|
| (123 | ) |
|
| 28 |
|
|
|
|
|
|
|
|
|
|
|
| COMPREHENSIVE INCOME (LOSS) |
| $ | 6,654 |
|
| $ | (7,273 | ) |
See accompanying notes to condensed consolidated financial statements.
| F-3 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
|
|
| Three months ended March 31, |
| |||||
|
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
|
| ||
| Cash flow from operating activities: |
|
|
|
|
|
| ||
| Net income (loss) |
| $ | 6,777 |
|
| $ | (7,301 | ) |
|
|
|
|
|
|
|
|
|
|
| Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Accounts receivable |
|
| (21 | ) |
|
| 4,396 |
|
| Deposits, prepayments and other receivables |
|
| (52 | ) |
|
| 43 |
|
| Accrued expenses and other payables |
|
| 285 |
|
|
| (2,414 | ) |
| Net cash generated from (used in) operating activities |
|
| 6,989 |
|
|
| (5,276 | ) |
|
|
|
|
|
|
|
|
|
|
| Csah flow from financing activities: |
|
|
|
|
|
|
|
|
| (Repayment to) advance from a director |
|
| (2,564 | ) |
|
| 1,824 |
|
| Advance from related companies |
|
| 2,784 |
|
|
| 6,416 |
|
|
|
|
|
|
|
|
|
|
|
| Net cash generated from financing activities |
|
| 220 |
|
|
| 8,240 |
|
|
|
|
|
|
|
|
|
|
|
| Effect on exchange rate change on cash and cash equivalents |
|
| (123 | ) |
|
| 28 |
|
|
|
|
|
|
|
|
|
|
|
| Net change in cash and cash equivalents |
|
| 7,086 |
|
|
| 2,992 |
|
|
|
|
|
|
|
|
|
|
|
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
| 9,343 |
|
|
| 5,111 |
|
|
|
|
|
|
|
|
|
|
|
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
| $ | 16,429 |
|
| $ | 8,103 |
|
|
|
|
|
|
|
|
|
|
|
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
| ||||||
| Cash paid for tax |
| $ | - |
|
| $ | - |
|
| Cash paid for interest |
| $ | - |
|
| $ | - |
|
See accompanying notes to condensed consolidated financial statements.
| F-4 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
|
|
| Common stock |
|
| Accumulated other comprehensive |
|
| Accumulated |
|
| Total shareholders’ |
| ||||||||
|
|
| No. of shares |
|
| Amount |
|
| losses |
|
| losses |
|
| deficit |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
| Balance as at January 1, 2019 |
|
| 10,000 |
|
| $ | 10,000 |
|
| $ | (371 | ) |
| $ | (75,518 | ) |
| $ | (65,889 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| 28 |
|
|
| - |
|
|
| 28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss for the period |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (7,301 | ) |
|
| (7,301 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance as at March 31, 2019 |
|
| 10,000 |
|
| $ | 10,000 |
|
| $ | (343 | ) |
| $ | (82,819 | ) |
| $ | (73,162 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance as at January 1, 2020 |
|
| 10,000 |
|
| $ | 10,000 |
|
| $ | (553 | ) |
| $ | (95,029 | ) |
| $ | (85,582 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| (123 | ) |
|
| - |
|
|
| (123 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income for the period |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 6,777 |
|
|
| 6,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance as at March 31, 2020 |
|
| 10,000 |
|
| $ | 10,000 |
|
| $ | (676 | ) |
| $ | (88,252 | ) |
| $ | (78,928 | ) |
See accompanying notes to condensed consolidated financial statements.
| F-5 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
| 1. | DESCRIPTION OF BUSINESS AND ORGANIZATION |
NEMO Holding Company Limited (the “Company” or “NHCL”) is incorporated as a BVI Business Company with limited liability on April 24, 2020 in the British Virgin Islands (the “BVI”). The Company through its subsidiary, mainly operates a smartphone application to provide the online platform with “Book Now, Pay Later” flight booking service for travelers among over 500 airlines worldwide to search and secured their tickets. With a simple, user-friendly interface, the Company enables customers to arrange and book the multiple-stop itineraries, and to check their bookings through official airline websites using the Gagfare booking reference number on http://presscentre.asia/gagfare.html.
Pursuant to its Memorandom of Association, the authorized capital is amounted to US$50,000 representing 50,000 ordinary shares with a par value of $1 at its inception.
On June 29, 2020, the Company consummated the Share Exchange Transaction among Gagfare Limited (“GL”) and its shareholders. Both the Company and GL are controlled by the same management team. Upon completion of the Share Exchange Transaction, GL became a 100% owed subsidiary of the Company.
Because the Company is a shell company, GL will comprise the ongoing operations of the combined entity and its senior management will serve as the senior management of the combined entity, GL is deemed to be the accounting acquirer for accounting purposes. The transaction will be treated as a recapitalization of the Company. Accordingly, the consolidated assets, liabilities and results of operations of the Company will become the historical financial statements of GL, and the Company’s assets, liabilities and results of operations will be consolidated with GL beginning on the acquisition date. GL was the legal acquiree but deemed to be the accounting acquirer. The Company was the legal acquirer but deemed to be the accounting acquiree in the reverse merger. The historical financial statements prior to the acquisition are those of the accounting acquirer (GL). After completion of the Share Exchange Transaction, the Company’s condensed consolidated financial statements include the assets and liabilities, the operations and cash flow of the accounting acquirer.
Description of subsidiary
| Name |
| Place of incorporation and kind of legal entity |
| Principal activities |
| Particulars of registered/ paid up share capital |
| Effective interest held |
| |
|
|
|
|
|
|
|
|
|
|
| |
| Gagfare Limited |
| Hong Kong |
| Travel agency |
| 500,000 ordinary shares at par value of HK$1 |
|
| 100 | % |
The Company and its subsidiary are hereinafter referred to as (the “Company”).
| 2. | GOING CONCERN UNCERTAINTIES |
The accompanying condensed consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
| F-6 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
The Company has suffered from shareholders’ deficit and net current liabilities of $78,928 at March 31, 2020. In addition, with respect to the ongoing and evolving coronavirus (COVID-19) outbreak, which was designated as a pandemic by the World Health Organization on March 11, 2020, the outbreak has caused substantial disruption in international economies and global trades and if repercussions of the outbreak are prolonged, could have a significant adverse impact on the Company’s business.
The continuation of the Company as a going concern through March 31, 2021 is dependent upon the continued financial support from its stockholders. Management believes the Company is currently pursuing additional financing for its operations. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations.
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern.
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.
| · | Basis of presentation |
These accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
| · | Use of estimates and assumptions |
In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates.
| · | Basis of consolidation |
The condensed consolidated financial statements include the financial statements of the Company and its subsidiary. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.
| · | Cash and cash equivalents |
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
| F-7 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
| · | Accounts receivable |
Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer’s financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. At the end of fiscal year, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of March 31, 2020 and December 31, 2019, there was no allowance for doubtful accounts.
| · | Revenue recognition |
The Company adopted Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers” (“ASC 606”) as of January 1, 2019 using the modified retrospective method. This method allows the Company to apply ASC 606 to new contracts entered into after January 1, 2019, and to its existing contracts for which revenue earned through December 31, 2018 has been recognized under the guidance in effect prior to the effective date of ASC 606. The revenue recognition processes the Company applied prior to adoption of ASC 606 align with the recognition and measurement guidance of the new standard, therefore adoption of ASC 606 did not require a cumulative adjustment to opening equity.
Under ASC 606, a performance obligation is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services. Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:
|
| • | identify the contract with a customer; |
|
| • | identify the performance obligations in the contract; |
|
| • | determine the transaction price; |
|
| • | allocate the transaction price to performance obligations in the contract; and |
|
| • | recognize revenue as the performance obligation is satisfied. |
The Company records its revenue from booking income upon the ticket booking service is rendered to travelers. The Company also records its revene from the sale of air tickets upon the confirmation and issuance of tickets to the travelers.
| F-8 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
| · | Income taxes |
The Company adopted the ASC 740 Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
| · | Uncertain tax positions |
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the three months ended March 31, 2020 and 2019.
| · | Foreign currencies translation |
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the condensed consolidated statement of operations.
The reporting currency of the Company is United States Dollar (“US$”) and the accompanying condensed consolidated financial statements have been expressed in US$. In addition, the Company is operating in Hong Kong and maintain its books and record in its local currency, Hong Kong Dollars (“HKD”), which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “ Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity.
Translation of amounts from HKD into US$ has been made at the following exchange rates for the three months ended March 31, 2020 and 2019:
|
|
| March 31, 2020 |
|
| March 31, 2019 |
| ||
| Period-end HKD:US$ exchange rate |
|
| 0.12898 |
|
|
| 0.12738 |
|
| Period average HKD:US$ exchange rate |
|
| 0.12868 |
|
|
| 0.12745 |
|
| F-9 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
| · | Comprehensive income |
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying condensed consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
| · | Leases |
The Company adopted Topic 842, Leases (“ASC 842”), using the modified retrospective approach through a cumulative-effect adjustment and utilizing the effective date of January 1, 2019 as its date of initial application, with prior periods unchanged and presented in accordance with the previous guidance in Topic 840, Leases (“ASC 840”).
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Leases with a term greater than one year are recognized on the balance sheet as right-of-use (“ROU”) assets, lease liabilities and long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain adjustments to the right-of-use asset may be required for items such as prepaid or accrued lease payments. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
Lease expense is recognized on a straight-line basis over the lease terms. Lease expense includes amortization of the ROU assets and accretion of the lease liabilities. Amortization of ROU assets is calculated as the periodic lease cost less accretion of the lease liability. The amortized period for ROU assets is limited to the expected lease term.
The Company has elected a practical expedient to combine the lease and non-lease components into a single lease component. The Company also elected the short-term lease measurement and recognition exemption and does not establish ROU assets or lease liabilities for operating leases with terms of 12 months or less.
| F-10 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
| · | Related parties |
The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of condensed consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
| · | Commitments and contingencies |
The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
| F-11 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
| · | Fair value of financial instruments |
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
| Level 1 |
| Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
|
|
|
|
| Level 2 |
| Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
|
|
|
|
| Level 3 |
| Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, deposits, prepayment and other receivables, amount due from a director and operating lease right-of-use assets, approximate their fair values because of the short maturity of these instruments.
| · | Recent accounting pronouncements |
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
| F-12 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
Accounting Standards Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”) in order to increase transparency and comparability among organizations by recognizing right-of-use assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous generally accepted accounting principles. ASU 2016-02 requires a lessee to recognize a lease liability for future lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term on the balance sheet for most lease arrangements. The new standard also changes many key definitions, including the definition of a lease. The new standard includes a short-term lease exception for leases with a term of 12 months or less, as part of which a lessee can make an accounting policy election not to recognize right-of-use assets and lease liabilities. Lessees will continue to differentiate between finance leases (previously referred to as capital leases) and operating leases using classification criteria that are substantially similar to the previous guidance in ASC 840.
ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) and early adoption is permitted. In August 2018, the FASB issued ASU 2018-11, Leases, Targeted Improvements, which provides a new transition option in which an entity initially applies ASU 2016-02 at the adoption date and recognizes a cumulative-effect adjustment in the period of adoption. Prior period comparative balances will not be adjusted. The Company used the new transition option and was also utilizing the package of practical expedients that allows it to not reassess: (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases, and (3) initial direct costs for any existing leases. We also used the short-term lease exception for leases with a term of 12 months or less. Additionally, the Company used the practical expedient that allowed each separate lease component of a contract and the associated non-lease components to be treated as a single lease component. The exercise of lease renewal options is at our discretion and the renewal to extend the lease terms are not included in the Company’s Right-Of-Use assets and lease liabilities as they are not reasonably certain of exercise. The Company will evaluate the renewal options and when they are reasonably certain of exercise, the Company will include the renewal period in its lease term. As of the January 1, 2019, effective date the Company identified one finance lease arrangement in which it is a lessee.
In calculating the present value of the lease payments, the Company applied an individual discount rate for each of its leases, and determined the appropriate discount rate based on the remaining lease terms at the date of adoption. As the lessee to several lease agreements, the Company did not have insight into the relevant information that would be required to arrive at the rate implicit in the lease. Therefore, the Company utilized its outstanding borrowings as a benchmark to determine the incremental borrowing rate for its leases. The benchmark rate was adjusted to arrive at an appropriate discount rate for each lease.
In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which expands the scope of Compensation – Stock Compensation (“Topic 718”) to include share-based payment transactions for acquiring goods and services from nonemployees. This amendment applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The Company adopted ASU 2018-07 on January 1, 2019. The impact was immaterial to the financial statements.
| F-13 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
In June 2018, the FASB issued ASU No. 2018-08, Not-For-Profit Entities – Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made (“ASU 2018-08”). ASU 2018-08 clarifies how an entity determines whether a resource provider is participating in an exchange transaction by evaluating whether the resource provider is receiving commensurate value in return for the resources transferred. The guidance is effective for annual periods beginning after June 15, 2018, including interim periods within those annual periods, and has been adopted on a modified prospective basis. The modified prospective adoption is applied to agreements that are not completed as of the effective date, or entered into after the effective date. Under the modified prospective adoption approach, prior period results have not been restated and no cumulative-effect adjustment has been recorded. The Company does not expect this standard to have a material impact on its financial statements.
Accounting Standards Issued, Not Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU requires measurement and recognition of expected credit losses for financial assets. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. ASU 2016-13 is effective for the Company beginning January 1, 2023. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently evaluating the potential effect of this standard on its financial statements. The Company does not expect this standard to have a material impact on its financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (“ASU 2018-13”), which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The amendment is effective for interim and annual reporting periods beginning after December 15, 2019. The Company is currently assessing the impact this will have on the financial statements.
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (“ASU 2018-18”), which clarifies the interaction between ASC 808, Collaborative Arrangements and ASC 606, Revenue from Contracts with Customers. Certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, ASU 2018-18 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue if the counterparty is not a customer for that transaction. ASU 2018-18 should be applied retrospectively to the date of initial application of ASC 606. This guidance is effective for interim and fiscal periods beginning after December 15, 2019. The Company is currently assessing the impact this will have on the financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. The Company does not expect the adoption of this standard to have a material impact on its financial position, results of operations or cash flows.
| F-14 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
| 4. | AMOUNTS DUE TO RELATED COMPANIES AND DIRECTORS |
The amounts represented temporary advances to the Company by its related companies and directors, which were unsecured, interest-free and had no fixed terms of repayments.
| 5. | SHAREHOLDERS’ DEFICIT |
Authorized shares
At inception, the Company’s authorized shares were 50,000 ordinary shares, with a par value of $1.
Issued and outstanding shares
At inception, the Company had 10,000 ordinary shares issued and outstanding.
| 6. | INCOME TAX |
The Company mainly operates in Hong Kong that is subject to taxes in the governing jurisdictions in which it operates. The effective tax rate in the period presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate, as follows:
BVI
Under the current BVI law, the Company is not subject to tax on income.
Hong Kong
The Company’s subsidiary operating in Hong Kong is subject to the Hong Kong Profits Tax at the two-tiered profits tax rates from 8.25% to 16.5% on the estimated assessable profits arising in Hong Kong during the current year, after deducting a tax concession for the tax year. The reconciliation of income tax rate to the effective income tax rate for the three months ended March 31, 2020 and 2019 is as follows:
|
|
| Three months ended December 31, |
| |||||
|
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
|
| ||
| Income (loss) before income taxes |
| $ | 6,777 |
|
| $ | (7,301 | ) |
| Statutory income tax rate |
|
| 16.5 | % |
|
| 16.5 | % |
| Income tax expense at statutory rate |
|
| 1,118 |
|
|
| (1,205 | ) |
| Tax effect of non-taxable items |
|
| (1,698 | ) |
|
| - |
|
| Net operating loss |
|
| 580 |
|
|
| 1,205 |
|
| Income tax expense |
| $ | - |
|
| $ | - |
|
As of March 31, 2020 and December 31, 2019, the operation in Hong Kong incurred $99,011 and $95,473 of cumulative net operating losses which can be carried forward to offset future taxable income at no expiry. The Company has provided for a full valuation allowance against the deferred tax assets of $16,337 and $15,753 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.
| F-15 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
| 7. | RELATED PARTY TRANSACTIONS |
From time to time, the directors of the Company advanced funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and had no fixed terms of repayment.
During the three months ended March 31, 2020 and 2019, the Company has been provided free office space by its shareholder. The management determined that such cost is nominal and did not recognize the rent expense in its condensed consolidated financial statements.
Since February 1, 2016, the Company was granted with the right of use to the website and mobile application platforms by JJ Explorer Tours Limited (“JJ Explorer”), which was also controlled by the directors of the Company. Also, the Company formed a cooperation partnership with JJ Explorer whereas JJ Explorer invested to develop and maintained the operations of the Gagfare web and mobile application platforms in a term of 5 years, to be expired on January 31, 2021. In return, JJ Explorer would share 50% of the net earnings generated by the Company in the use of its web and mobile application platforms during the cooperation period. For the three months ended March 31, 2020 and 2019, the Company did not record the service charges and paid to JJ Explorer.
As of March 31, 2020 and December 31, 2019, the Company owed to directors $80,813 and $83,377, respectively. The amounts due to the related parties are unsecured, non-interest bearing and have no fixed terms of repayment.
Apart from the transactions and balances detailed elsewhere in these accompanying condensed consolidated financial statements, the Company has no other significant or material related party transactions during the periods presented.
| 8. | CONCENTRATIONS OF RISK |
The Company is exposed to the following concentrations of risk:
| (a) | Major customers |
For the three months ended March 31, 2020 and 2019, there was no single customer exceeding 10% of the Company’s revenue.
| (b) | Economic and political risk |
The Company’s major operations are conducted in Hong Kong. Accordingly, the political, economic, and legal environments in Hong Kong, as well as the general state of Hong Kong’s economy may influence the Company’s business, financial condition, and results of operations.
| (c) | Exchange rate risk |
The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
| F-16 |
| Table of Contents |
NEMO HOLDING COMPANY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
| 9. | COMMITMENTS AND CONTINGENCIES |
As of March 31, 2020 and December 31, 2019, the Company has no material commitments or contingencies.
| 10. | SUBSEQUENT EVENTS |
On June 24, 2020, the Company consummated the Share Exchange Transaction among Gagfare Limited (“GL”) and its shareholders. Both the Company and GL are controlled by the same management team. Upon completion of the Share Exchange Transaction, GL became a 100% owed subsidiary of the Company.
On July 8, 2020, the Company and its shareholders executed a Share Exchange Agreement (“the “Share Exchange Agreement”) with Eason Education Kingdom Holdings Inc. (“EKKH”), a limited company organized under the laws of the State of Nevada. Pursuant to the Share Exchange Agreement, the Company agreed to sell its aggregate of 10,000 ordinary shares representing 100% of the issued and outstanding ordinary shares of the Company. As consideration, the Company’s Shareholders were received 10,000,000 shares of EKKH’s common stock, at a value of $0.60 per share, for an aggregate value of $6,000,000 (the “Shares”). The parties are entitled to terminate the Share Exchange Agreement if closing has not occurred on or prior to July 31, 2020. The consummation of the transactions contemplated in the Share Exchange Agreement is subject to normal and customary conditions precedent including, without limitation, satisfactory due diligence of the Company by EKKH.
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before condensed consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after March 31, 2020, up through July 8, 2020 the Company issued the unaudited condensed consolidated financial statements. The Company determined that there are no further events to disclose.
| F-17 |
EXHIBIT 99.3
EASON EDUCATION KINGDOM HOLDINGS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2020
(Unaudited)
|
|
| Historical |
|
| Historical |
|
| Pro Forma |
|
|
|
| Pro Forma Condensed |
| ||||
|
|
| EKKH |
|
| NHCL |
|
| Adjustments |
|
| Note |
| Combined |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Cash and cash equivalents |
| $ | - |
|
| $ | 16,429 |
|
|
|
|
|
|
| $ | 16,429 |
| |
| Escrow accounts held by attorney |
|
| 21,131 |
|
|
| - |
|
|
|
|
|
|
|
| 21,131 |
| |
| Accounts receivable |
|
| - |
|
|
| 524 |
|
|
|
|
|
|
|
| 524 |
| |
| Deposits and prepayments |
|
| - |
|
|
| 11,523 |
|
|
|
|
|
|
|
| 11,523 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Total current assets |
|
| 21,131 |
|
|
| 28,476 |
|
|
|
|
|
|
|
| 49,607 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| TOTAL ASSETS |
| $ | 21,131 |
|
| $ | 28,476 |
|
|
|
|
|
|
| $ | 49,607 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Accrued liabilities and other payables |
| $ | 20,000 |
|
| $ | 967 |
|
|
|
|
|
|
| $ | 20,967 |
| |
| Amount due to a related company |
|
| - |
|
|
| 25,624 |
|
|
|
|
|
|
|
| 25,624 |
| |
| Amounts due to directors |
|
| - |
|
|
| 80,813 |
|
|
|
|
|
|
|
| 80,813 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Total current liabilities |
|
| 20,000 |
|
|
| 107,404 |
|
|
|
|
|
|
|
| 127,404 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Total liabilities |
|
| 20,000 |
|
|
| 107,404 |
|
|
|
|
|
|
|
| 127,404 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Shareholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Preferred stock |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
| - |
| |
| Common stock |
|
| 310,869 |
|
|
| - |
|
|
| 10,000 |
|
| (b) |
|
| 320,869 |
|
| Additional paid-in capital |
|
| 413,349 |
|
|
| 10,000 |
|
|
| (423,349 | ) |
| (a),(b) |
|
| - |
|
| Accumulated other comprehensive income |
|
| - |
|
|
| (676 | ) |
|
|
|
|
|
|
|
| (676 | ) |
| (Accumulated deficit) retained earnings |
|
| (723,087 | ) |
|
| (88,252 | ) |
|
| 413,349 |
|
| (a),(b) |
|
| (397,990 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total shareholders’ equity |
|
| 1,131 |
|
|
| (78,928 | ) |
|
|
|
|
|
|
|
| (77,797 | ) |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
| $ | 21,131 |
|
| $ | 28,476 |
|
|
|
|
|
|
|
| $ | 49,607 |
|
| F-1 |
EASON EDUCATION KINGDOM HOLDINGS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATION
FOR THE THREE MONTHS ENDED MARCH 31, 2020
(Unaudited)
|
|
| Historical |
|
| Historical |
|
| Pro forma |
| Pro Forma Condensed |
| |||
|
|
| EKKH |
|
| NHCL |
|
| Adjustment |
| Combined |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
| |||
| Revenues, net |
| $ | - |
|
| $ | 20 |
|
|
|
| $ | 20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of revenues |
|
| - |
|
|
| - |
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit |
|
| - |
|
|
| 20 |
|
|
|
|
| 20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| General and administrative expenses |
|
| (8,573 | ) |
|
| (3,538 | ) |
|
|
|
| (12,111 | ) |
| Total operating expenses |
|
| (8,573 | ) |
|
| (3,538 | ) |
|
|
|
| (12,111 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from operations |
|
| (8,573 | ) |
|
| (3,518 | ) |
|
|
|
| (12,091 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Subsidy income |
|
| - |
|
|
| 10,295 |
|
|
|
|
| 10,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total other income |
|
| - |
|
|
| 10,295 |
|
|
|
|
| 10,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (LOSS) INCOME BEFORE INCOME TAXES |
|
| (8,573 | ) |
|
| 6,777 |
|
|
|
|
| (1,796 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income tax expense |
|
| - |
|
|
| - |
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NET (LOSS) INCOME |
| $ | (8,573 | ) |
| $ | 6,777 |
|
|
|
| $ | (1,796 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net (loss) income per share |
| $ | (0.00 | ) |
|
|
|
|
|
|
| $ | #(0.00 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average shares outstanding |
|
| 310,868,500 |
|
|
|
|
|
|
|
|
| 320,868,500 |
|
# less than $0.001
| F-2 |
EASON EDUCATION KINGDOM HOLDINGS, INC.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
AS OF MARCH 31, 2020
(Unaudited)
NOTE 1 – BACKGROUND
On June 29, 2020, Eason Education Kingdom Holdings, Inc. or the Company or EKKH completed the Share Exchange Agreement with NEMO Holding Company Limited and Subsidiary (collectively “NHCL”) (the “Share Exchange”) for its 100% equity interest.
The consideration of the Share Exchange totaled approximately 10,000,000 shares of the Company’s common stock, at the price of $0.6 equal to $6,000,000.
NOTE 2 – BASIS OF PRESENTATION
Because EKKH is a shell company, NHCL will comprise the ongoing operations of the combined entity and its senior management will serve as the senior management of the combined entity, NHCL is deemed to be the accounting acquirer for accounting purposes. The transaction will be treated as a recapitalization of EKKH. Accordingly, the consolidated assets, liabilities and results of operations of NHCL will become the historical financial statements of NHCL, and EKKH’s assets, liabilities and results of operations will be consolidated with NHCL beginning on the acquisition date. These pro forma financial statements are presented as a continuation of NHCL.
The pro forma balance sheet as of March 31, 2020 is based on the historical financial statements of EKKH after giving effect to NHCL’s acquisition of EKKH as a reverse merger using the acquisition method of accounting and applying the assumptions and adjustments described in the notes to the pro forma financial statements as if such acquisition had occurred as of March 31, 2020 for the balance sheet for pro forma financial statements purposes.
The pro forma financial statements have been prepared by management for illustrative purposes only and are not necessarily indicative of the financial position or results of operations in future periods. The pro forma adjustments are based on the preliminary information available at the time of the preparation of this document and assumptions that management believes are reasonable. The pro forma financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with EKKH’s historical financial statements included elsewhere on Form 10-Q for the quarter ended March 31, 2020, as Exhibits filed with SEC herewith.
The pro forma financial statements do not purport to represent what the results of operations or financial position of the combined entity would actually have been if the merger had in fact occurred on March 31, 2020, nor do they purport to project the results of operations or financial position of the combined entity for any future period or as of any date.
These pro forma financial statements do not give effect to any restructuring costs or to any potential cost savings or other operating efficiencies that could result from the merger between EKKH and NHCL since such amounts, if any, are not presently determinable.
| F-3 |
NOTE 3 – PRO FORMA ADJUSTMENTS
The pro forma financial statements have been prepared as if the acquisition was completed on March 31, 2020 for combined balance sheet purpose and reflects the following pro forma adjustment(s):
| (a) | To eliminate the accumulated deficits of EKKH incurred before the merger transaction to reflect the recapitalization of EKKH |
|
|
|
|
| Dr. Additional paid-in capital 413,349 Cr. Accumulated losses 413,349 |
|
|
|
| (b) | To reflect the issuance of 10,000,000 shares of common stock of EKKH for the acquisition of 100% of NHCL outstanding capital stock |
|
|
|
|
| Dr. Additional paid-in capital 10,000 Cr. Common stock 10,000 |
NOTE 4 – PRO FORMA EARNINGS PER SHARE
The pro forma earnings per share, giving effect to the share exchange transaction has been computed as follows:
| Net loss |
| $ | (1,796 | ) |
|
|
|
|
|
|
| Net loss per share – Basic and diluted |
| $ | #(0.00 | ) |
|
|
|
|
|
|
| Weighted average number of shares deemed issued and outstanding |
|
| 320,868,500 |
|
# less than $0.001
| F-4 |