Overview
Nocera, Inc. was incorporated in the State of Nevada
on February 1, 2002, with operations based in New Taipei City, Taiwan. Our primary business operations currently consist of designing,
developing and producing large scale recirculating aquaculture systems (“RASs”) for fish farms along with providing consulting,
technology transfer and aquaculture project management services to new and existing aquaculture management business services.
RASs operate by filtering water from the fish (or
shellfish) tanks so it can be reused within the tank. This dramatically reduces the amount of water and space required to intensively
produce seafood products. The steps in RASs include solids removal, ammonia removal, Co2 removal and oxygenation. Prior to 2021, we initially
focused on the Chinese market due to opportunities presented by changes to regulations governing water use for fish production in China.
As of October 2020, we had delivered 551 fish tank systems to six separate Chinese-based fish farms, and two fish tank systems to our
Taiwan showroom.
In October 2020, the government of Taiwan began supporting
the Green Power and Solar Sharing Fish Farms initiative. In view of the opportunities resulting from this initiative, in October 2020,
we ceased all of our operations in China and moved all of our technology and back-office operations to Taiwan. We now only operate out
of Taiwan.
Our current mission is to provide consulting
services and solutions in aquaculture projects to reduce water pollution and decrease the disease problems of fisheries. Our goal is to
become a global leader in the land-based aquaculture business. We are now poised to grow our existing operations in Taiwan and expand
into the development and management of land-based fish farms in Taiwan and North and South America. We do not currently have any intentions
of conducting operations in China or Hong Kong.
Corporate History
Nocera, Inc. was incorporated in the State of Nevada
on February 1, 2002, and is based in New Taipei City, Taiwan.
Reverse Merger
Effective December 31, 2018, we completed a reverse
merger transaction pursuant to an Agreement and Plan of Merger (the “Agreement”) with (i) GSI, (ii) GSI’s stockholders,
Yin-Chieh (“Jeff”) Cheng and Zhang Bi, who together owned shares constituting 100% of the issued and outstanding ordinary
shares of GSI (the “GSI Shares”) and (iii) GSI Acquisition Corp. Under the terms of the Agreement, the GSI Stockholders transferred
to us all of the GSI Shares in exchange for the issuance of 6,666,667 (post-split) shares of our common stock. As a result of the reverse
merger, GSI became our wholly-owned subsidiary and Mr. Cheng and Zhang Bi, the former stockholders of GSI, became our controlling stockholders.
The share exchange transaction with GSI was treated as a reverse merger, with GSI as the accounting acquirer and Nocera as the acquired
party. GSI is a limited company established under the laws and regulations of Hong Kong on August 1, 2014 and is a holding company without
any assets or operations.
In anticipation of the reverse merger, GSI undertook
a reorganization and became the 100% holding company of Guizhou Grand Smooth Technology Ltd (“GZ GST”) and GSI Guizhou Wan
Feng Hu Intelligent Aquatic Technology Co. Limited (“GZ WFH”), which were all controlled by the same stockholders before and
after the reorganization, pursuant to a series of contractual agreements (the “GZ WFH VIE Agreements”). As a result, GSI,
through GZ GST, was determined to be the primary beneficiary of GZ WFH and GZ WFH became a variable interest entity (“VIE”)
of GSI. Accordingly, GSI consolidated GZ WFH’s operations, assets and liabilities.
GZ WFH was incorporated in Xingyi City, Guizhou Province,
People’s Republic of China (PRC) on October 25, 2017, and was engaged in providing fish farming containers service, which integrated
sales, installments, and maintenance of aquaculture equipment.
Divestiture of GZ WFH
On September 21, 2020, we terminated our relationship
with GZ WFH and its management, and the GZ WFH Agreements between the parties were terminated as well.
Subsequently
on October 8, 2020, Zhang Bi and GZ WFH entered into a Settlement Agreement and Release with us wherein all claims as to GZ WFH’s
debt (claim to our shares or GZ GST) were compromised, settled, and otherwise resolved as to any and all claims or causes of action whatsoever
against us for any matter, action, or representation as to Nocera, and any debt to ownership of Nocera or GZ GST up to the date of the
settlement agreement. The consideration for the settlement agreement was mutual waiver of any and all claims against each other and GZ
GST, and GZ WFH (including Zhang Bi) waived any claims to our stock, and the 3,166,667 (post-split) shares
of our common stock owned by Zhang Bi were cancelled.
XFC Sale
On December 31, 2020, we exchanged 466,667 (post-split)
shares of our restricted common stock to stockholders of Xin Feng Construction Co., Ltd., a Taiwan limited liability company (“XFC”),
in exchange for 100% controlling interest in XFC. We also entered into contractual arrangements with a stockholder of XFC, that enabled
us to have the power to direct the activities that most significantly affects the economic performance of XFC and receive the economic
benefits of XFC that could be significant to XFC. On November 30, 2022, we entered into a Purchase of Business Agreement with Han-Chieh
Shih (the “Purchaser”), in which we sold our controlling interest of XFC, to the Purchaser for a total purchase cash price
of $300,000 (the “XFC Sale”). The closing of the XFC Sale occurred on November 30, 2022 and the XFC variable interest entity
(“VIE”) agreements were terminated in connection with the XFC Sale.
Reverse Stock Split
On July 26, 2022, we filed a Certificate of Amendment
with the Secretary of State of the State of Nevada to implement a 2-for-3 reverse stock split of our outstanding common stock, with fractional
shares resulting from the reverse stock split being rounded up to the nearest whole number. The reverse stock split was effected on August
11, 2022.
The VIE Agreements with Meixin
On September 7, 2022, we entered into a series of
contractual agreements (collectively, the “Meixin VIE Agreements”) with the majority stockholder (the “Selling Stockholder”)
of Meixin Institutional Food Development Co., Ltd., a Taiwan corporation and a food processing and catering company (“Meixin”),
and Meixin, of which we purchased 80% controlling interest of Meixin for $4,300,000. The Meixin VIE Agreements essentially confer
control and management of Meixin as well as substantially all of the economic benefits of the Selling Stockholder in Meixin to us.
Business Developments
The following highlights recent material developments
in our business:
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On September 19, 2022, we announced that our seafood
porridge bowl will be launched at the Ning Xia Night Market in the Datong District of Taipei City, Taiwan with a soft opening on September
26, 2022.
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On November 17, 2022, we announced that we achieved
eel sales revenue of over $3 million for the month of October 2022.
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On December 13, 2022, we announced that we achieved
eel sales revenue of approximately $3.2 million for the month of November 2022.
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On December 15, 2022, we announced that our flagship bento box store located in the Datong District of Taipei City, Taiwan officially opened. The two signature dishes, grilled eel rice bowl and super value bento box, made an instant hit around Nangang Software Park. Nangang Software Park contains around 400 companies with more than 25,000 people. |
Recent Developments
Recent developments of the Company are summarized
below and have been previously disclosed in Current Reports on Form 8-K filed with the SEC:
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On September 8, 2022, we entered into a Real Estate Purchase Agreement with an unaffiliated third party pursuant to which we agreed to purchase 229 contiguous acres of land located in Montgomery County, Alabama (the “Land Acquisition”). We paid an earnest deposit of $10,000 on the land with the balance of $865,000 payable at closing. We borrowed $650,000 to fund the purchase price. The Land Acquisition closed on February 16, 2023. We intend to build RASs on the land for fish farming. The property includes a house, a manufactured home and a building site with sewer and power which we intend to develop into an office and dormitory for our future employees. |
Corporate Structure
We conduct our operations through (i) Meixin; and
(ii) Nocera Taiwan Branch, an unincorporated division of the Company (“NTB”). Our other subsidiaries, GSI, which wholly-owns
GZ GST, are dormant and currently do not have any operations. However, GZ GST may be involved with RASs manufacturing in the near future.
We acquired GSI in a reverse merger on December 31,
2018. Prior to the merger, we were a “shell company” as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act). GSI is the parent holding company of GZ GST, which was incorporated on November 13, 2018, as a wholly
foreign-owned enterprise established in the PRC. Both GSI and GZ GZT are currently dormant and do not conduct any operations. We currently
do not conduct any operations in China or Hong Kong.
In December 2020, we added XFC as a VIE in order to
obtain a Class A construction license to construct indoor RASs and solar sharing fish farms. On November 30, 2022, we entered into a Purchase
of Business Agreement with Han-Chieh Shih, in which we sold our controlling interest of XFC, to the Purchaser for a total purchase cash
price of $300,000. The closing of the XFC Sale occurred on November 30, 2022 and the XFC VIE agreements were terminated in connection
with the XFC Sale. As of November 30, 2022, we ceased providing services to construct indoor RASs and solar sharing fish farms in Taiwan.
On September 7, 2022, we entered into a series of
contractual agreements with the majority stockholder of Meixin and Meixin, of which we purchased 80% controlling interest of Meixin for
$4,300,000. The Meixin VIE Agreements essentially confer control and management of Meixin as well as substantially all of the economic
benefits of the Selling Stockholder in Meixin to us. Therefore, in accordance with ASC 810 “Consolidation,” we are considered
the primary beneficiary of Meixin and have consolidated Meixin’s assets, liabilities, results of operations, and cash flows in the
accompanying consolidated financial statements.
NTB was established on January 14, 2021 in Taiwan.
In October 2021, Nocera began its eel trading business in response to domestic demands created by the COVID-19 lockdown. NTB currently
procures and sells eel in Taiwan and plans to trade other types of seafood, such as tilapia and milkfish, in the near future.
Significant Products & Services
We manufacture, sell, and install RASs for land-based
fish farms. Originally, our systems were designed and constructed from used marine shipping containers. We then developed our next generation
of RASs, a cylindrical shaped tank that holds approximately 15,000 U.S. gallons of water, which we believe make them among the largest
systems in the market.
There are several significant benefits to our RASs:
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the system provides a controlled and “traceable”
environment;
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the recirculating aquaculture system can be installed
almost anywhere and requires minimal site preparation; and
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it
benefits local economies by providing fresher and, therefore, generally healthier fish.
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Nocera’s RASs include the fish tank, circulation
and filtration systems.
Nocera Land-based RASs Overview |
Height / width |
1.5m/10m |
Main composition of our tank |
Environmental-friendly PE |
Yield per growing season (Tilapia) |
11,000 lbs. |
Fish farming density |
100-109 lb./m3 |
Price per RASs Total Solution |
$35,000 USD |
Our RASs can raise both freshwater and saltwater fish,
as well as a variety of crustaceans.
Nocera Recirculating Aquaculture System
Market Overview
Global fish consumption has long been on the rise
at a rate higher than any other source of animal protein, and the trend is expected to continue. With overfishing already threatening
the earth’s marine ecosystem, it is anticipated that a significantly larger proportion of fish consumption would be farm-raised
instead of wild-caught in the future.
Also, the trade conflict between the U.S. and China
has led to a greater demand for non-Chinese origin seafood products from the U.S. market.
On a broader perspective, as the world rapidly begins
a transition towards net zero carbon emissions in response to the ever-more pressing threat of climate change, it is foreseeable that
solar energy will be the go-to option for many countries as a new source of green energy.
We believe that the RASs, with its proven advantage
in producing more fish in a more cost-effective and environmentally friendly manner while offering greater location flexibility and the
potential for a “solar-fish sharing mode,” is a perfect solution to address the opportunities highlighted above.
Consulting Services
We also provide consulting services and solutions
for aquaculture projects, where we offer design innovation and RAS expertise to increase revenue, while decreasing operating expenses,
allowing clients to operate more efficiently while increasing production. Additionally, we show clients how to operate more strategically
by diversifying the species of fish raised to meet market demands. Our equipment enhances the management of fish farms by reducing the
incidence of disease among the fish populations, while reducing water pollution from inland fish farms. We currently provide such services
in Taiwan and intend to expand into other international markets and the United States to increase revenues and operate more efficiently.
We plan to provide the following service offerings:
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for qualified investors or investment groups who are
interested in capitalizing on the potential of the aquaculture industry and want to develop or take part in commercial fish farming or
shrimp farming but lack the experience, design, installation, build and management of aquaculture projects to meet these interests;
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a full range of pilot and management services to aquaculture
companies and new aquaculture projects throughout Taiwan and potentially the rest of the world, providing tailored solutions to meet customer
needs and to fulfill our commitment, to encourage and support clean water and clean fish products from the fish farm to the table; and
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select equipment and materials from suppliers to provide
unique service offerings structured to generate higher profit margins.
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Strategy
We plan to focus on countries with a growing population
and growing demand for food. By 2050, we will need to double the global food supply to feed the world’s growing population.1
There is a growing need for new ways to produce high-quality local fish without putting more pressure on our natural ecosystems. Like
Taiwan, there are also many countries with a growing population and growing demand for high-protein food. We plan to go global through
building demo sites promoting our RASs and selling our price-competitive systems in these countries to meet their demand for food and
to satisfy their desire for a greener environment.
In January 2021, we moved our operation and market
focus from China to Taiwan. In 2021, we established a Nocera Taiwan Branch to focus on customers in a variety of sectors, such as individual
investors, government supported or funded companies, and international customers. We have received interest from areas like Japan, Thailand,
Jordan, South Africa and the United States.
During the year ended December 31, 2022 and 2021,
the net sales were approximately $16.3 million and approximately $9.9 million, respectively.
Construction Services
Prior to terminating the VIE agreements with XFC in
connection with the XFC Sale, we were the only provider of RAS solar power energy sharing and construction services in Taiwan. As of the
filing date of this Annual Report on Form 10-K, we have no intention of providing services to construct indoor RASs and solar sharing
fish farms in Taiwan.
Customers
In 2023, we intend to target customers in a variety
of markets (e.g., Japan, Taiwan, Thailand, Jordan, South Africa and the United States), such as individual investors, government supported
or funded companies and other types of international customers. During the year ended December 31, 2022 and 2021, the net sales were approximately
$16.3 million and approximately $9.9 million, respectively.
______________________
] Ranganathan et al, How to Sustainably
Feed 10 Billion People by 2050, in 21 Charts, WORLD RESOURCES INSTITUTE (Dec. 5, 2018); https://www.wri.org/insights/how-sustainably-feed-10-billion-people-2050-21-charts#:~:text=
How%20to%20Sustainably%20Feed%2010%20Billion%20People%20by%202050%2C%20in%2021%20Charts,-December%205%2C%202018&text=There%20is%20a%20big%20shortfall,than%20there%20were%20in%202010.
Suppliers
We intend to purchase raw materials and parts and
equipment from third parties locally in Taiwan and build and sell them to customers. We are not directly involved in the production or
manufacturing of readily available equipment, and we do not take a risk in the repair and maintenance of the equipment because of the
manufacturer’s maintenance policy. We have identified and sourced multiple suppliers in Taiwan, and our relationships with suppliers
are generally good. We expect that our suppliers will be able to meet the anticipated demand for our products in the foreseeable future.
There can be no assurance that our suppliers will continue to meet our needs, particularly as we ramp up our expansion into the U.S. and
other markets around the world.
Competition
The market for aquaculture projects and services is
highly competitive. Many of the producers and sellers are large entities that have significantly greater resources than we have. We also
compete with small suppliers which provide smaller alternative aquaculture solutions regionally but due to the size of our projects, we
believe that we should have a better price point.
Trademarks and Patents
We do not own any trademarks or patents.
Sales and Marketing
We intend to create a brand and by our creation of
the brand, offer unique and better incentives to the consumers. Our target market is not only limited to the direct processing plants;
instead, consumers will be informed about the uniqueness of the fish product, and the important health benefits of fish protein.
Further, we plan to increase the species selection
and product form through the investment of the additional 500 tanks; among all we plan to build a hatchery system by collaborating with
professionals to promote and maintain healthy, self-sustaining populations of fish and other aquatic species. We are aiming for the direct
wholesale option, including live hauling, restaurants, supermarkets and specialty stores. As of December 2022, we sell our food items,
including our signature seafood porridge bowl, through our flagship bento box store located at the Ning Xia Night Market in the Datong
District of Taipei City, Taiwan. In addition to utilizing Meixin’s distribution channel, we will move towards online marketing as
well to achieve a greater market share.
Manufacturing Operations
Currently, we manufacture RASs through our branch
office in Taiwan and may manufacture RASs through our Chinese subsidiaries. Additionally, we provide consulting services regarding RAS
technology transfer and aquaculture project management services to customers in Taiwan.
Government Regulation
We are subject to many varying laws and regulations
in Taiwan and throughout the world, including, without limitation, those related to privacy, data protection, intellectual property, consumer
protection, e-commerce, marketing, advertising, messaging, rights of publicity, health and safety, employment and labor, product liability,
accessibility, competition, and taxation. These laws and regulations are constantly evolving and may be interpreted, applied, created,
or amended in a manner that could harm our current or future business and operations. In addition, it is possible that certain governments
may seek to block or limit our products and services or otherwise impose other restrictions that may affect the accessibility or usability
of any or all of our products and services for an extended period of time or indefinitely.
Our properties and operations are subject to a number
of environmental, health and safety laws and regulations in each of the jurisdictions in which we operate. Under certain of these laws
and regulations, we may be subject to joint and several liability for environmental investigations and cleanups, including at properties
that we currently or previously owned or operated, or at sites at which waste we generated was disposed, even if the contamination was
not caused by us or was legal at the time it occurred.
We are also subject to laws regulating consumer products
in the jurisdictions in which we sell our products. In the United States for instance, certain of our products are subject to the U.S.
Consumer Product Safety Act, under which the U.S. Consumer Product Safety Commission may exclude products from the market that are found
to be unsafe or hazardous, require repair, replacement or refund of products, impose fines for noncompliance with requirements and impose
fines for failure to timely notify them of potential safety hazards.
Also, with respect to the potential sale of eel and
any other seafood into the United States, we are subject to extensive regulation, including, among other things, the Food, Drug and Cosmetic
Act, as amended by the Food Safety Modernization Act (“FSMA”), the Public Health Security and Bioterrorism Preparedness and
Response Act of 2002, and the rules and regulations promulgated thereunder by the U.S. Food and Drug Administration (the “FDA”).
The FSMA was enacted in order to aid the effective prevention of food safety issues in the food supply. This comprehensive and evolving
regulatory program impacts how food is grown, packed, processed, shipped and imported into the United States and it governs compliance
with Good Manufacturing Practices regulations. The FDA has finalized seven major rules to implement FSMA, recognizing that ensuring the
safety of the food supply is a shared responsibility among many different points in the global supply chain. The FSMA rules are designed
to make clear specific actions that must be taken at each of these points to prevent contamination. Some aspects of these laws use a strict
liability standard for imposing sanctions on corporate behavior. If we fail to comply with applicable laws and regulations, we may be
subject to civil remedies, including fines, injunctions, recalls, or seizures, and criminal sanctions, any of which could impact our results
of operations.
In addition, the Nutrition Labeling and Education
Act of 1990 prescribes the format and content of certain information required to appear on the labels of food products.
Our operations and products are also subject to state
and local regulation, including the registration and licensing of plants, enforcement by state health agencies of various state standards,
and the registration and inspection of facilities. Compliance with federal, state and local regulation is costly and time-consuming. Enforcement
actions for violations of federal, state, and local regulations may include seizure and condemnation of products, cease and desist orders,
injunctions or monetary penalties. We believe that our practices are sufficient to maintain compliance with applicable government regulations.
We are subject to certain regulations by the U.S.
Federal Trade Commission. Advertising of our products is subject to such regulation pursuant to the Federal Trade Commission Act and the
regulations promulgated thereunder.
We are also subject to certain health and safety regulations,
including regulations issued pursuant to the Occupational Safety and Health Act. These regulations require us to comply with certain manufacturing,
health, and safety standards to protect our employees from accidents.
Our business depends in part on environmental regulations
and programs of Taiwan that promote cleaner water sources to restore clean water back to people. Our customers may be encouraged with
incentives by the local governments relating to aquaculture investment. The approvals of land, licenses or permits, are required from
relevant central and local government authorities. In addition, from time to time, relevant government authorities may impose new regulations
at a local level regulating fish farming. We believe that we have skills to help our customers obtain all necessary licenses, registrations
and permits to comply with all requirements necessary to allow our customers and investors to conduct aquaculture business in Taiwan.
Listing on The Nasdaq Capital Market
Our common stock is listed on The Nasdaq Capital Market
under the symbol “NCRA” since August 11, 2022.
Our business is subject to many risks and uncertainties,
which may affect our future financial performance. If any of the events or circumstances described below occur, our business and financial
performance could be adversely affected, our actual results could differ materially from our expectations, and the price of our securities
could decline. The risks and uncertainties discussed below are not the only ones we face. There may be additional risks and uncertainties
not currently known to us or that we currently do not believe are material that may adversely affect our business and financial performance.
The statements contained in this Annual Report on Form 10-K 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, the trading price of our securities could decline, and investors in our securities may lose all or part of their investment.
Risks Related to Our Business
Our business may be materially adversely affected
by the coronavirus (COVID-19) outbreak.
The current outbreak of COVID-19 has globally resulted
in loss of life, business closures, restrictions on travel, and widespread cancellation of social gatherings. The extent to which the
COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted at this
time, including:
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new information which may emerge concerning the severity
of the disease;
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the duration and spread of the outbreak;
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the severity of travel restrictions imposed by geographic
areas in which we operate, mandatory or voluntary business closures;
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regulatory actions taken in response to the pandemic,
which may impact merchant operations, consumer and merchant pricing, and our product offerings;
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other business disruptions that affect our workforce;
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the impact on capital and financial markets; and
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actions taken throughout the world, including in markets
in which we operate, to contain the COVID-19 outbreak or treat its impact.
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In addition, the current outbreak of COVID-19 has
resulted in a widespread global health crisis and adversely affected global economies and financial markets, and similar public health
threats could do so in the future.
Substantially all our revenues are concentrated in
Taiwan pending expansion into other international markets. Consequently, our results of operations will likely be adversely, and may be
materially affected, to the extent that the COVID-19 pandemic or any epidemic harms Taiwan’s economy and society and the global
economy in general. Any potential impact to our results will depend on, to a large extent, future developments and new information that
may emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by government authorities and other entities
to contain the COVID-19 pandemic or treat its impact, almost all of which are beyond our control. If the disruptions posed by the COVID-19
pandemic or other matters of global concern continue for an extensive period of time, the operations of our business may be materially
adversely affected.
To the extent the COVID-19 pandemic or a similar public
health threat has an impact on our business, it is likely to also have the effect of heightening many of the other risks described in
this Part I Item 1A “Risk Factors” section.
We have a limited operating history in an evolving
industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
We have a limited operating history on which to base
an evaluation of its business and prospects. We are subject to all the risks inherent in a small company seeking to develop, market and
distribute new services, particularly companies in evolving markets. The likelihood of our success must be considered, in light of the
problems, expenses, difficulties, complications and delays frequently encountered in connection with the development, introduction, marketing
and distribution of new products and services in a competitive environment.
Such risks for us include, but are not limited to,
dependence on the success and acceptance of our services and the management of growth. In view of our limited operating history, we believe
that period-to-period comparisons of its operating results are not necessarily meaningful and should not be relied upon as an indication
of future performance.
We are therefore subject to many of the risks common
to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial, and other
resources and lack of revenues.
If we fail to raise capital when needed it will
have a material adverse effect on our business, financial condition and results of operations.
We have limited revenue-producing operations and will
require proceeds from future offerings to execute its full business plan. A failure to raise capital when needed would have a material
adverse effect on our business, financial condition and results of operations. In addition, debt and other debt financing may involve
a pledge of assets and may be senior to interests of equity holders. Any debt financing secured in the future could involve restrictive
covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for us
to obtain additional capital or to pursue business opportunities, including potential acquisitions. If adequate funds are not obtained,
we may be required to reduce, curtail or discontinue operations.
Our ability to obtain additional capital on acceptable
terms is subject to a variety of uncertainties, including:
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investors’ perception of, and demand for, our
securities;
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conditions of the U.S. and other capital markets in
which we may seek to raise funds; and
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our future results of operations, financial condition
and cash flow.
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Our failure to successfully market our brands
could result in adverse financial consequences.
We believe that continuing to strengthen our brands
is critical to achieving our widespread acceptance, particularly in light of the competitive nature of the market in which we operate.
Promoting and positioning its brands will depend largely on the success of our marketing efforts and our ability to provide high quality
services. There can be no assurance that brand promotion activities will yield increased revenues or that any such revenues would offset
the expenses incurred us in building our brand. If we fail to promote and maintain our brand or incur substantial expenses in an attempt
to promote and maintain our brand or if our existing or future strategic relationships fail to promote our brand or increase brand awareness,
our business, results of operations and financial condition would be materially adversely affected.
We may not generate the same level of revenues
from general construction projects.
Our revenues for the year ended December 31, 2022
and for the year ended December 31, 2021 were approximately $16.3 million and $9.9 million, respectively. There were four customers
(The Fifth District Management Office of Taiwan Water Corporation, Farmers Vending Machine Co., Ltd., Ming-Chi Chen, Kai-Ling Chen, and
Yu-Zhen Zhang) who represented approximately 50% of our total revenue for the year ended December 31, 2022, and one customer, The Fifth
District Management Office of Taiwan Water Corporation, who represented approximately 58% of our total revenue for the prior year period.
These customers are not located in mainland China or Hong Kong. Our future plan of operations is to shift away from general construction
services to the construction of fish farms and fish trading business. There can be no guarantee that such shift in operations will generate
the same levels of revenues previously generated through our VIE.
There is no assurance that we will be profitable.
There is no assurance that we will earn profits
in the future, or that profitability will be sustained. There is no assurance that future revenues will be sufficient to generate the
funds required to continue our business development and marketing activities. If we do not have sufficient capital to fund our operations,
we may be required to reduce our sales and marketing efforts or forego certain business opportunities.
There is substantial doubt of our ability
to continue as a going concern.
We have incurred net losses since our inception.
In the twelve months ended December 31, 2022 and 2021, we incurred operating losses of $5,180,208 and $9,475,092, respectively. As at December
31, 2022, we have working capital of $1,715,103 and had an accumulated deficit of $14,747,461. In their audit report for the fiscal year
ended December 31, 2022 included in this report, our auditors have expressed their concern as to our ability to continue as a going concern.
Our ability to continue as a going concern is dependent upon our ability to generate cashflows from operations and obtain financing. We
intend to continue funding our operations through equity and debt financing arrangements, which may be insufficient to fund our capital
expenditures, working capital and other cash requirements in the long term. There can be no assurance that the steps management is taking
will be successful.
We may not have the ability to manage our growth.
We anticipate that significant expansion will be required
to address potential growth in our customer base and market opportunities. Our anticipated expansion is expected to place a significant
strain on our management, operational and financial resources. To manage any material growth of its operations and personnel, we may be
required to improve existing operational and financial systems, procedures and controls and to expand, train and manage our employee base.
There can be no assurance that our planned personnel, systems, procedures and controls will be adequate to support our future operations,
that management will be able to hire, train, retain, motivate and manage required personnel or that our management will be able to successfully
identify, manage and exploit existing and potential market opportunities. If we are unable to manage growth effectively, our business,
prospects, financial condition and results of operations may be materially adversely affected.
We will need additional financing in order to
grow our business.
From time to time, in order to expand operations to
meet customer demand, we will need to incur additional capital expenditures. These capital expenditures are intended to be funded from
third party sources, including the incurring of debt and/or the sale of additional equity securities. In addition to requiring additional
financing to fund capital expenditures, we may require additional financing to fund working capital, research and development, sales and
marketing, general and administrative expenditures, and operating losses. The incurrence of debt creates additional financial leverage
and therefore an increase in the financial risk of our operations. The sale of additional equity securities will be dilutive to the interests
of current equity holders. In addition, there can be no assurance that such additional financing, whether debt or equity, will be available
to us or that it will be available on acceptable commercial terms. Any inability to secure such additional financing on appropriate terms
could have a materially adverse impact on our business, financial condition and operating results.
We rely on our executive officers.
Our success is dependent on our current executive
officers. Our success also depends in large part on the continued service of our key operational and management personnel. We face intense
competition from our competitors, customers and other companies throughout the industry. The loss of any our executive officers, specifically
Mr. Yin-Chieh (“Jeff”) Cheng, our Chief Executive Officer, or any failure on our part to hire, train and retain a sufficient
number of qualified professionals could impair our business.
We rely on the performance of highly skilled
personnel, and if we are unable to attract, retain and motivate well-qualified employees, our business could be harmed.
We are, and will be, heavily dependent on the skill,
acumen and services of our management and other employees. Our future success depends on our continuing ability to attract, develop, motivate
and retain highly qualified and skilled employees. Qualified individuals are in high demand, and we may incur significant costs to attract
them. In addition, the loss of any of our senior management or key employees could materially adversely affect our ability to execute
our business plan, and we may not be able to find adequate replacements. We cannot ensure that we will be able to retain the services
of any members of our senior management or other key employees. If we do not succeed in attracting well-qualified employees or retaining
and motivating existing employees, our business could be harmed.
We may have inadvertently violated Section 13(k)
of the Exchange Act (implementing Section 402 of the Sarbanes-Oxley Act of 2002) and may be subject to sanctions as a result.
Section 13(k) of the Exchange Act provides that it
is unlawful for a company that has a class of securities registered under Section 12 of the Exchange Act to, directly or indirectly, including
through any subsidiary, extend or maintain credit in the form of a personal loan to or for any of its directors or executive officers.
In 2019, we did not have a corporate bank account established in Hong Kong or the U.S., and certain funds that were supposed to be deposited
into such corporate bank account were instead deposited into the personal bank account of our principal stockholder as well as Chairman
of the Board of Directors of the Company (“Board”), President, Chief Executive Officer and Director, Yin-Chieh Cheng, which
was considered to be a personal loan made by us to Yin-Chieh Cheng and may have violated Section 13(k) of the Exchange Act. The receivable
was repaid to us in January 2020. Issuers that are found to have violated Section 13(k) of the Exchange Act may be subject to civil sanctions,
including injunctive remedies and monetary penalties, as well as criminal sanctions. The imposition of any of such sanctions on us could
have a material adverse effect on our business, financial position, results of operations or cash flows.
Future acquisitions may have an adverse effect
on our ability to manage our business.
Selective acquisitions currently form part of our
strategy to further expand our business. If we are presented with appropriate opportunities, we may acquire additional businesses, services
or products that are complementary to our core business. Future acquisitions and the subsequent integration of new companies into ours
would require significant attention from our management. Future acquisitions would also expose us to potential risks, including risks
associated with the assimilation of new operations, services and personnel, unforeseen or hidden liabilities, the diversion of resources
from our existing businesses and technologies, the inability to generate sufficient revenue to offset the costs and expenses of acquisitions
and potential loss of, or harm to, relationships with employees as a result of integration of new businesses. The diversion of our management’s
attention and any difficulties encountered in any integration process could have a material adverse effect on our ability to manage our
business.
The value of seafood which we sell (e.g., eel)
is subject to fluctuation which may result in volatility of our results of operations and the value of an investment in us.
Our business is partly dependent upon the sale of
eel which value is subject to fluctuation and which value greatly fluctuates. Our net sales and operating results vary significantly due
to the volatility of the value of eel and any other seafood that we sell which may result in the volatility of the market price of our
common stock.
We are highly susceptible to changes in market
demand for the types of seafood for which our recirculating aquaculture systems are used.
A significant portion of our revenues are derived
from constructing recirculating aquaculture systems for fish farming. We therefore are highly susceptible to changes in market demand
for the seafood for which our systems are used, which may be impacted by factors over which we have limited or no control. Factors that
could lead to a decline in market demand for seafood in general and specifically the type of fish farmed using our systems include economic
conditions and evolving consumer preferences. A substantial downturn in market demand for such seafood may have a material adverse effect
on our business and on our results of operations.
A portion of our revenues are derived from a
single product, eel, and therefore we are highly susceptible to changes in market demand, which may be affected by factors over which
we have limited or no control.
Approximately 84% of our revenues are derived from
a single product, eel. We therefore are highly susceptible to changes in market demand, which may be impacted by factors over which we
have limited or no control. Factors that could lead to a decline in market demand for eel include economic conditions and evolving consumer
preferences. A substantial downturn in market demand for eel may have a material adverse effect on our business and on our results of
operations.
There are risks associated with outsourced production
that may result in a decrease in our profit.
The possibility of delivery delays, product defects
and other production-side risks stemming from outsourcers cannot be eliminated. In particular, inadequate production capacity among outsourced
manufacturers could result in us being unable to supply enough product amid periods of high product demand, the opportunity costs of which
could be substantial.
We have limited insurance coverage.
We do not have any business liability, disruption
or litigation insurance coverage for our operations in Taiwan. Any uninsured occurrence of loss or litigation or business disruption may
result in the incurrence of substantial costs and the diversion of resources, which could have an adverse effect on our operating results.
Competitors and potential competitors may develop
products and technologies that make ours obsolete or garner greater market share than ours.
Our ability to compete successfully will depend on
our ability to demonstrate that our products are superior to and/or less expensive than other products available in the market. Some of
our competitors have the benefit of marketing their products under brand names that have better market recognition than ours or have stronger
marketing and distribution channels than we do. Increased competition as to any of our products could result in price reduction, reduced
margins and loss of market share, which could negatively affect our profitability.
Certain of our competitors may benefit from government
support and other incentives that are not available to us. As a result, our competitors may be able to develop competing and/or superior
products and compete more aggressively and sustain that competition over a longer period of time than we can. As more companies develop
new intellectual property in our markets, a competitor could acquire patent or other rights that may limit our ability to successfully
market our product.
We may produce products of inferior quality
which would cause us to lose customers.
Although we make an effort to ensure the quality of
our RASs, they could from time to time contain defects, anomalies or malfunctions that are undetectable at the time of shipment, installation
and initial testing. These defects, anomalies or malfunctions could be discovered after our products are shipped to customers and installed
and tested at the site, resulting in the return or exchange of our products or discontinuation of the use of our products, which could
negatively impact our operating results.
If our technologies or products are stolen,
misappropriated, or reverse engineered, others could use the technologies to produce competing technologies or products.
Third parties, including our collaborators, contractors,
and others involved in our business often have access to our technologies. If our technologies or products were stolen, misappropriated,
or reverse engineered, they could be used by other parties that may be able to reproduce our technologies or products using our technologies
for their own commercial gain. If this were to occur, it would be difficult for us to challenge this type of use, especially since we
do not own any patents or other intellectual property rights with respect to our technologies and products.
We are subject to certain risks by virtue of
our international operations.
We mainly operate in Taiwan and plan to expand in
other international countries and in the United States. We expect to expand our operations significantly by accessing new markets abroad
and expanding our services offerings. Our ability to manage our business and conduct our operations in other international countries and
in the United States requires considerable management attention and resources and is subject to the particular challenges of supporting
a growing business in an environment of multiple languages, cultures, customs, legal systems, alternative dispute systems, regulatory
systems and commercial infrastructures. Furthermore, in most international markets, we would not be the first entrant, and our competitors
may be better positioned than we are to succeed. Expanding in other international countries and in the United States may subject us to
risks that we have either not faced before or increase our exposure to risks that we currently face, including risks associated with:
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recruiting and retaining qualified, multi-lingual
employees, including customer support personnel;
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increased competition from similar local businesses
and potential preferences by local populations for local providers;
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compliance with applicable foreign laws and regulations,
including different liability standards and regulations;
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providing solutions in different languages for different
cultures;
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credit risk and higher levels of payment fraud;
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compliance with anti-bribery laws;
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currency exchange rate fluctuations;
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foreign exchange controls that might prevent us from
repatriating cash earned outside the United States;
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political and economic instability in some countries;
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double taxation of our international earnings and
potentially adverse tax consequences due to changes in the tax laws of the United States or the foreign jurisdictions in which we operate;
and
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higher costs of doing business in other international
countries.
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Natural disasters or other catastrophic events
could harm our operations.
Our operations in the U.S. and Taiwan could be subject
to significant risk of natural disasters, including earthquakes, hurricanes, typhoons, flooding and tornadoes, as well as other catastrophic
events, such as terrorist attacks or wars. For example, our manufacturers are all located in Taiwan, which is susceptible to typhoons
and earthquakes. Any disruption in our manufacturers’ manufacturing facilities arising from these and other natural disasters or
other catastrophic events could cause significant delays in the production or shipment of the components of our products until such manufacturers
are able to shift production to different facilities or until we are able to arrange for other third party manufacturers to manufacture
the components of our products. The affected manufacturers may not be able to obtain alternate capacity to manufacture the components
of our products or we may not be able to arrange for other third party manufacturers to manufacture the components of our products on
favorable terms or at all. The occurrence of any of these circumstances may adversely affect our financial condition and results of operation.
The primary substantial portion of our revenues
will be derived from Taiwan.
We anticipate that sales of our services in Taiwan
will represent our primary revenues in the near future. Any significant decline in the condition of the economy of Taiwan could adversely
affect consumer demand of our services, among other things, which in turn would have a material adverse effect on our business and financial
condition.
Currency fluctuations may adversely affect our
business and if the NT dollar were to decline in value, that would reduce our revenue in U.S. dollar terms.
Our reporting currency is the U.S. dollar and our
operations in Taiwan use their local currency as their functional currencies. Substantially all of our revenue and expenses are in NT
dollars. We are subject to the effects of exchange rate fluctuations with respect to any of such currency. For example, the value of the
NT dollar depends to a large extent on Taiwan government policies and Taiwan’s domestic and international economic and political
developments, as well as supply and demand in the local market.
The income statements of our operations are translated
into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies,
the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for
our international operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign
currency denominated transactions results in increased revenue, operating expenses and net income for our international operations. We
are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars
in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial
statements into U.S. dollars will lead to a translation gain or loss which is recorded as a component of other comprehensive income. In
addition, we have certain assets and liabilities that are denominated in currencies other than the relevant entity’s functional
currency. Changes in the functional currency value of these assets and liabilities create fluctuations that will lead to a transaction
gain or loss. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in
the future. The availability and effectiveness of any hedging transaction may be limited, and we may not be able to successfully hedge
our exchange rate risks.
We may be subject to product liability claims
if people or properties are harmed by the services sold by us.
The components of our products intended to be sold
by us, as part of our services, are manufactured by third parties. The components of our products may be defectively designed or manufactured.
As a result, sales of the products could expose us to liability claims relating to personal injury or property damage and may require
product recalls or other actions. Third parties subject to such injury or damage may bring claims or legal proceedings against us as the
reseller of the products. We do not currently maintain any third-party liability insurance or products liability insurance in relation
to products we intend to sell in conjunction with our services. As a result, any material products liability claim or litigation could
have a material and adverse effect on our business, financial condition and results of operations. Even unsuccessful claims could result
in the expenditure of funds and managerial efforts in defending them and could have a negative impact on our reputation.
Risk of litigation.
We and/or its directors and officers may be subject
to a variety of civil or other legal proceedings, with or without merit. From time to time in the ordinary course of its business, we
may become involved in various legal proceedings, including commercial, employment and other litigation and claims, as well as governmental
and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources
and cause us to incur significant expenses. Furthermore, because litigation is inherently unpredictable, the results of any such actions
may have a material adverse effect on our business, operating results or financial condition.
Even if the claims are without merit, the costs associated
with defending these types of claims may be substantial, both in terms of time, money, and management distraction. The results of litigation
and claims to which we may be subject cannot be predicted with certainty. Even if these matters do not result in litigation or are resolved
in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them,
could harm our business, results or operations and reputation.
Third parties may assert that our employees
or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets.
We employ individuals who previously worked with other
companies, including our competitors or potential competitors. Although we try to ensure that our employees and consultants do not use
the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants
or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary
information, of a former employer or other third party. Litigation may be necessary to defend against these claims. If we fail in defending
any such claims or settling those claims, in addition to paying monetary damages or a settlement payment, we may lose valuable intellectual
property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs
and be a distraction to management and other employees.
We currently, and may in the future, have assets
held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation, the loss of
such assets would have a severe negative affect on our operations and liquidity.
We may maintain our cash assets at certain financial
institutions in the U.S. in amounts that may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance
limit of $250,000. In the event of a failure of any financial institutions where we maintain our deposits or other assets, we may incur
a loss to the extent such loss exceeds the FDIC insurance limitation, which could have a material adverse effect upon our liquidity, financial
condition and our results of operations.
Regulatory Risks
We must comply with the Foreign Corrupt Practices
Act while many of our competitors do not.
We are required to comply with the United States Foreign
Corrupt Practices Act, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the
purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions.
Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time to time in Taiwan. If our competitors engage
in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing
business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. Although
we inform our personnel that such practices are illegal, we cannot assure you that our employees or other agents will not engage in such
conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could
suffer severe penalties.
Future laws, regulations and standards relating
to corporate governance and public disclosure may create uncertainty for public companies, which may increase legal and financial compliance
costs and make some activities more time consuming.
Future laws, regulations and standards relating to
corporate governance and public disclosure are subject to varying interpretations, in many cases due to their lack of specificity, and,
as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could
result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance
practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased
general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance
activities. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing
bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be
harmed.
We also expect that being listed on a national exchange
will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage
or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified
members of our Board.
Relations between the PRC and Taiwan could negatively
affect our business and financial status and therefore the market value of your investment.
Taiwan has a unique international political status.
The PRC does not recognize the sovereignty of Taiwan. Although significant economic and cultural relations have been established in recent
years between Taiwan and the PRC, relations have often been strained. The government of the PRC has threatened to use military force to
gain control over Taiwan in limited circumstances. Our principal executive offices are located in Taiwan and a substantial majority of
our net revenues are derived from our operations in Taiwan. Therefore, factors affecting military, political or economic conditions in
Taiwan could have a material adverse effect on our results of operations.
A significant disruption in the operations of
our suppliers in Taiwan, such as a trade war or political unrest, could materially adversely affect our business, financial condition
and results of operations.
Any disruption in the operations of our suppliers
in Taiwan or in their ability to meet our needs, whether as a result of a natural disaster or other causes, could impair our ability to
operate our business on a day-to-day basis. Furthermore, since many of these third parties are located outside the U.S., we are exposed
to the possibility of disruption and increased costs in the event of changes in the policies of the U.S. or foreign governments, political
unrest or unstable economic conditions in any of the countries where we conduct such activities. For example, a trade war could lead to
higher tariffs. Any of these matters could materially and adversely affect our development timelines, business and financial condition.
Our business, including our costs and supply
chain, is subject to risks associated with manufacturing.
In the event of a significant disruption in the supply
of the raw materials used in the manufacture of the components of the products we offer, the suppliers that we work with might not be
able to locate alternative suppliers of materials of comparable quality at an acceptable price. For example, natural disasters may increase
raw material costs and impact pricing with our suppliers, and cause shipping delays for the components of our products. Any delays, interruption,
damage to, or increased costs in the manufacture of the components of the products we offer could result in higher prices to acquire the
components of the products or non-delivery of the components of the products altogether, and could adversely affect our operating results.
If we remain identified as a Commission-Identified
Issuer for three consecutive years (or if the AHFCAA is enacted, two years), our securities will be delisted or prohibited from trading
on Nasdaq or any other national securities exchange or the over-the-counter trading market under the Holding Foreign Companies Accountable
Act. The delisting or the cessation of trading on Nasdaq or any other national securities exchange or the over-the-counter trading market
of our securities, or the threat of their being delisted or prohibited, may materially and adversely affect the value and/or liquidity
of your investment. Additionally, the inability of the PCAOB to conduct full inspections or investigations of our auditor deprives our
investors of the benefits of such inspections or investigations.
The Holding Foreign Companies Accountable Act was
enacted on December 18, 2020. The HFCAA states that if the SEC determines that an issuer has filed audit reports issued by a registered
public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years, the SEC shall prohibit the
securities of the issuer from being traded on a national securities exchange or in the over-the-counter trading market in the United States.
The Company’s auditor, the independent registered
public accounting firm that issues the audit report included elsewhere in this prospectus, as an auditor of companies that are traded
publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB
conducts regular inspections to assess its compliance with the applicable professional standards. Since our auditor is located in Hong
Kong, it is included on a list of audit firms the PCAOB determined it is unable to inspect or investigate completely because of a position
taken by one or more authorities in Hong Kong, and is therefore subject to the PCAOB’s determination and currently not inspected
by the PCAOB.
On March 24, 2021, the SEC adopted interim final
rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA. We would be required to comply
with these rules if the SEC identifies it as having a “non-inspection” year under a process to be subsequently established
by the SEC. The SEC is assessing how to implement other requirements of the HFCAA, including the listing and trading prohibition requirements
described above.
In May 2021, the PCAOB issued a proposed rule 6100, Board
Determinations Under the Holding Foreign Companies Accountable Act, for public comment. The proposed rule is related to the PCAOB’s
responsibilities under the HFCAA, which would establish a framework for the PCAOB to use when determining whether the PCAOB is unable
to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken
by one or more authorities in that jurisdiction. The proposed rule was adopted by the PCAOB on September 22, 2021 and approved by
the SEC on November 5, 2021. On December 2, 2021, the SEC adopted final amendments implementing the disclosure and submission requirements
under the HFCAA, pursuant to which the SEC will identify a “Commission-Identified Issuer” if an issuer has filed an annual
report containing an audit report issued by a registered public accounting firm that the PCAOB has determined it is unable to inspect
or investigate completely because of a position taken by an authority in the foreign jurisdiction, and will then impose a trading prohibition
on an issuer after it is identified as and remains a Commission-Identified Issuer for three consecutive years. If we remain identified
as a Commission-Identified Issuer and have a “non-inspection” year, there is no assurance that we will be able to take remedial
measures in a timely manner.
On December 16, 2021, the PCAOB issued a report on
its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland
China and Hong Kong, because of positions taken by PRC authorities in such jurisdictions.
On June 22, 2021, the U.S. Senate passed the Accelerating
Holding Foreign Companies Accountable Act, which, if passed by the U.S. House of Representatives and signed into law, would amend the
HFCAA and reduce the number of consecutive non-inspection years required for triggering the listing and trading prohibitions under
the HFCAA from three years to two years.
The SEC may propose additional rules or guidance that
could impact us if our auditor is not subject to PCAOB inspection. For example, on August 6, 2020, the President’s Working
Group on Financial Markets (the “PWG”), issued the Report on Protecting United States Investors from Significant Risks from
Chinese Companies to the then President of the United States. This report recommended that the SEC implement five recommendations to address
companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfil its statutory mandate. Some of the concepts
of these recommendations were implemented with the enactment of the HFCAA. However, some of the recommendations were more stringent than
the HFCAA. For example, if a company was not subject to PCAOB inspection, the report recommended that the transition period before a company
would be delisted would end on January 1, 2022.
The SEC has announced that the SEC staff is preparing
a consolidated proposal for the rules regarding the implementation of the HFCAA and to address the recommendations in the PWG report.
It is unclear when the SEC will complete its rulemaking and when such rules will become effective and what, if any, of the PWG recommendations
will be adopted. The SEC has also announced amendments to various annual report forms to accommodate the certification and disclosure
requirements of the HFCAA. There could be additional regulatory or legislative requirements or guidance that could impact us if our auditor
is not subject to PCAOB inspection. The implications of this possible regulation or guidance in addition to the requirements of the HFCAA
are uncertain, and such uncertainty could cause the market price of our securities to be materially and adversely affected.
Since the PCAOB is unable to conduct inspections or
full investigations of our auditor, in May 2022, we were added to the SEC’s conclusive lists of issuers identified under the HFCAA,
or a Commission-Identified Issuer. We will be delisted and our securities will be prohibited from being traded on Nasdaq or any other
national securities exchange or the over-the-counter trading market if we remain identified as a Commission-Identified Issuer for three
consecutive years (or two if the AHFCAA is enacted). Such a delisting would substantially impair your ability to sell or purchase our
securities when you wish to do so, and the risk and uncertainty associated with a potential delisting could have a negative impact on
the price of our securities. Also, such a delisting could significantly affect our ability to raise capital on acceptable terms, or at
all, which would have a material adverse effect on our business, financial condition and prospects.
Inspections of other audit firms that the PCAOB has
conducted outside the PRC have identified deficiencies in those firms’ audit procedures and quality control procedures, which may
be addressed as part of the inspection process to improve future audit quality. If the PCAOB were unable to conduct inspections or full
investigations of our auditor, we and our investors would be deprived of the benefits of such PCAOB inspections. In addition, the inability
of the PCAOB to conduct inspections or full investigations of auditors would make it more difficult to evaluate the effectiveness of our
independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors that are
subject to the PCAOB inspections, which could cause investors and potential investors to lose confidence in the audit procedures and reported
financial information and the quality of our financial statements.
Our contractual arrangements may not be as effective
in providing operational control as direct ownership and our VIE shareholders may fail to perform their obligations under our contractual
arrangements.
Since the laws of Taiwan limit foreign equity ownership
in certain businesses in Taiwan, we operate such business in Taiwan through our VIE (variable interest entity), Meixin Institutional Food
Development Co., Ltd., a Taiwan corporation (“Meixin”), in which we have no ownership interest and rely on a series of contractual
arrangements with Meixin and its respective equity holders to control and operate the VIE. Our revenue and cash flows from such business
are attributed to our VIE. The contractual arrangements may not be as effective as direct ownership in providing us with control over
our VIE. Direct ownership would allow us, for example, to directly or indirectly exercise our rights as a shareholder to effect changes
in the board of directors of our VIE, which, in turn, could effect changes, subject to any applicable fiduciary obligations at the management
level. However, under the contractual arrangements, as a legal matter, if our VIE or its equity holders fail to perform their respective
obligations under the contractual arrangements, we may have to incur substantial costs and expend significant resources to enforce those
arrangements and resort to litigation or arbitration and rely on legal remedies under the laws of Taiwan. These remedies may include seeking
specific performance or injunctive relief and claiming damages, any of which may not be effective. In the event we are unable to enforce
these contractual arrangements or we experience significant delays or other obstacles in the process of enforcing these contractual arrangements,
we may not be able to exert effective control over our VIE and may lose control over the assets owned by our VIE. As a result, we may
be unable to consolidate our VIE in our consolidated financial statements, which could materially and adversely affect our financial condition
and results of operations.
We may lose the ability to use, or otherwise
benefit from licenses and assets held by our VIE, which could render us unable to conduct some or all of our business operations and constrain
our growth.
Our VIE, Meixin, holds assets, approvals and licenses
that are necessary for the operation of a certain portion of our business to which foreign investments are typically restricted or prohibited
under the laws of Taiwan. Without our VIE, and if we are unable to maintain the license that is necessary for us to conduct our operations
in Taiwan or fail to obtain any other required licenses, we will be unable to operate in Taiwan. The contractual arrangements contain
terms that specifically obligate the equity holders of our VIE to ensure the valid existence of our VIE and restrict the disposition of
material assets or any equity interest of our VIE. However, in the event the equity holders of our VIE breach the terms of these contractual
arrangements and voluntarily liquidate our VIE, or our VIE declares bankruptcy and all or part of its assets become subject to liens or
rights of third-party creditors, or are otherwise disposed of without our consent, we may be unable to operate some or all of our business
or otherwise benefit from the assets held by our VIE, which could have a material adverse effect on our business, financial condition,
and results of operations. Furthermore, if our VIE undergoes a voluntary or involuntary liquidation proceeding, its equity holders or
unrelated third-party creditors may claim rights to some or all of the assets of our VIE, thereby hindering our ability to operate our
business as well as constrain our growth.
Geopolitical conditions,
including trade disputes and direct or indirect acts of war or terrorism, could have an adverse effect on our operations and financial
results.
Since we operate on a global
basis, our operations could be disrupted by geopolitical conditions, trade disputes, international boycotts and sanctions, political and
social instability, acts of war, terrorist activity or other similar events. From time to time, we could have a large investment in a
particular asset type, a large revenue stream associated with a particular customer or industry, or a large number of customers located
in a particular geographic region. Decreased demand from a discrete event impacting a specific asset type, customer, industry, or region
in which we have a concentrated exposure could negatively impact our results of operations.
Recently, Russia initiated
significant military action against Ukraine. In response, the U.S. and certain other countries imposed significant sanctions and export
controls against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business, and financial
organizations, and the U.S. and certain other countries could impose further sanctions, trade restrictions, and other retaliatory actions
should the conflict continue or worsen. It is not possible to predict the broader consequences of the conflict, including related geopolitical
tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof as well as any counter measures
or retaliatory actions by Russia or Belarus in response, including, for example, potential cyberattacks or the disruption of energy exports,
is likely to cause regional instability, geopolitical shifts, and could materially adversely affect global trade, currency exchange rates,
regional economies and the global economy. The situation remains uncertain, and while it is difficult to predict the impact of any of
the foregoing, the conflict and actions taken in response to the conflict could increase our costs, disrupt our supply chain, reduce our
sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely
affect our business, financial condition, and results of operations.
We continue to expand
our international footprint and operations, and we may expand further in the future, which subjects us to a variety of risks and complexities
which, if not effectively managed, could negatively affect our business.
We currently maintain operations
in Taiwan, and may in the future expand, or seek to expand, our operations to additional foreign jurisdictions.
For example, operating in
Europe exposes us to political, legal and economic risks. In addition, a significant percentage of the production, downstream processing
and sales of our products occurs outside the United States or with vendors, suppliers or customers located outside the United States.
If tariffs or other restrictions are placed by the United States on foreign imports from Taiwan or other countries where we operate or
seek to operate, or any related countermeasures are taken, our business, financial condition, results of operations and growth prospects
may be harmed. Tariffs may increase our cost of goods, which could result in lower gross margins on certain of our products. If we raise
prices to account for any such increase in costs of goods, the competitiveness of the affected products could potentially be reduced.
In either case, increased tariffs on imports from Taiwan or other countries where we operate or seek to operate could materially and adversely
affect our business, financial condition and results of operations. Trade restrictions and sanctions implemented by the United States
or other countries, including sanctions imposed on Russia by the United States and other countries due to Russia’s recent invasion
of Ukraine, could materially and adversely affect our business, financial condition and results of operations.
Risks Related to our Securities.
Our common stock has been listed on Nasdaq under
the alternative initial listing standard which could suppress the trading price of our securities and the liquidity of your investment.
Since the price per unit in the Public Offering was
$3.50, our common stock is listed on The Nasdaq Capital Market under the alternative initial listing standard pursuant to Nasdaq Rule
5550(a)(1)(B). A company that qualifies only for initial listing under Nasdaq’s alternative listing standard could become a “penny
stock” if it later fails the net tangible assets and revenue tests after listing and does not satisfy any of the other exclusions
from being a penny stock contained in Rule 3a51-1 under the Exchange Act. In order to assist brokers’ and dealers’ compliance
with the requirements of the penny stock rules, Nasdaq monitors companies listed under the alternative requirement and publishes on its
website on a daily basis a list of any company that was initially listed under the alternative initial listing standard, which no longer
satisfies the net tangible assets or revenue test contained in Nasdaq Rule 5505(a)(1)(B), and which does not satisfy any of the other
exclusions from being a penny stock contained in Rule 3a51-1 under the Exchange Act. If a company initially lists with a bid price below
$4.00 under the alternative initial listing standard contained in Nasdaq Rule 5505(a)(1)(B), but subsequently achieves a $4.00 closing
price for at least five consecutive business days and, at the same time, satisfies all other initial listing criteria, it will no longer
be considered as having listed under the alternative requirement, and Nasdaq will notify the company that it has qualified for listing
under the price requirement contained in Rule 5505(a)(1)(A). Although we satisfy the other listing requirements of The Nasdaq Capital
Market, there is no guarantee that our common stock will achieve a $4.00 closing price for at least five consecutive trading days and
that will be deemed to not have been listed under the Nasdaq alternative listing standard. Until we are no longer considered to have been
listed under Nasdaq’s alternative initial listing standard, the trading prices and liquidity of your securities might be adversely
affected.
We have identified material weaknesses in our
internal control over financial reporting. Failure to maintain effective internal controls could cause our investors to lose confidence
in us and adversely affect the market price of our common stock. If our internal controls are not effective, we may not be able to accurately
report our financial results or prevent fraud.
Section 404 of the Sarbanes-Oxley Act of 2002 (“Section
404”) requires that we maintain internal control over financial reporting that meets applicable standards. We may err in the design
or operation of our controls, and all internal control systems, no matter how well designed and operated, can provide only reasonable
assurance that the objectives of the control system are met. Because there are inherent limitations in all control systems, there can
be no assurance that all control issues have been or will be detected.
As of December
31, 2022, we did not maintain effective controls over the control environment. Our weaknesses related to a lack of a sufficient
number of personnel with appropriate training and experience in U.S. general acceptable accounting principles (GAAP) and SEC rules and
regulations with respect to financial reporting functions. Furthermore, we lack robust accounting systems as well as sufficient resources
to hire such staff and implement these accounting systems.
If we are unable, or are perceived as unable, to produce
reliable financial reports due to internal control deficiencies, investors could lose confidence in our reported financial information
and operating results, which could result in a negative market reaction and a decrease in our stock price.
We have a large number of authorized but unissued
shares of our common stock which will dilute your ownership position when issued.
Our authorized capital stock consists of 200,000,000
shares of common stock, of which approximately 181,726,411 shares are available for issuance. Our management will continue to have broad
discretion to issue shares of our common stock in a range of transactions, including capital-raising transactions, mergers, acquisitions
and other transactions, without obtaining stockholder approval, unless stockholder approval is required under law or under Nasdaq Rule
5635(b) which requires stockholder approval for change of control transactions where a stockholder acquires 20% of a Nasdaq-listed company’s
common stock or securities convertible into common stock, calculated on a post-transaction basis. If our management determines to issue
shares of our common stock from the large pool of authorized but unissued shares for any purpose in the future and is not required to
obtain stockholder approval, your ownership position would be diluted without your further ability to vote on that transaction.
Sales of our currently issued and outstanding
shares of common stock and shares of common stock underlying warrants may become freely tradable pursuant to Rule 144 and may dilute the
market for your shares and have a depressive effect on the price of the shares of our common stock.
Approximately 52.4% of the shares of common stock
are “restricted securities” within the meaning of Rule 144 under the Securities Act (“Rule 144”). As restricted
securities, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other
applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides
in essence that a non-affiliate who has held restricted securities for a period of at least six months may sell their shares of common
stock.
Under Rule 144, affiliates who have held restricted
securities for a period of at least six months may, under certain conditions, sell every three months, in brokerage transactions, a number
of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading
volume during the four calendar weeks prior to the sale. A sale under Rule 144 or under any other exemption from the Securities Act, if
available, or pursuant to subsequent registrations of our shares of common stock, may have a depressive effect upon the price of our shares
of common stock in any active market that may develop.
An active, liquid, and orderly market for our
common stock may not develop.
Our common stock is listed on Nasdaq. An active trading
market for our common stock may never develop or be sustained. If an active market for our common stock does not continue to develop or
is not sustained, it may be difficult for investors to sell their shares of common stock without depressing the market price and investors
may not be able to sell their securities at all. An inactive market may also impair our ability to raise capital by selling our securities
and may impair our ability to acquire other businesses, applications, or technologies using our securities as consideration, which, in
turn, could materially adversely affect our business and the market prices of your shares of common stock.
Shares of our common stock may continue to be
subject to illiquidity because our shares may continue to be thinly traded and may never become eligible for trading on a national securities
exchange.
While our common stock is listed on The Nasdaq Capital
Market, we cannot assure you that we will be able to maintain listing on Nasdaq. There are continuing eligibility requirements for Nasdaq-listed
companies. If we are unable to satisfy the continuing eligibility requirements of Nasdaq, our common stock could be delisted. This could
result in a lower trading price for our common stock and may limit your ability to sell your shares, any of which could result in you
losing some or all of your investments.
We may issue preferred stock in different series
with terms that could dilute the voting power or reduce the value of our common stock.
While we have no specific plan to issue preferred
stock in different series, our amended and restated articles of incorporation, as amended (“Articles of Incorporation”) authorizes
us to issue, without the approval of our stockholders, one or more series of preferred stock having such designation, relative powers,
preferences (including preferences over our common stock respecting dividends and distributions), voting rights, terms of conversion or
redemption, and other relative, participating, optional, or other special rights, if any, of the shares of each such series of preferred
stock and any qualifications, limitations, or restrictions thereof, as our Board may determine. The terms of one or more classes or series
of preferred stock could dilute the voting power or reduce the value of our common stock. For example, the repurchase or redemption rights
or liquidation preferences we could assign to holders of a specific preferred stock class could affect the residual value of the common
stock.
The market valuation of our business may fluctuate
due to factors beyond our control and the value of your investment may fluctuate correspondingly.
The market valuations of smaller reporting companies,
such as us, frequently fluctuate due to factors unrelated to the past or present operating performance of such companies. Our market valuation
may fluctuate significantly in response to a number of factors, many of which are beyond our control, including:
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changes in securities analysts’ estimates of
our financial performance, although there are currently no analysts covering our stock;
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fluctuations in stock market prices and volumes, particularly
among securities of smaller reporting companies;
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fluctuations in related commodities prices; and
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additions or departures of key personnel. |
As a result, the value of your investment in us may
fluctuate.
The trading prices of our common stock could
be volatile and could decline following this offering at a time when you want to sell your holdings.
Numerous factors, many of which are beyond our control,
may cause the trading prices of our common stock to fluctuate significantly. These factors include:
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quarterly variations in our results of operations
or those of our competitors;
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delays in end-user deployments of products;
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fluctuations in related commodities prices;
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announcements by us or our competitors of acquisitions, new products, significant contracts, commercial relationships or capital commitments; |
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intellectual property infringements;
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our ability to develop and market new and enhanced
products on a timely basis;
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commencement of, or our involvement in, litigation; |
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major changes in our Board or management; |
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changes in governmental regulations;
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changes in earnings estimates or recommendations by
securities analysts;
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the impact of the COVID-19 pandemic on capital markets;
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our failure to generate material revenues; |
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our public disclosure of the terms of this financing
and any financing which we consummate in the future;
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any acquisitions we may consummate;
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short selling activities;
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changes in market valuations of similar companies; |
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changes in our capital structure, such as future issuances
of securities or the incurrence of debt;
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changes in the prices of commodities associated with
our business; and
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general economic conditions and slow or negative growth of end markets. |
Additionally, the global
economy and financial markets may be adversely affected by geopolitical events, including the current or anticipated impact of military
conflict and related sanctions imposed on Russia by the United States and other countries due to Russia’s recent invasion of Ukraine.
Securities class action litigation is often instituted
against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs to us
and divert our management’s attention and resources.
Moreover, securities markets may from time to time
experience significant price and volume fluctuations for reasons unrelated to the operating performance of particular companies, such
as the uncertainty associated with the COVID-19 pandemic. These market fluctuations may adversely affect the price of our common stock
and other interests in our Company at a time when you want to sell your interest in us.
Future sales or perceived sales of our common
stock could depress the trading prices of our common stock.
If the holders of our securities were to attempt to
sell a substantial amount of their holdings at once, the market prices of our common stock could decline. Moreover, the perceived risk
of this potential dilution could cause stockholders to attempt to sell their securities and investors to short such securities, a practice
in which an investor sells securities that he or she does not own at prevailing market prices, hoping to purchase such securities later
at a lower price to cover the sale. As each of these events would cause the number of shares of our common stock being offered for sale
to increase, our common stock market price would likely further decline and if such market price is less than the exercise price of the
warrants, make the warrants worthless. All of these events could combine to make it very difficult for us to sell equity or equity-related
securities in the future at a time and price that we deem appropriate.
Our common stock may be affected by limited
trading volume and price fluctuations, which could adversely impact the value of our common stock.
Our common stock has experienced, and is likely to
experience in the future, significant price and volume fluctuations, which could adversely affect the market prices of our common stock
without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results
and changes in the overall economy or the condition of the financial markets could cause the market prices of our common stock to fluctuate
substantially. These fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results
in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common
stock will be stable or appreciate over time.
We currently do not intend to declare dividends
on our common stock in the foreseeable future and, as a result, your returns on your investment may depend solely on the appreciation
of our common stock.
We currently do not expect to declare any dividends
on our common stock in the foreseeable future. Instead, we anticipate that all of our earnings in the foreseeable future will be used
to provide working capital, support our operations and finance the growth and development of our business. Any determination to declare
or pay dividends in the future will be at the discretion of our Board, subject to applicable laws and dependent upon a number of factors,
including our earnings, capital requirements and overall financial conditions. In addition, terms of any future debt or preferred securities
may further restrict our ability to pay dividends on our common stock. Accordingly, your only opportunity to achieve a return on your
investment in our common stock may be if the market price of our common stock appreciates and you sell your shares at a profit. The market
price for our common stock may never exceed, and may fall below, the price that you pay for such common stock.
Because we initially became a reporting company
under the Exchange Act by means other than a traditional underwritten initial public offering, we may not be able to attract the attention
of research analysts at major brokerage firms.
Because we did not initially
become a reporting company by conducting an underwritten initial public offering of our common stock on a national securities exchange,
securities analysts of brokerage firms may not provide coverage of us. In addition, investment banks may be less likely to agree to underwrite
secondary offerings on our behalf than they might have if we initially became a public reporting company by means of an underwritten initial
public offering on a national securities exchange, because they may be less familiar with us as a result of more limited coverage by analysts
and the media, and because we became public at an early stage in our development. The failure to receive research coverage or support
in the market for our shares will have an adverse effect on our ability to develop a liquid market for our common stock.
Because we were a shell
company before we conducted a reverse merger, holders of restricted shares will not be able to rely on exemption Rule 144 to resell their
shares unless we comply with Rule 144(i).
Additional risks may exist as a result of our becoming
a public reporting company through a “reverse merger.” Certain SEC rules are more restrictive when applied to reverse merger
companies, such as the ability of stockholders to re-sell their shares pursuant to Rule 144.
Historically, the SEC has taken the position that
Rule 144 under the Securities Act is not available for the resale of securities initially issued by companies that are, or previously
were, blank check companies, to their promoters or affiliates despite technical compliance with the requirements of Rule 144. The SEC
has codified and expanded this position in its amendments effective on February 15, 2008, which applies to securities acquired both before
and after that date by prohibiting the use of Rule 144 for the resale of securities issued by shell companies (other than business transaction
related shell companies) or issuers that have been at any time previously a shell company. The SEC has provided an important exception
to this prohibition, however, if the following conditions are met:
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the issuer of the securities that was formerly a shell company has ceased to be a shell company; |
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the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; |
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the issuer of the securities has filed all Exchange
Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was
required to file such reports and materials), other than Form 8-K reports; and
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at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company. |
In addition, for proposed
sales under Rule 144(i)(2), there must be adequate current information about the issuing company publicly available before the sale can
be made. For reporting companies, this generally means that the companies have complied with the periodic reporting requirements of the
Exchange Act. As such, due to the fact that we were a shell company until the effective time of the reverse merger, holders of “restricted
securities” within the meaning of Rule 144 will be subject to the above conditions.
We may not be able to satisfy the continued
listing requirements of Nasdaq to maintain a listing of our common stock.
As a Nasdaq-listed company, we must meet certain financial
and liquidity criteria to maintain such listing. If we violate the maintenance requirements for continued listing of our common stock,
our common stock may be delisted. In addition, our Board may determine that the cost of maintaining our listing on a national securities
exchange outweighs the benefits of such listing. A delisting of our common stock from Nasdaq may materially impair our stockholders’
ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market
for, our common stock. In addition, the delisting of our common stock could significantly impair our ability to raise capital.
We are an “emerging growth company”
and a “smaller reporting company” under the JOBS Act, and we cannot be certain if the reduced disclosure requirements applicable
to emerging growth companies and smaller reporting companies will make our common stock less attractive to investors.
We are an “emerging growth company” and
a “smaller reporting company” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not “emerging growth companies” and “smaller reporting
companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404
of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements,
and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden
parachute payments not previously approved.
In addition, Section 107 of the JOBS Act also provides
that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the
Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay
the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take
advantage of the extended transition period for complying with new or revised accounting standards.
We will remain an “emerging growth company”
until the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an
effective registration statement under the Securities Act, although we will lose that status sooner if our revenues exceed $1.235 billion,
if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held
by non-affiliates exceeds $700 million as of the last day of our most recently completed second fiscal quarter.
We may continue to be a smaller reporting company
even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller
reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) the market value of our common stock
held by non-affiliates is equal to or less than $250 million as of the last business day of the most recently completed second fiscal
quarter, and (ii) our annual revenues is equal to or less than $100 million during the most recently completed fiscal year and the market
value of our common stock held by non-affiliates is equal to or less than $700 million as of the last business day of the most recently
completed second fiscal quarter.
We cannot predict if investors will find our common
stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there
may be a less active trading market for our common stock and our stock price may be more volatile. In addition, taking advantage
of reduced disclosure obligations may make comparison of our financial statements with other public companies difficult or impossible.
If investors are unable to compare our business with other companies in our industry, we may not be able to raise additional capital as
and when we need it, which may materially and adversely affect our financial condition and results of operations.
The elimination of personal liability against
our directors and officers under Nevada law and the existence of indemnification rights held by our directors, officers and employees
may result in substantial expenses.
Our Articles of Incorporation and our amended and
restated bylaws (“Bylaws”) eliminate the personal liability of our directors and officers to us and our stockholders for damages
for breach of fiduciary duty as a director or officer to the extent permissible under Nevada law. Further, our Articles of Incorporation
and our Bylaws provide that we are obligated to indemnify each of our directors or officers to the fullest extent authorized by Nevada
law and, subject to certain conditions, advance the expenses incurred by any director or officer in defending any action, suit or proceeding
prior to its final disposition. Those indemnification obligations could expose us to substantial expenditures to cover the cost of settlement
or damage awards against our directors or officers, which we may be unable to afford. Further, those provisions and resulting costs may
discourage us or our stockholders from bringing a lawsuit against any of our current or former directors or officers for breaches of their
fiduciary duties, even if such actions might otherwise benefit our stockholders.
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to any charter provision,
by law or otherwise, the registrant has been advised that in the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities
(other than payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
If securities or industry analysts do not publish
research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock will depend
in part on the research and reports that securities or industry analysts publish about us or our business. Several analysts may cover
our stock. If one or more of those analysts downgrade our stock or publish inaccurate or unfavorable research about our business, our
stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly,
demand for our stock could decrease, which might cause our stock price and trading volume to decline.