| Summary of Significant Accounting Policy | Note
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICY Change
of Reporting Entity and Basis of Presentation As
a result of the Share Exchange on December 31, 2018, GSI became a wholly owned subsidiary of Nocera, Inc. The former GSI’s stockholders
owned a majority of the common stock of the Company. The Transaction was regarded as a reverse merger whereby GSI was considered to be
the accounting acquirer as its stockholders retained control of the Company after the Share Exchange, although Nocera, Inc. is the legal
parent company. The Share Exchange was treated as a recapitalization of the Company. As
a result, the assets and liabilities and the historical operations that will be reflected in the Nocera’s financial statements
after consummation of the Transaction will be those of GSI and will be recorded at the historical cost basis of GSI. Nocera’s assets,
liabilities and results of operations will be consolidated with the assets, liabilities and results of operations of GSI upon consummation
of the Transaction. As such, GSI is the continuing entity for financial reporting purpose. In a reverse merger, the historical stockholder’s
equity of the accounting acquirer prior to the merger is retroactively reclassified (a recapitalization) for the equivalent number of
shares received in the merger after giving effect to any difference in par value of the registrant’s and the accounting acquirer’s
stock by an offset in paid-in-capital. Therefore, the financial statements have been prepared as if GSI had always been the reporting
company and then on the share exchange date, had changed its name and reorganized its capital stock. The
accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the
United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange
Commission (“SEC”) for interim financial information. The
consolidated financial statements included the financial statements of all subsidiaries and the VIE of the Company. All transactions
and balances between the Company and its subsidiary and VIE have been eliminated in consolidation. Reclassification
Certain
prior period amounts have been reclassified to conform with current year presentation. Use
of Estimates The
preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions
include, but are not limited to, the allowance for doubtful receivables; the useful lives of property and equipment and intangible assets;
impairment of long-lived assets; recoverability of the carrying amount of inventory; fair value of financial instruments; provisional
amounts based on reasonable estimates for certain income tax effects of the Tax Cuts and Jobs Act (the “Act”) and the assessment
of deferred tax assets or liabilities. These estimates are often based on complex judgments and assumptions that management believes
to be reasonable but are inherently uncertain and unpredictable. Actual results could differ from these estimates. Concentrations
of Credit Risk Financial
instruments that potentially expose the Company to concentrations of credit risk consist primarily of accounts receivable. The Company
conducts credit evaluations of its customers and suppliers, and generally does not require collateral or other security from them. The
Company evaluates its collection experience and long outstanding balances to determine the need for an allowance for doubtful accounts.
The Company conducts periodic reviews of the financial condition and payment practices of its customers to minimize collection risk on
accounts receivable. There
were two customers who represents 96.44% of the Company's total revenue during the years ended December 31, 2020. There was one customer
who represents 87.55% of the Company's total revenue during the years ended December 31, 2019. The
following table sets forth a summary of single customers who represent 10% or more of the Company’s total accounts receivable,
net:
December
31, December
31,
Percentage of the Company’s
accounts receivable
Customer A - 38.97%
Customer B - 32.24%
Customer C - 28.79%
Customer D 26.33% -
Customer E 73,67% -
100.00% 100.00% The
following table sets forth a summary of single suppliers who represent 10% or more of the Company’s total purchase:
For
the years ended December 31,
2020 2019
Percentage of the Company’s
purchase
Supplier A - 50.50%
Supplier B - 41.58%
Supplier C 100% -
100% 92.08% Fair
Value Measurement The
Company applies ASC Topic 820, Fair Value Measurements and Disclosures which defines fair value, establishes a framework for measuring
fair value and expands financial statement disclosure requirements for fair value measurements. ASC
Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price)
on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset
or liability. ASC
Topic 820 specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable
or unobservable. The hierarchy is as follows: Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are
observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. Level
3 inputs to the valuation methodology are unobservable and significant to the fair value. Unobservable inputs are valuation technique
inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset
or liability. Management
of the Company is responsible for determining the assets acquired, liabilities assumed and intangibles identified as of the acquisition
date and considered a number of factors including valuations from an independent appraiser. When
available, the Company uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not
available, the Company measures fair value using valuation techniques that use, when possible, current market-based or independently
sourced market parameters, such as interest rates and currency rates. As
of December 31, 2020 and 2019, there are no assets or liabilities that are measured and reported at fair value on a recurring basis. Cash
and Cash Equivalents Cash
and cash equivalents include all cash on hand and cash in bank with no restrictions. The balance of cash as of December 31, 2020 and
2019 were $1,023,531 and $28,539, respectively. Accounts
Receivable, Net Accounts
receivable are stated at the original amount less an allowance for doubtful accounts, if any, based on a review of all outstanding amounts
at period end. An allowance is also made 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. The Company analyzes the aging of the customer accounts, coverage of credit insurance,
customer concentrations, customer credit-worthiness, historical and current economic trends and changes in its customer payment patterns
when evaluating the adequacy of the allowance for doubtful accounts. Prepaid
Expenses and Other Assets, Net Prepaid
expense and other assets, net consist of receivable from investment, prepaid rent and etc. Management reviews its receivable balance
each reporting period to determine if an allowance for doubtful accounts is required. An allowance for doubtful account is recorded in
the period in which loss is determined to be probable based on an assessment of specific evidence indicating doubtful collection, historical
experience, account balance aging, and prevailing economic conditions. Bad debts are written off against the allowance after all collection
efforts have ceased. Inventories,
net Inventories
are stated at lower of cost or net realizable value. Cost is determined using the weighted average method. Inventories include raw materials,
work in progress and finished goods. The variable production overhead is allocated to each unit of product on the basis of the actual
use of the production facilities. The allocation of fixed production overhead to the costs of conversion is based on the normal capacity
of the production facilities. Where
there is evidence that the utility of inventories, in their disposal in the ordinary course of business, will be less than cost, whether
due to physical deterioration, obsolescence, changes in price levels, or other causes, the inventories are written down to net realizable
value. Property
and Equipment, Net Property
and equipment are stated at cost less accumulated depreciation. Cost represents the purchase price of the asset and other costs incurred
to bring the asset into its existing use. Maintenance, repairs, and betterments, including replacement of minor items, are charged to
expense; major additions to physical properties are capitalized. Depreciation
of property and equipment is provided using the straight-line method over their estimated useful lives, which are shown as follows.
Useful
life
Leasehold improvements Shorter of the
remaining lease terms and estimated useful lives
Furniture and fixture 5 years
Equipment 3 years
Vehicle 5 years Upon
sale or disposal, the applicable amounts of asset cost and accumulated depreciation are removed from the accounts and the net amount
less proceeds from disposal is charged or credited to income. Goodwill Goodwill
is recorded as the difference between the aggregate consideration in a business combination and the fair value of the acquired net assets
acquired. The Company evaluates goodwill for impairment on an annual basis in the fourth quarter or more frequently if indicators of
impairment exist that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company first
assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its
carrying value. Based on that qualitative assessment, if it is more likely than not that the fair value of a reporting unit is less than
its carrying value, the Company conducts a quantitative goodwill impairment test, which involves comparing the estimated fair value of
the reporting unit with its carrying value, including goodwill. The Company estimates the fair value of a reporting unit using a combination
of the income and market approach. If the carrying value of the reporting unit exceeds its estimated fair value, an impairment loss is
recorded for the difference. The Company performed its qualitative assessment and determined that no impairment indicators were present
during the years ended December 31, 2020 and 2019. Intangible
Assets, Net The
intangible assets are a series of software that are surveillance app connecting smart phones, achieving smart fish farming. It reports
a real time data of water in our fish farming tanks, such as temperature, PH value, and dissolved oxygen, to the smart phones of fish
farmers, helping fish farmers to understand the water condition in a timely manner. Intangible
assets are stated at cost less accumulated amortization and impairment losses. Intangible assets are amortized over estimated useful
lives, and are reviewed annually for impairment. The estimated useful life of the intangible assets is 5 years. Impairment
of Long-lived Assets The
Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the
long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition.
If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Company would recognize an impairment
loss, which is the excess of carrying amount over the fair value of the assets. Commitments
and Contingencies In
the normal course of business, the Company is subject to contingencies, including legal proceedings and claims arising out of its business
that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such
contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may
consider many factors in making these assessments including historical and the specific facts and circumstances of each matter. Revenue
Recognition The
Company has early adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and all subsequent ASUs that modified ASC 606
on January 1, 2017. The
core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve
that core principle, the Company applies the following steps:
● Step
1: Identify the contract (s) with a customer
● Step 2: Identify the performance
obligations in the contract
● Step 3: Determine the transaction
price
● Step 4: Allocate the transaction
price to the performance obligation in the contract
● Step 5: Recognize revenue
when (or as) the entity satisfies a performance obligation The
Company considered revenue is recognized when (or as) the Company satisfies performance obligations by transferring a promised goods
and provide maintenance service to a customer. Revenue is measured at the transaction price which is based on the amount of consideration
that the Company expects to receive in exchange for transferring the promised goods and providing maintenance service to the customer.
Contracts with customers are comprised of invoices and written contracts. The
Company does not have arrangements for returns from customers and does not have any future obligations directly or indirectly related
to services resale by customers. The Company has no sales incentive programs. The
Company provides goods, maintenance service warranties for the goods sold with a period vary from 18 months to 72 months, which majority
are 18 months, and exclusive sales agency license to its customers. For performance obligation related to providing products, the Company
expects to recognize the revenue according to the delivery of products. For performance obligation related to maintenance service warranties,
the Company expects to recognize the revenue on a ratable basis using a time-based output method. The performance obligations are typically
satisfied as services are rendered on a straight-line basis over the contract term, which is generally for 18 months as majority of the
maintenance service warranties periods provided are 18 months. For performance obligation related to exclusive agency license, the Company
recognizes the revenue ratably upon the satisfaction over the estimated economic life of the license. . The
Company does not have amounts of contract assets since revenue is recognized as control of goods is transferred. The contract liabilities
consist of advance payments from customers and deferred revenue. Advance payments from customer are expected to be recognized as revenue
within 12 months. Deferred revenue is expected to be recognized as revenue within 12 months. Cost
of Sales Cost
of sales consists primarily of material costs, labor costs, depreciation, and related expenses, which are directly attributable to the
production of the product. Write-down of inventories to lower of cost or net realizable value is also recorded in cost of sales. Income
Taxes The
Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years
of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted
tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Leases In
February 2016, the FASB issued ASU 2016-12, Leases (ASC Topic 842), which amends the leases requirements in ASC Topic 840, Leases. Under
the new lease accounting standard, a lessee will be required to recognize a right-of-use asset and lease liability for most leases on
the balance sheet. The new standard also modifies the classification criteria and accounting for sales-type and direct financing leases,
and enhances the disclosure requirements. Leases will continue to be classified as either finance or operating leases. The
Company adopted ASC Topic 842 using the modified retrospective transition method effective January 1, 2019. There was no cumulative effect
of initially applying ASC Topic 842 that required an adjustment to the opening retained earnings on the adoption date nor revision of
the balances in comparative periods. As a result of the adoption, The Company recognized a lease liability and right-of-use asset for
each of our existing lease arrangement. The adoption of the new lease standard does not have a material impact on our consolidated income
statement or our consolidated statement of cash flow. Uncertain
Tax Positions The
Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The
first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more
likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.
The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Interest
and penalties related to uncertain tax positions are recognized and recorded as necessary in the provision for income taxes. According
to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational
errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances,
where the underpayment of taxes is more than RMB 100,000. In the case of transfer pricing issues, the statute of limitation is ten years.
There is no statute of limitation in the case of tax evasion. The Company records interest and penalties on uncertain tax provisions
as income tax expense. There are no uncertain tax positions as of December 31, 2019 and 2018, and the Company has no accrued interest
or penalties related to uncertain tax positions. The company does not believe that the unrecognized tax benefits will change over the
next twelve months. Comprehensive
(Loss) Income Comprehensive
income or loss is comprised of the Company’s net (loss) income and other comprehensive income or loss. The component of other comprehensive
income or loss consists solely of foreign currency translation adjustments, net of the income tax effect. Foreign
Currency Translation and Transactions The
Company’s reporting currency is the U.S. dollar (“US$”). The functional currency of the Company’s subsidiary
and the consolidated VIE is RMB. In the consolidated financial statements, the financial information of the Company’s subsidiary
and the consolidated VIE has been translated into US$. Assets and liabilities are translated at the exchange rates on the balance sheet
date, equity amounts are translated at historical exchange rates, except for changes in accumulated deficit during the year which is
the result of income statement translation process, and revenue, expense, gains or losses are translated using the average exchange rate
during the year. Translation adjustments are reported as foreign currency translation adjustments and are shown as a separate component
of other comprehensive income or loss in the consolidated statements of changes in equity and comprehensive (loss) income. The exchange
rates as of December 31, 2020 and 2019 are 6.5249 and 6.9630, respectively. The annual average exchange rates for the year ended December
31, 2020 and 2019 are 6.8996 and 6.8937, respectively. (Loss)
Earnings per Share Basic
(loss) earnings per share is computed by dividing net (loss) income attributable to holders of common stock by the weighted average number
of common shares outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if securities
or other contracts to issue common shares were exercised or converted into common shares. Recent
Accounting Pronouncements Recently
Adopted Accounting Standards Adoption
of ASC Topic 606, “Revenue from Contracts with Customers ASU
2018-13. In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to
the Disclosure Requirements for Fair Value Measurement”. The amendments in this update is to improve the effectiveness of disclosures
in the notes to the financial statements by facilitating clear communication of the information required by GAAP that is most important
to users of each entity’s financial statements. The amendments in this update apply to all entities that are required, under existing
GAAP, to make disclosures about recurring or nonrecurring fair value measurements. The amendments in this update are effective for all
entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. There was no impact of the
standard on the Company’s consolidated financial statements. Accounting
Pronouncements Issued But Not Yet Adopted ASU
2019-12. On December 18, 2019, the FASB issued ASU No. 2019-12, Income taxes (Topic 740), Simplifying the Accounting for Income Taxes.
This guidance amends ASC Topic 740 and addresses several aspects including 1) evaluation of step-up tax basis of goodwill when there
is not a business combination, 2) policy election to not allocate consolidated taxes on a separate entity basis to entities not subject
to income tax, 3) accounting for tax law changes or rates during interim periods, 4) ownership changes from equity method investment
to subsidiary or vice versa, 5) elimination of exception to intraperiod allocation when there is gain in discontinued operations and
a loss from continuing operations, 6) treatment of franchise taxes that are partially based on income. The guidance is effective for
calendar year-end public entities on January 1, 2021 and other entities on January 1, 2022. The Company is evaluating the impact of this
guidance on its consolidated financial statements. The
Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material
effect on the consolidated financial position, statements of operations and cash flows. |
