Document:

gkos_Ex10_1

		
			Exhibit 10.1
		

		
			 
		

		
			EXECUTIVE SEVERANCE 
		

		
			&
		

		
			CHANGE IN CONTROL AGREEMENT
		

		
			THIS EXECUTIVE SEVERANCE AND CHANGE IN CONTROL AGREEMENT (the “Agreement”) is made by and between Glaukos Corporation (the “Company”), and Joseph E. Gilliam (“Executive”) as of May 5, 2017.
		

		
			In consideration of the mutual promises, covenants and obligations contained herein, the Company and Executive agree as follows:
		

		
			1.        At-Will Employment.  The Company and Executive acknowledge that Executive’s employment is and shall continue to be at-will, as defined under applicable law. If Executive’s employment terminates for any reason, Executive shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or as may otherwise be available in accordance with the Company’s established employee plans and practices in accordance with other agreements between the Company and Executive.
		

		
			2.        Definitions.    For purposes of this Agreement, the following terms have the following meanings:
		

		
			(a)      “Accrued Obligations” means (i) Executive’s earned but unpaid Base Salary through the Termination Date; (ii) payment of any annual, long-term, or other incentive award which relates to a completed fiscal year or performance period, as applicable, and is payable (but not yet paid) on or before the Termination Date; (iii) a lump-sum payment in respect of accrued but unused vacation days at Executive’s per-business-day Base Salary rate in effect as of the Termination Date; and (iv) any unpaid expense or other reimbursements due pursuant to Company expense reimbursement policy.
		

		
			(b)      “Affiliate(s)” means, with respect to any specified Person (as such term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended), any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.
		

		
			(c)      “Annual Bonus” means Executive’s target annual bonus for the year in which the Change in Control occurs. 
		

		
			(d)      “Base Salary” means Executive’s base rate of pay as of a specified date.  
		

		
			(e)      “Cause” means a finding by the Company that Executive has (i) been convicted of a felony or crime involving moral turpitude; (ii) disclosed trade secrets or confidential information of the Company (or any Parent or Subsidiary) to persons not entitled to receive such information; (iii) engaged in conduct in connection with Executive’s employment or service to the Company (or any Parent or Subsidiary), that has, or could reasonably be expected to result in, material injury to the business or reputation of the Company (or any Parent or Subsidiary), including, without limitation, act(s) of fraud, embezzlement, misappropriation and 
		

		
			
		

		
			

		 

 

		

		
			breach of fiduciary duty; (iv) violated the operating and ethics policies of the Company (or any Parent or Subsidiary) in any material way, including, but not limited to those relating to sexual harassment and the disclosure or misuse of confidential information; (v) engaged in willful and continued negligence in the performance of the duties assigned to Executive by the Company, after Executive has received notice of and failed to cure such negligence; or (v) breached any material provision of any agreement between Executive and the Company (or any Parent or Subsidiary), including, without limitation, any confidentiality agreement.
		

		
			(f)      “Change in Control” means the occurrence of any of the following events:  
		

		
			(i)        Any “person” (as such term is used in sections 13(d) and 14(d) of the Exchange Act) becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the voting power of the then outstanding securities of the Company; provided that a Change of Control shall not be deemed to occur as a result of a change of ownership resulting from the death of a shareholder, and a Change of Control shall not be deemed to occur as a result of a transaction in which the Company becomes a subsidiary of another corporation and in which the shareholders of the Company, immediately prior to the transaction, will beneficially own, immediately after the transaction, shares entitling such shareholders to more than 50% of all votes to which all shareholders of the parent corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote); 
		

		
			(ii)       A change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election; or 
		

		
			(iii)      The consummation of (A) a merger or consolidation of the Company with another corporation where the shareholders of the Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, shares entitling such shareholders to more than 50% of all votes to which all shareholders of the surviving corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote); (B) a sale or other disposition of all or substantially all of the assets of the Company; or (C) a liquidation or dissolution of the Company.
		

		
			(g)      “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code or in the Company’s long-term disability plan. A termination of Executive’s 
		

		
			
		

		
			

		 

		

			-  2  -

		

 

		

		
			employment due to a Disability shall be effective only if the party terminating Executive’s employment first gives at least 15 days’ written notice of such termination to the other party.
		

		
			(h)      “Good Reason” means, without Executive’s express written consent, the occurrence of any one or more of the following: (i) a substantial and material diminution in Executive’s duties or responsibilities; (ii) a material reduction in Executive’s Base Salary; or (iii) the relocation of Executive’s principal place of employment to a location more than 50 miles from Executive’s principal work location to a location that is more than 50 miles from the prior location. A termination of employment by Executive for Good Reason shall be effectuated by giving the Company written notice (“Notice of Termination for Good Reason”), not later than 90 days following the occurrence of the circumstance that constitutes Good Reason, setting forth in reasonable detail the specific conduct of the Company that constitutes Good Reason and the specific provision(s) of this Agreement on which Executive relied.  The Company shall be entitled, during the 30-day period following receipt of a Notice of Termination for Good Reason, to cure the circumstances that gave rise to Good Reason, provided that the Company shall be entitled to waive its right to cure or reduce the cure period by delivery of written notice to that effect to Executive (such 30-day or shorter period, the “Cure Period”).  If, during the Cure Period, such circumstance is remedied, Executive will not be permitted to terminate employment for Good Reason as a result of such circumstance.  If, at the end of the Cure Period, the circumstance that constitutes Good Reason has not been remedied, Executive shall terminate employment for Good Reason on the date of expiration of the Cure Period.  
		

		
			(i)      “Termination Date” means the date on which Executive’s employment hereunder terminates.
		

		
			3.        Termination Without Cause or by Executive With Good Reason.  Subject to Section 6 below, if the Company terminates Executive’s employment without Cause, or the Executive terminates for Good Reason, Executive shall be entitled to: (a) the Accrued Obligations; (b) an amount equal to nine (9) months of the Base Salary as in effect immediately prior to the Termination Date, paid in a lump sum on the sixtieth (60th) day following the Termination Date; (c) medical, dental benefits provided by the Company to Executive and Executive’s spouse and dependents (in each case, as provided in any applicable plan) at least equal to the levels of benefits provided to other similarly situated active employees of the Company and its subsidiaries until the earlier of (i) the nine (9) month anniversary of the Termination Date or (ii) the date that Executive becomes covered under a subsequent employer’s medical and dental plans; and (d) acceleration of vesting of all equity and equity-based awards that would otherwise have vested during the twelve (12) months following the Termination Date.
		

		
			4.        Change in Control Termination.  Subject to Section 6 below, in the event that within the three (3) months prior to or the twelve (12) months following a Change in Control the Company terminates Executive’s employment without Cause, or the Executive terminates for Good Reason, then, in lieu of the payments and benefits otherwise due to Executive under Section 3 above, Executive shall be entitled to: (a) the Accrued Obligations; (b) an amount equal to the sum of (i)  twelve (12) months of the Base Salary as in effect on the Termination Date or the date of the Change in Control, whichever is greater and (ii) 1.0 times the Annual Bonus, paid in a lump sum on the sixtieth (60th) day following the Termination Date; (c) medical, dental benefits provided by the Company to Executive and Executive’s spouse and dependents (in each 
		

		
			
		

		
			

		 

		

			-  3  -

		

 

		

		
			case, as provided in any applicable plan) at least equal to the levels of benefits provided to other similarly situated active employees of the Company and its subsidiaries until the earlier of (i) the twelve (12) month anniversary of the Termination Date or (ii) the date that Executive becomes covered under a subsequent employer’s medical and dental plans; and (d) acceleration of vesting of all equity and equity-based awards.
		

		
			5.        Other Terminations.  If Executive’s employment hereunder is terminated (a) by Executive without Good Reason; (b) by the Company for Cause; or (c) due to Executive’s death or Executive’s Disability, Executive and/or Executive’s estate or beneficiaries shall be entitled to the Accrued Obligations.    
		

		
			6.        Release.  Executive’s entitlement to the payments (other than the Accrued Obligations) and benefits described in Sections 3 and 4 above is expressly contingent upon Executive providing the Company with a signed release satisfactory to the Company (the “Release”).  To be effective, such Release must be delivered by Executive to the Company no later than 45 days following the Termination Date and must not be revoked during the seven (7) days following such delivery.  If such Release is not executed in a timely manner or is revoked, all such payments and benefits shall immediately cease and the Executive shall be required to repay to the Company any such payments that have already been paid to the Executive.
		

		
			7.        Withholding.  The Company shall withhold all applicable federal, state and local taxes, social security and workers’ compensation contributions and other amounts as may be required by law with respect to compensation payable to Executive. 
		

		
			8.        Modification of Payments.  In the event it shall be determined that any payment, right or distribution by the Company or any other person or entity to or for the benefit of Executive pursuant to the terms of this Agreement or otherwise, in connection with, or arising out of, his employment with the Company or a change in ownership or effective control of the Company or a substantial portion of its assets (a “Payment”) is a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) on account of the aggregate value of the Payments due to Executive being equal to or greater than three times the “base amount,” as defined in Section 280G(b)(3) of the Code, (the “Parachute Threshold”) so that Executive would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”) and the net after-tax benefit that Executive would receive by reducing the Payments to the Parachute Threshold is greater than the net after-tax benefit Executive would receive if the full amount of the Payments were paid to Executive, then the Payments payable to Executive shall be reduced (but not below zero) so that the Payments due to Executive do not exceed the amount of the Parachute Threshold, reducing first any Payments under Section 4(d) above. 
		

		
			9.        Section 409A.  (a)  Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payment of the benefits set forth herein shall either be exempt from the requirements of Section 409A of the Code (“Section 409A”) or shall comply with the requirements of such provision.  
		

		
			(b)      Notwithstanding any provision of this Agreement to the contrary, if Executive is a “specified employee” within the meaning of Section 409A, any payments or 
		

		
			
		

		
			

		 

		

			-  4  -

		

 

		

		
			arrangements due upon a termination of Executive’s employment under any arrangement that constitutes a “nonqualified deferral of compensation” within the meaning of Section 409A and which do not otherwise qualify under the exemptions under Treas. Regs. Section 1.409A-1 (including without limitation, the short-term deferral exemption or the permitted payments under Treas. Regs. Section 1.409A-1(b)(9)(iii)(A)), shall be delayed and paid or provided, without interest, on the earlier of (i) the date which is six months after Executive’s “separation from service” (as such term is defined in Section 409A and the regulations and other published guidance thereunder) for any reason other than death, and (ii) the date of Executive’s death.  
		

		
			(c)      After any Termination Date, Executive shall have no duties or responsibilities that are inconsistent with having a “separation from service” within the meaning of Section 409A and, notwithstanding anything in the Agreement to the contrary, distributions upon termination of employment of nonqualified deferred compensation may only be made upon a “separation from service” as determined under Section 409A and such date shall be the Termination Date for purposes of this Agreement.  Each payment under this Agreement or otherwise shall be treated as a separate payment for purposes of Section 409A.  In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement which constitutes a “nonqualified deferral of compensation” within the meaning of Section 409A and to the extent an amount is payable within a time period, the time during which such amount is paid shall be in the discretion of the Company.   
		

		
			10.      Merger Clause.  Effective as of the Effective Date, this Agreement contains the complete, full, and exclusive understanding of Executive and the Company as to its subject matter and shall, on such date, supersede any prior agreement between Executive and the Company regarding severance benefits. Any amendments to this Agreement shall be effective and binding on Executive and the Company only if any such amendments are in writing and signed by both Parties.  
		

		
			11.      Assignment.  (a)  This Agreement is personal to Executive and, without the prior written consent of the Company, shall not be assigned by Executive otherwise than by will or the laws of descent and distribution, and any assignment in violation of this Agreement shall be void.
		

		
			(b)      This Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If Executive should die while any amounts would still be payable to him or her hereunder if he or she had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee or other designee or, should there be no such designee, to Executive’s estate.
		

		
			(c)      The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company (a “Successor”) to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place.  As used in this Agreement, (i) the term “Company” shall mean the Company as hereinbefore defined and any Successor and any permitted assignee to which 
		

		
			
		

		
			

		 

		

			-  5  -

		

 

		

		
			this Agreement is assigned and (ii) the term “Board” shall mean the Board as hereinbefore defined and the board of directors or equivalent governing body of any Successor and any permitted assignee to which this Agreement is assigned.
		

		
			12.      Dispute Resolution.  The parties agree that any dispute arising out of or relating to this Agreement or the formation, breach, termination or validity thereof, will be settled by binding arbitration by a panel of three arbitrators in accordance with the commercial arbitration rules of the American Arbitration Association.  The arbitration proceedings will be located in Orange County, California.  The arbitrators are not empowered to award damages in excess of compensatory damages and each party irrevocably waives any damages in excess of compensatory damages.  Judgment upon any arbitration award may be entered into any court having jurisdiction thereof and the parties consent to the jurisdiction of any court of competent jurisdiction located in the State of California.
		

		
			13.      GOVERNING LAW.  THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN THE STATE OF CALIFORNIA, AND THE VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT IN ALL RESPECT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.
		

		
			14.      Amendment; No Waiver.  No provision of this Agreement may be amended, modified, waived or discharged except by a written document signed by Executive and duly authorized officer of the Company.  The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered as a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.  No failure or delay by any party in exercising any right or power hereunder will operate as a waiver thereof, nor will any single or partial exercise of any other right or power.  No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by any party, which are not set forth expressly in this Agreement.
		

		
			15.      Severability.  If any term or provision of this Agreement is invalid, illegal or incapable of being enforced by any applicable law or public policy, all other conditions and provisions of this Agreement shall nonetheless remain in full force and effect so long as the economic and legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party.  Upon any such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.
		

		
			16.      Survival.  The rights and obligations of the parties under the provisions of this Agreement that relate to post-termination obligations shall survive and remain binding and enforceable, notwithstanding the expiration of the term of this Agreement, the termination of Executive’s employment with the Company for any reason or any settlement of the financial rights and obligations arising from Executive’s employment hereunder, to the extent necessary to preserve the intended benefits of such provisions.
		

		
			
		

		
			

		 

		

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			17.      Notices.  All notices and other communications required or permitted by this Agreement will be made in writing and all such notices and communications will be deemed to have been duly given when delivered or (unless otherwise specified) mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the Company at its headquarters, and addressed to Executive at his last address on file with the Company, or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
		

		
			18.      Headings and References.  The headings of this Agreement are inserted for convenience only and neither constitute a part of this Agreement nor affect in any way the meaning or interpretation of this Agreement.  When a reference in this Agreement is made to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated.
		

		
			19.      Counterparts.  This Agreement may be executed in one or more counterparts (including via facsimile), each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.
		

		
			
		

		
			

		 

		

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			IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the date first written above.
		

			
					
						 

					
					
						GLAUKOS CORPORATION

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						By:

					
					
						/s/ Thomas W. Burns

				
	
					
						 

					
					
						Name: 

					
					
						Thomas W. Burns

				
	
					
						 

					
					
						Title:

					
					
						President & Chief Executive Officer

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						EXECUTIVE

					
						 

				
	
					
						 

					
					
						/s/ Joseph E. Gilliam

				
	
					
						 

					
					
						Name: 

					
					
						Joseph E. Gilliam

				
	
					
						 

					
					
						Title:

					
					
						Chief Financial Officer

				

		
			 
		

		 

		

			-  8  -eos_ex101.htm

EXHIBIT 10.1

 

EMPEROR STAR INTERNATIONAL TRADE CO., LTD.

 

Financial Statements for the year ended December 31, 2016 and for the

period from November 16, 2015, (Inception) through December 31, 2015

 

	 
	1
	

 
	

 

FINANCIAL STATEMENT SCHEDULES

 

	
Report of Registered Independent Auditors
	
 
	
 
	
3
	
 

		
 
	
 
	

	
 

	
Financial Statements:
	
 
	
 
		
 

		
 
	
 
	

	
 

	
Balance Sheet as of December 31, 2016 and 2015
	
 
	
 
	
4
	
 

		
 
	
 
	

	
 

	
Statements of Operations and Comprehensive Income for the year ended December 31, 2016 and for the period from November 16, 2015, (Inception), through December 31, 2015
	
 
	
 
	
5
	
 

		
 
	
 
	

	
 

	
Statement of Cash Flows for the year ended December 31, 2016 and for the period from November 16, 2015, (Inception), through December 31, 2015
	
 
	
 
	
6
	
 

		
 
	
 
	

	
 

	
Statements of Equity for the year ended December 31, 2016 and for the period from November 16, 2015, (Inception), through December 31, 2015
	
 
	
 
	
 7
	
 

		
 
	
 
	

	
 

	
Notes to Financial Statements
	
 
	
 
	
 8-13
	
 

 

	 
	2
	

 
	Table of Contents

 

	

	
Audit • Tax • Consulting • Financial Advisory

Registered with Public Company Accounting Oversight Board (PCAOB)

 

Report of Independent Registered Public Accounting Firm

 

To Board of Director of

Emperor Star International Trade Co., Ltd.

Taipei, Taiwan (R.O.C.)

 

We have audited the accompanying balance sheet of Emperor Star International Trade Co., Ltd. as of December 31, 2016 and 2015, and the related statements of operations and comprehensive income, cash flows, and equity for year ended December 31, 2016 and for the period from November 16, 2015 (inception) through December 31, 2015. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the year ended December 31, 2016 and for the period from November 16, 2015, (Inception), through December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 of the financial statements, the Company’s viability is dependent upon its ability to obtain future financing and the success of its future operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note 2 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ KCCW Accountancy Corp.

Diamond Bar, California

April 20, 2017

 

	 
	3
	

 
	Table of Contents

 

	
EMPEROR STAR INTERNATIONAL TRADE CO., LTD.

	
BALANCE SHEETS

 

	
 
	
 
	
December 31, 
	
 
	
 
	
December 31, 
	
 

	
 
	
 
	
2016
	
 
	
 
	
2015
	
 

	
ASSETS 
	
 
	
 
	
 
	
 
	
 
	
 

	
Current Assets
	
 
	
 
	
 
	
 
	
 
	
 

	
Cash and cash equivalents
	
 
	$	6,390	
 
	
 
	$	4,292	
 

	
Accounts Receivable - Related Parties
	
 
	
 
	-	
 
	
 
	
 
	3,294	
 

	
Inventory
	
 
	
 
	1,919	
 
	
 
	
 
	48,000	
 

	
Prepaid expenses and other current assets
	
 
	
 
	6,229	
 
	
 
	
 
	2,919	
 

	
Total Current Assets 
	
 
	
 
	14,538	
 
	
 
	
 
	58,505	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Property & Equipment, net
	
 
	
 
	3,180	
 
	
 
	
 
	-	
 

	
Deposits
	
 
	
 
	2,544	
 
	
 
	
 
	-	
 

	
Total Assets
	
 
	$	20,262	
 
	
 
	$	58,505	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
LIABILITIES AND EQUITY 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Current Liabilities
	
 
	
 
	
 
	
 
	
 

	
Accounts payable
	
 
	
 
	2,778	
 
	
 
	
 
	35,504	
 

	
Accrued expenses and other current liabilities
	
 
	
 
	10,572	
 
	
 
	
 
	9,172	
 

	
Due to shareholders
	
 
	
 
	57,405	
 
	
 
	
 
	-	
 

	
Unearned revenues
	
 
	
 
	34,797	
 
	
 
	
 
	-	
 

	
Total Current Liabilities
	
 
	
 
	105,552	
 
	
 
	
 
	44,676	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Total Liabilities
	
 
	
 
	105,552	
 
	
 
	
 
	44,676	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Equity
	
 
	
 
	
 
	
 
	
 

	
Paid-in capital
	
 
	
 
	30,562	
 
	
 
	
 
	30,562	
 

	
Accumulated deficit
	
 
	
 
	(116,512	)	
 
	
 
	(16,692	)
	
Accumulated other comprehensive income
	
 
	
 
	660	
 
	
 
	
 
	(41	)
	
Total Equity
	
 
	
 
	(85,290	)	
 
	
 
	13,829	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Total Liabilities and Equity
	
 
	$	20,262	
 
	
 
	$	58,505	
 

 

The accompanying notes are an integral part of financial statements.

 

	 
	4
	

 
	Table of Contents

 

	
EMPEROR STAR INTERNATIONAL TRADE CO., LTD.

	
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

	
FOR THE YEARS ENDED DECEMBER 31, 2016 AND FOR THE PERIOD FROM

	
NOVEMBER 16, 2015, (INCEPTION), THROUGH DECEMBER 31, 2015

 

	
 
	
 
	
2016
	
 
	
 
	
From November

16, 2015 through

December 31,

2015
	
 

	
Sales, net
	
 
	$	281,111	
 
	
 
	$	3,299	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Cost of sales
	
 
	
 
	131,232	
 
	
 
	
 
	2,744	
 

	
Gross profit
	
 
	
 
	149,879	
 
	
 
	
 
	555	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Selling, general and administrative expenses
	
 
	
 
	243,555	
 
	
 
	
 
	17,252	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Loss from operations
	
 
	
 
	(93,676	)	
 
	
 
	(16,697	)
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Other income (expense)
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Interest income
	
 
	
 
	23	
 
	
 
	
 
	5	
 

	
Gain (loss) on foreign currency exchange
	
 
	
 
	(6,167	)	
 
	
 
	-	
 

	
Total other income (expenses)
	
 
	
 
	(6,144	)	
 
	
 
	5	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Loss before income taxes
	
 
	
 
	(99,820	)	
 
	
 
	(16,692	)
	
Provision for income taxes expense
	
 
	
 
	-	
 
	
 
	
 
	-	
 

	
Net loss
	
 
	
 
	(99,820	)	
 
	
 
	(16,692	)
	
Foreign currency translation adjustment
	
 
	
 
	701	
 
	
 
	
 
	(41	)
	
Comprehensive Income (Loss)
	
 
	$	(99,119	))	
 
	$	(16,733	)

 

The accompanying notes are an integral part of financial statements.

 

	 
	5
	

 
	Table of Contents

 

	
EMPEROR STAR INTERNATIONAL TRADE CO., LTD.

	
STATEMENTS OF CASH FLOWS

	
FOR THE YEARS ENDED DECEMBER 31, 2016 AND FOR THE PERIOD FROM NOVEMBER 16, 2015,

	
(INCEPTION), THROUGH DECEMBER 31, 2015

 

	
 
	
 
	

2016
	
 
	
 
	
From November

16, 2015 through December 31,

2015
	
 

	
Cash flows from operating activities
	
 
	
 
	
 
	
 
	
 
	
 

	
Net loss
	
 
	$	(99,820	)	
 
	$	(16,692	)
	
Adjustments to reconcile net loss to net cash provided by(used in) operating activities:
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Depreciation and amortization expenses
	
 
	
 
	410	
 
	
 
	
 
	-	
 

	
Changes in assets and liabilities:
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Decrease (Increase) in accounts receivable
	
 
	
 
	3,351	
 
	
 
	
 
	(3,299	)
	
Decrease (Increase) in inventory
	
 
	
 
	46,911	
 
	
 
	
 
	(48,075	)
	
Increase in prepaid expense &other assets
	
 
	
 
	(5,850	)	
 
	
 
	(2,924	)
	
Increase (Decrease) in accounts payable
	
 
	
 
	(33,333	)	
 
	
 
	35,560	
 

	
Increase in accrued expense & other current liabilities
	
 
	
 
	1,296	
 
	
 
	
 
	9,187	
 

	
Increase in unearned revenues
	
 
	
 
	34,985	
 
	
 
	
 
	-	
 

	
Increase in due to shareholders
	
 
	
 
	57,714	
 
	
 
	
 
	-	
 

	
Net cash provided by (used in) operating activities
	
 
	
 
	5,664	
 
	
 
	
 
	(26,243	)
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Cash flows from investing activities
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Purchase of fixed assets
	
 
	
 
	(3,607	)	
 
	
 
	-	
 

	
Net cash used in investing activities
	
 
	
 
	(3,607	)	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Cash flows from financing activities
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Capital contribution
	
 
	
 
	-	
 
	
 
	
 
	30,545	
 

	
Net cash provided by financing activities
	
 
	
 
	-	
 
	
 
	
 
	30,545	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Effect of exchange rate changes on cash and cash equivalents
	
 
	
 
	41	
 
	
 
	
 
	(10	)
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Net increase in cash and cash equivalents
	
 
	
 
	2,098	
 
	
 
	
 
	4,292	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Cash and cash equivalents
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Beginning
	
 
	
 
	4,292	
 
	
 
	
 
	-	
 

	
Ending
	
 
	$	6,390	
 
	
 
	$	4,292	
 

	
Supplemental disclosure of cash flows
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Cash paid during the year for:
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Income tax
	
 
	$	-	
 
	
 
	$	-	
 

	
Interest expense
	
 
	$	-	
 
	
 
	$	-	
 

 

The accompanying notes are an integral part of financial statements.

 

	 
	6
	

 
	Table of Contents

 

	
EMPEROR STAR INTERNATIONAL TRADE CO., LTD.

	
STATEMENT OF EQUITY

	
FROM NOVEMBER 16, 2015, (INCEPTION), THROUGH DECEMBER 31, 2016

 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Accumulated other
	
 
	
 
	
 
	
 

	
 
	
 
	
Paid-in
	
 
	
 
	
Accumulated
	
 
	
 
	
Comprehensive
	
 
	
 
	
 
	
 

	
 
	
 
	
Capital
	
 
	
 
	
Deficits
	
 
	
 
	
Income
	
 
	
 
	
Total
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Balance at November 16, 2015 (Inception)
	
 
	$	-	
 
	
 
	$	-	
 
	
 
	$	-	
 
	
 
	$	-	
 

	
Pain-in capital 
	
 
	
 
	30,562	
 
	
 
	
 
	-	
 
	
 
	
 
	-	
 
	
 
	
 
	30,562	
 

	
Translation adjustment
	
 
	
 
	-	
 
	
 
	
 
	-	
 
	
 
	
 
	(41	)	
 
	
 
	(41	)
	
Net loss
	
 
	
 
	-	
 
	
 
	
 
	(16,692	)	
 
	
 
	-	
 
	
 
	
 
	(16,692	)
	
Balance at December 31, 2015
	
 
	$	30,562	
 
	
 
	$	(16,692	)	
 
	$	(41	)	
 
	$	13,829	
 

	
Translation adjustment
	
 
	
 
	-	
 
	
 
	
 
	-	
 
	
 
	
 
	701	
 
	
 
	
 
	701	
 

	
Net loss
	
 
	
 
	-	
 
	
 
	
 
	(99,820	)	
 
	
 
	-	
 
	
 
	
 
	(99,820	)
	
Balance at December 31, 2016
	
 
	$	30,562	
 
	
 
	$	(116,512	)	
 
	$	660	
 
	
 
	$	(85,290	)

 

	
The accompanying notes are an integral part of financial statements.

 

	 
	7
	

 
	Table of Contents

 

EMPEROR STAR INTERNATIONAL TRADE CO., LTD.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2016

 

NOTE 1. ORGANIZATION AND BUSINESS 

 

Emperor Star International Trade Co., Ltd., (“Emperor Star” or the “Company”), was incorporated on November 16, 2015, a Taiwan Company. The Company is in the business of marketing and distribution of various products, including detergents, nutrition supplements, and skin care products. 

 

The Company’s year-end is December 31.

 

Segment Reporting — The Company follows the provisions of ASC 280 (formerly referred to as SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information), which establishes standards for reporting information about operating segments, which uses a “management” approach for determining segments. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company’s reportable segments. ASC Topic 280, “Segment Reporting,” also requires disclosures about products or services, geographic areas, and major customers. The Company’s management reporting structure provided for only one segment for the year ended December 31, 2016 and for the period from November 16, 2015, (Inception), through December 31, 2015, and accordingly, no separate segment information is presented.

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

 

Going Concern — The Company has incurred net loss of $99,820 and $16,692 for the year ended December 31, 2016 and for the period from November 16, 2015 (Inception) through December 31, 2015, respectively. As of December 31, 2016 and 2015, the Company had accumulated deficit of $116,512 and $16,692, respectively. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. This presentation presumes funds will be available to finance ongoing research and development, operations and capital expenditures and permit the realization of assets and the payment of liabilities in the normal course of operations for the foreseeable future.

 

There can be no assurances that there will be adequate financing available to the Company and the financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

 

The Company intends on financing its future development activities and its working capital needs largely from the sale of public deficit securities with some additional funding from other traditional financing sources until such time that funds provided by operations are sufficient to fund working capital requirements.

 

Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

	 
	 
	

 
	Table of Contents

 

Cash and Cash Equivalents— The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents.

 

Accounts Receivable — Accounts receivables are stated at carrying value less estimates made for doubtful receivables. An allowance for impairment of trade receivables is established if the collection of a receivable becomes doubtful. Such receivable becomes doubtful when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. An impairment loss is recognized in the statement of income, as are subsequent recoveries of previous impairments.

 

Inventory — Inventory is stated at the lower of cost or market and consists mainly of finished goods held for resale. Cost is determined on a standard cost basis of FIFO (first-in, first-out) method. Market is determined based on net realizable value. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has become obsolete or has declined in value, and incurs a charge to operations for known and anticipated inventory obsolescence.

Property and Equipment — Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of five years. 

Revenue Recognition— Revenues are recognized when products are shipped to customers, both title and the risks of ownership are transferred, and the collectability of accounts receivable can be reasonably assured. The Company’s standard shipping term is Free on Board (FOB) destination. Usually no sales returns, discounts or other allowances are provided to customers. Shipping and handling charges to customers are included in net sales. Shipping and handling charges incurred by the Company are included in selling, general and administrative expenses.

 

Advertising Costs — Advertising costs are expensed at the time such advertising commences. Advertising expenses were $ 32,038 and 5,774 for the year ended December 31, 2016 and for the period from November 16, 2015(inception) through December 31, 2015, respectively.

 

Income Taxes — Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. The deferred income tax asset was $0 and $0 as of December 31, 2016 and 2015, respectively. 

 

	 
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	Table of Contents

 

The Company applied the provisions of ASC 740-10-50, “Accounting For Uncertainty In Income Taxes”, which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. At December 31, 2016 and 2015, management considered that the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.

 

The Company is subject to the tax authority in Taiwan for the years since incorporated. (See Note 6).

 

Concentration of Credit Risk — The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and restricted cash. The Company places its cash and temporary cash investments in high quality credit institutions, but these investments may be in excess of Taiwan Central Deposit Insurance Corporation’s insurance limits. The Company does not enter into financial instruments for hedging, trading or speculative purposes. Concentration of credit risk with respect to trade and notes receivables is limited due to the wide variety of customers and markets in which the Company transacts business, as well as their dispersion across many geographical areas. The Company performs ongoing credit evaluations of its customers and generally does not require collateral, but does require advance deposits on certain transactions.

 

Customers: The Company performs ongoing credit evaluations of its customers’ financial condition and generally, requires no collateral. For the year ended December 31, 2016 and for the period from November 16, 2015 (Inception) through December 31, 2015, one customer, also a related party (See Note 5), accounting for 100% of the Company’s total sales revenues. 

 

Suppliers: The Company’s inventory is purchased from various suppliers. For the year ended December 31, 2016, five vendors who accounted for more than 10% of the Company’s total net purchase, representing approximately 18%, 18%, 16%, 15%, and 15% of total net purchase, and 0% of accounts payable in aggregate at December 31, 2016, respectively:

 

	

Customer
	
 
	
Purchase

for the

year

2016
	
 
	
 
	
Accounts

payable

balance as of

December 31, 2016
	
 

	
A
	
 
	$	15,081	
 
	
 
	$	-	
 

	
B
	
 
	$	14,938	
 
	
 
	$	-	
 

	
C
	
 
	$	13,498	
 
	
 
	$	-	
 

	
D
	
 
	$	12,722	
 
	
 
	$	-	
 

	
E
	
 
	$	12,456	
 
	
 
	$	-	
 

 

	 
	10
	

 
	Table of Contents

 

For the period from November 16, 2015 through December 31, 2015, one vendor accounting for more than 10% of the Company’s total net sales revenues, representing 100% of total net purchase of $50,820, and 0% of accounts payable in aggregate at December 31, 2015.

 

Foreign-currency Transactions — Foreign-currency transactions are recorded in New Taiwan dollars (“NTD”) at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currencies denominated investments in shares of stock where such differences are accounted for as translation adjustments under Equity.

 

Statement of Cash Flows — Cash flows from the Company's operations are based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

 

Translation Adjustment — The accounts of the Company was maintained, and its financial statements were expressed, in New Taiwan Dollar (“NTD”). Such financial statements were translated into U.S. Dollars (“$” or “USD”) in accordance ASC 830, "Foreign Currency Matters", with the NTD as the functional currency. According to the Statement, all assets and liabilities are translated at the current exchange rate, Equity's deficit are translated at the historical rates and income statement items are translated at an average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income as a component of Equity’s deficit.

 

Comprehensive Income — Comprehensive income includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income on its statements of Equity’s deficit and comprehensive income (loss).

 

Recently Issued Accounting Pronouncements — The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its result of operations, financial position or cash flow.

 

NOTE 3. PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets mainly consist of the following:

 

	
 
	
 
	
December 31,

2016
	
 
	
 
	
December 31,

2015
	
 

	
Prepaid website set-up 
	
 
	$	926	
 
	
 
	$	-	
 

	
Prepaid operating lease equipment
	
 
	
 
	158	
 
	
 
	
 
	-	
 

	
Prepaid sales tax
	
 
	
 
	5,130	
 
	
 
	
 
	2,919	
 

	
Others
	
 
	
 
	15	
 
	
 
	
 
	-	
 

	
 
	
 
	$	6,229	
 
	
 
	$	2,919	
 

 

	 
	11
	

 
	Table of Contents

 

NOTE 4. PROPERTY AND EQUIPMENT

 

Property and Equipment mainly consists of the following:

 

	
 
	
 
	
December 31,

2016
	
 
	
 
	
December 31,

2015
	
 

	
Office equipment
	
 
	$	3,588	
 
	
 
	$	-	
 

	
Less: accumulated depreciation
	
 
	
 
	(408	)	
 
	
 
	-	
 

	
Property and equipment, net
	
 
	$	3,180	
 
	
 
	$	-	
 

 

Depreciation expense was $410 and $0 for the year ended December 31, 2016 and for the period from November 16, 2015(inception) through December 31, 2015, respectively.

 

NOTE 5. RELATED PARTY TRANSACTIONS

 

Sales

The Company had sales to EOS Trading Co., Ltd., (“EOS Trading”), a Hong Kong company owned by father of the Company’s sole director and shareholder, in an aggregate amount of $281,111 and $3,299 for year ended December 31, 2016 and for the period from November 16, 2015 (Inception) through December 31, 2015, respectively. 

 

Due to shareholders

The Company has advanced funds from its shareholder for working capital purposes. The Company has not entered into any agreement on the repayment terms for these advances. The advances bear no interest rate and are due upon demand by shareholders. As of December 31, 2016 and 2015, there was $57,405 and $0 advances outstanding. The outstanding balance bears no interest and is due upon request.

 

NOTE 6. INCOME TAX

 

Emperor Star is incorporated in Taiwan and is subject to Taiwan tax law. The statutory tax rate under Taiwan tax law is 17%. The Company has incurred losses for the period ended December 31, 2016 and for the period from November 16, 2015 (Inception) through December 31, 2015, respectively. As a result, no tax liability was incurred at December 31, 2016 and 2015, respectively. 

 

The following is a reconciliation of the statutory tax rate to the effective tax rate losses for the year ended December 31, 2016 and for the period from November 16, 2015 (Inception) through December 31, 2015:

 

	
 
	
 
	
2016
	
 
	
 
	
2015
	
 

	
Taiwan tax at statutory rate
	
 
	
 
	17	%	
 
	
 
	17	%
	
Other (a)
	
 
	
 
	(17	)%	
 
	
 
	(17	)%
	
Effective tax rate
	
 
	
 
	0	%	
 
	
 
	0	%

 

	
(a)
	
Other represents expenses incurred by the Company that are not deductible for Taiwan income taxes and changes in valuation allowance for Taiwanese entities for the period ended December 31, 2016 and for the period from November 16, 2015 (Inception) through December 31, 2015, respectively. 

 

	 
	12
	

 
	Table of Contents

 

NOTE 7. COMMITMENTS AND CONTINGENCIES

 

Operating lease obligation:

 

The Company leases an office space under an operating lease agreement which expires on November 1, 2017. The monthly base rent is NT$24,000, approximately equivalent to $745. The Company's obligations under operating leases are as follows:

 

	
As of December 31,
	
 
		
Amount
	
 

	
2017
	
 
	$	7,447	
 

	
Total minimum payments
	
 
	$	7,447	
 

 

NOTE 8. SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events through the date which the financial statements were available to be issued. All subsequent events requiring recognition as of December 31, 2016 have been incorporated into these financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”

 

******

 

 

	
13

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