ITEM 1A – RISK FACTORS
Our business and an investment in our securities
are subject to a variety of risks. The following risk factors describe the most significant events, facts or circumstances that could
have a material adverse effect upon our business, financial condition, results of operations, ability to implement our business plan
and the market price for our securities. Additional risks and uncertainties that presently are not considered material or are not known
to us, and therefore are not mentioned herein, may impair our business operations. Many of these events are outside of our control.
If any of these risks actually occurs, our business, financial condition or results of operations may be materially adversely affected.
In such case, the trading price of our common stock could decline and investors in our common stock could lose all or part of their investment.
Risks Related to Our Business
An occurrence of an uncontrollable event
such as the COVID-19 pandemic may negatively affect our operations and financial results.
In recent years, there have been outbreaks of
epidemics in various countries, including China. Recently, there was an outbreak of a novel strain of coronavirus (COVID-19), which has
been spread rapidly to many parts of the world, including China, Hong Kong and the U.S. In March 2020, the World Health Organization
declared COVID-19 a pandemic. The COVID-19 pandemic has resulted in, among other things, quarantines, travel restrictions, and the temporary
closure of office buildings and facilities in China, Hong Kong and in the U.S.
A large part of our revenues are generated in
China and Hong Kong. Consequently, our results of operations have been and may continue to be adversely affected, to the extent that
COVID-19 harms the Chinese, Hong Kong and global economy. 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 COVID-19 and the actions taken by government
authorities and other entities to contain COVID-19 or treat its impact, almost all of which are beyond our control. Potential impacts
include, but are not limited to, the following:
33
Because of the uncertainty surrounding the COVID-19
outbreak, the future impact related to the outbreak and potential resurgence as well as the local and global response cannot be reasonably
estimated at this time. There have been outbreaks of Omicron variant in various cities in China in 2022 which have resulted quarantines,
travel restrictions, and temporary closure of office buildings and facilities in these cities. In December 2022, the Chinese government
eased its strict zero COVID-19 policy which resulted in a surge of new COVID-19 cases during December 2022 and January 2023, which has
disrupted our business operations in China.
The global economy has
also been materially negatively affected by the COVID-19 and there is continued severe uncertainty about the duration and intensity of
its impacts. The Chinese and global growth forecast is extremely uncertain, which would seriously affect our business.
While the potential
economic impact brought by, and the duration of COVID-19 and its new variants may be difficult to assess or predict, a widespread pandemic
could result in significant disruption of global financial markets, reducing our ability to access capital, which could negatively affect
our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 and its new variants could materially
negatively affect our business and the value of our common stock.
Further, as we do not
have access to a revolving credit facility, there can be no assurance that we would be able to secure commercial debt financing in the
future in the event that we require additional capital. We currently believe that our financial resources will be adequate to see us
through the outbreak. However, in the event that we do need to raise capital in the future, outbreak-related instability in the securities
markets could adversely affect our ability to raise additional capital.
In general, our business could be adversely affected
by the epidemics, including, but not limited to, COVID-19, avian influenza, severe acute respiratory syndrome (SARS), the influenza A
virus, the Ebola virus, or other outbreaks. In response to an epidemic or other outbreaks, governments and other organizations may adopt
regulations and policies that could lead to severe disruption to our daily operations, including temporary closure of our offices and
other facilities. These severe conditions may cause us and/or our partners to make internal adjustments, including but not limited to,
temporarily closing down business, limiting business hours, and setting restrictions on travel and/or visits with clients and partners
for a prolonged period of time. Various impacts arising from severe conditions may cause business disruption, resulting in material,
adverse effects to our financial condition and results of operations.
34
Economic conditions have had and may continue
to have an adverse effect on our customers’ spending on our products and services.
The worldwide economy remains volatile and may
have entered in global recession. The adverse effect of a sustained international economic downturn, including sustained periods of decreased
spending, high unemployment levels, declining consumer or business confidence and continued volatility and disruption in the credit and
capital markets, would likely result in reduced demand for our products and services. To the extent an international economic downturn
develops, we could experience a reduction in sales volume. If we are unable to reduce our operating costs and expenses proportionately,
many of which are fixed, our results of operations would be adversely affected.
The supply chain financing service industry
is an emerging and rapidly evolving industry in China and we might not achieve the development as we expected.
The supply chain financing service industry in
China is highly dynamic and rapidly evolving. Operating in this industry demands applying cutting-edge technologies to digitalize supply
chain financing workflows and optimize payment cycles, which is an emerging and relatively new business model in China. In addition,
we are faced with uncertainties relating to the intensifying competition and evolving regulatory environment in China’s supply
chain financing service industry. There have been limited proven methods to project available technology, regulatory and industry standards
on which we can rely, and the delayed, unexpected or adverse developments in this sector may adversely and materially affect our operational
and financial performances. As market dynamics, regulatory environment and our business continue to develop, we may need to adjust our
business model and continue to upgrade our products and service offerings, and if we fail to adapt to these developments promptly, or
at all, our business, financial condition, results of operations and prospects may be materially and adversely affected.
The supply chain financing service industry
is increasingly competitive in China. If we fail to compete effectively, we may lose our customers and partners, which could materially
and adversely affect our business, financial condition and results of operations.
The supply chain financing service industry in
the PRC is increasingly competitive, and there is no guarantee that we will be able to compete effectively and implement our business
strategies. We face intense competition primarily from third-party supply chain financing service providers. Some of these competitors
may have established strong brand recognition, robust technological capabilities and significant financial resources or offer comparable
technology solutions or own similar business scale to us. Intensifying competition may result in certain developments in this industry,
such as downward competitive pressure on price, expansion by existing competitors, adoption by our competitors of innovative technology
solutions or comparatively effective branding efforts, any of which may have a material adverse impact on our financial condition, results
of operations and growth prospects. Increased investments made and lower prices or innovative services offered by our competitors may
require us to divert significant managerial, financial and human resources in order to remain competitive, and ultimately may place a
greater pressure on us to maintain our market share and negatively impact the revenues growth and profitability of our business. Furthermore,
our business is subject to rapid changes in the industries we operate in, such as the introduction of new business models, and the entry
of new and well-funded competitors or industry disruptors. We may face even more intensified competition as a result of certain alliances,
acquisitions or consolidations within the industries where we operate that result in emergence of stronger competitors. Existing and
new competitors may leverage their established platforms or market positions, or introduce innovative business models, to launch products
or services that may attract a large customer base and achieve rapid growth, which may materially and adversely affect our business and
results of operations. If we are not able to compete effectively, the number of our customers and partners may decrease and our market
share and profitability may be negatively affected, which could materially and adversely affect our business, financial condition, results
of operations and prospects, as well as our reputation and brand.
35
Our supply chain finance business faces
risks in receivables, timely supplies, credit evaluation and commodity price fluctuations all of which could materially and adversely
affect our business, financial condition and results of operations.
Our supply chain finance
business faces various risk in its operation, including (i) risk of failure to collect our receivables in time after the delivery of
commodities; (ii) risk of unable to supply the commodity according to the contract requirements such as issues of quality and/or quantity
of goods. If we fail to control such risk and strictly implement our new supplier and client evaluation standards as well as the background
investigation for our risk control, we might not receive payment for the goods delivered or lose control of the title of the goods or
breach contracts to supply goods according to its terms, which will materially and adversely affect our business, financial condition
and results of operations. Also, if the market for commodities fluctuates sharply, our downstream customers might default on their purchase
obligation and cause losses to us.
The asset management
services that NTAM provides involve various risks, and failure to identify or fully appreciate such risks will negatively affect our
reputation, client relationships, operations and prospects.
NTAM provides asset
and wealth management service to clients.
Neither the principal
nor the return of the asset management products that NTAM has provided its services on is guaranteed by NTAM. As such, NTAM generally
does not bear any liabilities for any loss to capital invested in the products. However, despite related risk warnings and disclaimers,
the investors may attempt to hold NTAM responsible for their losses and terminate their business with us, which could harm our reputation
and result in reduced business. In addition, although NTAM has implemented transparent disclosure policies, such policies and procedures
may not be fully effective. If NTAM or its customer service personnel are found to have engaged in misconduct or negligent in providing
their services, NTAM may be held responsible when the investors incur losses, and our reputation, client relationships, business and
prospects will be materially and adversely affected.
Our operations
of NTAM depend on key management and professional staff and our business may suffer if we are unable to recruit or retain them.
The success of our business
is dependent, to a large extent, on the continued services of NTAM’s senior management, especially Mr. Siu Kei Chan, the Chief
Executive Officer of NTAM. If NTAM loses the services of Mr. Chan, it needs to promptly hire an experienced professional from the market,
otherwise it may not be able to execute its existing business strategy effectively, or we may have to change our current business direction.
Such disruptions to our business may take up significant energy and resources of the Company, and materially and adversely affect our
future prospects.
Moreover, NTAM daily
operations depend on the members of its mid-level management, experienced investment and trading managers, licensed representatives,
risk management officers, research analysts and IT specialists. We devote considerable resources to the recruiting and retaining these
personnel. However, the market for quality professionals is increasingly competitive. We expect to face significant competition from
other assets management firms and technology companies in hiring such personnel. The intense competition may require us to offer more
competitive compensation and other benefits to our talent, which could materially and adversely affect our financial condition and results
of operations. As a result, it may be difficult for us to continue to retain and motivate these employees, and this could affect their
decisions about whether or not they continue to work for us. If we do not succeed in attracting, hiring, and integrating excellent personnel,
or retaining and motivating existing personnel, NTAM may be unable to grow effectively.
36
Our risk management
and internal control systems of NTAM, as well as the risk management tools available to us, may not fully protect us against various
risks inherent in our business.
Currently, NTAM follows
its comprehensive internal risk management framework and procedures to manage its risks, including but not limited to, reputational risk,
legal risk, regulatory and compliance risk, operational risk, market risk, liquidity risk, and credit risk. However, its risk management
policies, procedures and internal controls may not be adequate or effective in mitigating the risks or protecting it against unidentified
or unanticipated risks. In particular, some methods of managing risks are based upon observed historical market behavior and experience
in the securities industry. These methods may fail to predict future risk exposures, which could be significantly greater than those
indicated by our historical measures. Other risk management methods depend upon an evaluation of available information regarding operating
and market conditions and other matters, which may not be accurate, complete, up-to-date or properly evaluated. In addition, the capital
markets in Hong Kong are rapidly developing, the information and experience that NTAM relies on for its risk management methods may become
quickly outdated as capital markets and regulatory environment in Hong Kong continue to evolve. Deficiencies in the risk management and
internal control systems and procedures may adversely affect our ability to identify or report our deficiencies or non-compliance. Any
of these may have a material and adverse effect on our business, financial condition, and operating results.
The operations
of NTAM may be adversely affected if it fails to obtain or maintain necessary approvals for conducting a particular business.
Due to the highly regulated nature of the financial
industry in jurisdiction where NTAM operates, many aspects of its business depend on obtaining and maintaining approvals, licenses, permits
or qualifications from relevant regulators in Hong Kong. Obtaining and maintaining such approvals, licenses, permits or qualifications
is contingent on NTAM’s compliance with regulatory requirements. Any failure to comply with regulatory requirements could limit
the scope of businesses in which NTAM is permitted to engage. Furthermore, additional regulatory approvals, licenses, permits or qualifications
may be required by relevant regulators in the future, and some of current approvals, licenses, permits or qualifications of NTAM are
subject to periodic renewal. The failure to obtain or maintain the required approvals, licenses, permits or qualifications could adversely
affect our results of operations and financial condition.
We may engage in future acquisitions involving
significant expenditures of cash, the incurrence of debt or the issuance of stock, all of which could have a materially adverse effect
on our operating results.
As part of our business strategy, we review acquisition
and strategic investment prospects that we believe would complement our current product and service offerings, augment our market coverage,
enhance our technological capabilities or otherwise offer growth opportunities. From time to time, we review investments in new business
and we expect to make investments in, and to acquire, business, products or technologies in the future. We are in the process to complete
an acquisition of a money transfer company in UK, which is expected to close during the first half of this year. In the event of any
future acquisitions, we may expend significant cash, incur substantial debt and/or issue equity securities and dilute the percentage
ownership of current shareholders, all of which could have a material adverse effect on our operating results and the price of our stock.
We cannot guarantee that we will be able to successfully integrate any business, products, technologies or personnel that we may acquire
in the future, and our failure to do so could have a material adverse effect on our business, operating results and financial condition.
We may not be able to prevent others from
unauthorized use of our intellectual property, which could harm our business and competitive position.
Our success depends, in part, on our ability
to protect our proprietary technologies. The process of seeking intellectual property protection can be lengthy and expensive and we
cannot guarantee that our existing or future intellectual property rights will be fully protected or bring us the commercial advantages.
We also cannot guarantee that our current or potential competitors do not have, and will not obtain, intellectual property rights that
will prevent, limit or interfere with our ability to use our technology or sell our products and services in the PRC or other countries.
37
The implementation and enforcement of PRC intellectual
property laws historically have not been vigorous or consistent. Accordingly, intellectual property rights and confidentiality protections
in the PRC are not as effective as those in the United States and other countries. We may need to resort to litigation to enforce or
defend our rights or to determine the enforceability, scope and validity of our proprietary rights or those of others. Such litigation
will require significant expenditures of cash and management efforts and could harm our business, financial condition and results of
operations. An adverse determination in any such litigation will impair our intellectual property rights and may harm our business, competitive
position, business prospects and reputation.
The blockchain related products and services
that we are developing have the potential to be used in ways we do not intend, including for criminal or other illegal activities.
Blockchain-related products and services, in
particular cryptocurrencies, have the potential to be used for financial crimes or other illegal activities. Because the blockchain platform
that we are developing is novel, there are uncertainties regarding any legal and regulatory requirements for preventing blockchain-related
products and services from being put to such uses, and there are uncertainties regarding the liabilities and risks to the Company if
we are unable to prevent such uses. Even if we comply with all laws and regulations regarding financial and blockchain related products
and services, we have no ability to ensure that our customers, partners or others to whom we license or sell our products and services
comply with all laws and regulations applicable to them and their transactions.
Our blockchain based Shopping Mall employs security
measures common to blockchain technologies, such a multiple identity authentication and multi-signature requirements. The security measures
to be employed by our blockchain projects are subject to further improvement and development. There is no guarantee that the security
measures that we currently use or any that we may develop in the future will be effective.
Any negative publicity we receive regarding any
allegations of unlawful uses of our blockchain platform could damage our reputation. More generally, any negative publicity regarding
unlawful uses of blockchain technology in the marketplace could reduce the demand for our products and services. The occurrence of any
of the foregoing could have a material adverse effect on our financial results and business.
The regulatory regime governing blockchain
technologies, cryptocurrencies, digital assets, and offerings of digital assets is uncertain, and new regulations or policies may materially
adversely affect the development of our blockchain related business.
Regulation of digital assets, cryptocurrencies,
crypto mining, blockchain technologies, and the blockchain platform we are developing is currently undeveloped and likely to rapidly
evolve as government agencies take greater interest in them. Regulation also varies significantly among international, federal, state
and local jurisdictions and is subject to significant uncertainty. Various legislative and executive bodies in the United States and
in other countries may in the future adopt laws, regulations, or guidance, or take other actions, which may severely impact the permissibility
of tokens generally and the technology behind them or the means of transaction or in transferring them. Failure by our subsidiaries to
comply with any laws, rules and regulations, some of which may not exist yet or are subject to interpretation and may be subject to change,
could result in a variety of adverse consequences, including civil penalties and fines.
Intellectual property infringement claims
may adversely impact our results of operations.
As we develop and introduce new products and
services, we may be increasingly subject to claims of infringement of another party’s intellectual property. If a claim for infringement
is brought against us, such claim may require us to modify our products or services, cease selling certain products or engage in litigation
to determine the validity and scope of such claims. Any of these events may harm our business and results of operations.
Our e-commerce business depends on the
continued use of the Internet and the adequacy of the Internet infrastructure.
Our e-commerce business, money transfer business
and cryptocurrency market data platform depend upon the widespread use of the Internet and e-commerce. Factors which could reduce the
widespread use of the internet for e-commerce include, without limitation, actual or perceived lack of security of information or privacy
protection, cyberattacks or other disruptions or damage to the internet or to users’ computers, whatever the cause, could reduce
customer satisfaction with our platforms and services and harm our business.
38
Our business depends on our website, app,
network infrastructure and transaction-processing systems.
Our e-commerce business, money transfer business
and cryptocurrency market data platform are dependent on our IT infrastructure. Any system interruption that results in the unavailability
of our websites, apps or reduced performance of our transaction and information systems could reduce our ability to conduct our business.
We use internally and externally developed systems for our websites, apps and our transaction and information processing systems. We
expect to experience system interruptions due to software failure. We may also experience temporary capacity constraints due to sharply
increased traffic during events or other promotions. Capacity constraints can cause system disruptions, slower response times, delayed
page presentation, degradation in levels of customer service and other problems. We may also experience difficulties with our infrastructure
upgrades. Any future difficulties with our transaction and information processing systems or difficulties upgrading, expanding or integrating
aspects of our systems may cause system disruptions, slower response times, and degradation in levels of customer service, additional
expense, impaired quality and speed of our services or other problems.
If the location where all of our computer and
communications hardware is located is compromised, our business, prospects, financial condition and results of operations could be harmed.
If we suffer an interruption or degradation of services at the location for any reason, our business could be harmed. Our success, and
in particular, our ability to successfully receive and fulfil customers’ requests and provide high-quality customer service, largely
depends on the efficient and uninterrupted operation of our computer and communications systems. These limitations could have an adverse
effect on our business. Our disaster recovery plan may be inadequate, and we do not carry business interruption insurance to compensate
us for the losses that could occur. Despite our implementation of network security measures, our servers are vulnerable to computer viruses,
physical or electronic break-ins and similar disruptions, the occurrence of any of which could lead to interruptions, delays, loss of
critical data or the inability to accept and fulfil customer requests. The occurrence of any of the foregoing risks could harm our business.
We are subject to cyber security risks
and may incur increasing costs in an effort to minimize those risks and to respond to cyber incidents.
Our e-commerce business, money transfer business
and cryptocurrency market data platform are entirely dependent on the secure operation of our website and systems as well as the operation
of the internet generally. Our business involves the storage and transmission of users’ proprietary information, and security breaches
could expose us to a risk of loss or misuse of this information, litigation, and potential liability. A number of large internet companies
have suffered security breaches, some of which have involved intentional ransomware attacks. From time to time, we and many other internet
businesses also may be subject to a denial of service attacks wherein attackers attempt to block customers’ access to our website
with ransomware. If we are unable to avert a denial of service attack for any significant period, we could sustain substantial loss from
payment of ransom fee, lost sales and customer dissatisfaction. We may not have the resources or technical sophistication to anticipate
or prevent rapidly evolving types of cyberattacks.
Cyberattacks may target us, our customers, our
suppliers, banks, payment processors, e-commerce in general or the communication infrastructure on which we depend. If an actual or perceived
attack or breach of our security occurs, customer and/or supplier perception of the effectiveness of our security measures could be harmed
and we could lose customers, vendors or both. Actual or anticipated attacks and risks may cause us to incur increasing costs, including
costs to deploy additional personnel and protection technologies, train employees, and engage third party experts and consultants. A
person who is able to circumvent our security measures might be able to misappropriate our or our users’ proprietary information,
cause interruption in our operations, damage our computers or those of our users, or otherwise damage our reputation and business. Any
compromise of our security could result in a violation of applicable privacy and other laws, significant legal and financial exposure,
damage to our reputation, and a loss of confidence in our security measures, which could harm our business.
39
Failure to comply with the relatively new
E-Commerce Law may have a material adverse impact on our business, financial conditions and results of operations.
As the e-commerce industry is still evolving
in China, new laws and regulations may be adopted from time to time to address new issues that arise from time to time. For example,
in August 2018, the Standing Committee of the National People’s Congress promulgated the E-Commerce Law, which became effective
on January 1, 2019. The E-Commerce Law generally provides that e-commerce operators must obtain administrative licenses if business
activities conducted by the e-commerce operators are subject to administrative licensing requirements under applicable laws and regulations.
In addition, the E-Commerce Law imposes a number of obligations on e-commerce platform operators, including the obligations: (i) to
verify and register platform merchants, (ii) to ensure platform cybersecurity, including, but not limited to, data privacy, (iii) to
ensure fair dealing and the legitimate rights and interests of consumers on the platform, (iv) to publicize transaction information
preservation and transaction rules, and (v) to protect intellectual properties. See “Item 1. Overview—Government
Regulations—Regulations Relating to E-Commerce” for further details. As the E-Commerce Law is relatively new, no detailed
interpretation and implementation rules have been promulgated, and it remains uncertain how the E-Commerce Law will be interpreted and
implemented. We cannot assure you that our current business operations satisfy the obligations provided under the E-Commerce Law in all
respects. If the PRC governmental authorities determine that we are not in compliance with all the requirements proposed under the E-Commerce
Law, we may be subject to fines and/or other sanctions.
The E-Commerce Law also imposes a requirement
on operators of e-commerce platforms, such as E-Commerce Tianjin, to assist in tax collection with respect to income generated by sellers
from transactions conducted on e-commerce platforms, including, among others, submitting to the tax authority information on the identities
of sellers on e-commerce platforms and other information relating to tax payment. Failure to comply with the requirement may result in
operators of e-commerce platforms being subject to fines and, in severe circumstances, suspension of business operations of e-commerce
platforms. Substantial uncertainties exist regarding the interpretation and implementation of the E-Commerce Law. We encourage and incentivize
merchants to promote the products on our platform. If the merchants were deemed to be selling our products on consignment basis, the
PRC tax authorities may require them to make tax registration and request our assistance in these efforts, pursuant to the E-Commerce
Law, and the merchants on our platform may be subject to more stringent tax compliance requirements. The PRC government may adopt additional
requirements from time to time, and we may be requested by tax authorities to provide further assistance in the enforcement of tax regulations,
such as disclosure of transaction records and bank account information of the merchants, and withholding taxes for such merchants. If
any of these were to occur, we may lose our existing stores or fail to attract new stores on our platform and the level of activity may
be reduced on our platform. We may also incur increased costs and expenses as a result. The tightened tax enforcement by PRC tax authorities
in the e-commerce industry, such as imposition of reporting or withholding obligations on operators of e-commerce platforms with respect
to tax payable of merchants on e-commerce platforms, may have a material and adverse effect on our business, financial condition and
results of operations.
Failure to comply with sanctions laws,
anti-terrorist financing laws, anti-money laundering laws, and similar laws associated with
our activities, and anti-corruption laws could subject us to penalties and other adverse consequences.
We have implemented
policies and procedures designed to allow us to comply with anti-money laundering laws and economic sanctions laws and prevent our money
transfer platform from being used to facilitate business in countries or with persons or entities designated on lists promulgated by
UK government and equivalent international authorities or that are otherwise the target of sanctions. We may utilize the services of
vendors, such as screening tools, in implementing such policies and procedures. In the event that we or any of our users engage in any
conduct, intentionally or not, that facilitates money laundering, terrorist financing, or other illicit activity, or that violates anti-money
laundering or sanctions laws, or otherwise constitutes activity that is prohibited by such laws, including through the fault of any vendor,
we may be subject to fines, penalties, lawsuits, and enforcement actions; additional compliance requirements; increased regulatory scrutiny
of our business; restriction of our operations; or damage to our reputation or brand.
Law enforcement and
regulators continue to scrutinize compliance with these obligations, which may require us to further revise or expand our compliance
program, including the procedures that we use to verify the identity of our customers or monitor our platform for potential illegal activity.
In addition, any policies and procedures that we implement to comply with sanctions laws may not be effective, including in preventing
customers from using our services for transactions with sanctioned persons or jurisdictions subject to comprehensive sanctions. Given
the technical limitations in developing controls to prevent, among other things, the ability of customers to publish on our platform
false or deliberately misleading information or to develop sanctions-evasion methods, it is possible that we may inadvertently and without
our knowledge provide services to individuals or entities that have been designated by UK government or other relevant sanctions authorities
are located in a jurisdiction subject to comprehensive sanctions or an embargo by the UK or another country in which we operate or are
licensed to do business, and such services may not be in compliance with applicable economic sanctions regulations.
40
Sanctions are imposed
to address acute foreign policy and national security threats and may change rapidly and unpredictably in response to world events or
domestic or international political developments. Additionally, as we expand our services into additional jurisdictions, we may become
subject to additional sanctions requirements imposed by those jurisdictions or face increased risk of processing transactions in violation
of sanctions requirements to which we are currently subject. We may be unable to update policies, procedures, or controls to timely and
effectively address changes in applicable legal requirements or in our sanctions risk environment.
Consequences for failing
to comply with applicable rules and regulations could include fines, criminal and civil lawsuits, forfeiture of significant assets, or
other enforcement actions. We could also be required to make changes to our business practices or compliance programs as a result of regulatory
scrutiny. In addition, any perceived or actual breach of compliance by us, our customers, vendors, or our payment or disbursement partners
with respect to applicable laws, rules, and regulations could have a significant impact on our reputation and could cause us to lose existing
customers, prevent us from obtaining new customers, cause other payment or disbursement partners to terminate or not renew their agreements
with us, require us to expend significant funds to remedy problems caused by violations and to avert further violations, adversely affect
our relationship with our partner banks and other commercial counterparties and expose us to legal risk and potential liability, all of
which may adversely affect our business, operating results, and financial condition.
Use of our money
transfer platform for illegal or fraudulent activities could harm our business, reputation, financial condition, and operating results.
Our platform is susceptible
to illegal, improper or fraudulent uses, including money laundering, terrorist financing, sanctions evasion, bank fraud, payments involving
child pornography or human trafficking, and the facilitation of other illegal, improper or fraudulent activity. The digital financial
services industry is under increasing scrutiny from federal, state, and international regulators in connection with the potential for
such illegal, improper or fraudulent activities. In addition, our remittance service facilitates payments to jurisdictions which may in
some cases have higher levels of illegal, improper payments. Our payment system has been utilized for illegal, improper and fraudulent
uses in the past and we cannot guarantee that our policies, procedures and internal controls, or insurance, would adequately protect our
business, maintain our continued ability to operate in the jurisdictions that we serve, or our reputation, especially if such illegal,
improper or fraudulent activities were discovered to have taken place on our platform in the future. Our fraud loss expenses may increase
if our fraud systems lose effectiveness or if new methods or schemes are developed to defraud us. Since the methods and schemes utilized
by perpetrators of fraud are constantly evolving or, in some cases, not immediately detectable, we cannot assure you that our policies,
procedures and controls for managing fraud will be effective over time or of our ability to update these measures to address emerging
fraud risks. In addition, if illicit or fraudulent activity levels involving our services were to rise, it could lead to regulatory intervention
and reputational and financial damage to us. This, in turn, could lead to government enforcement actions and investigations, a suspension
or termination of our operating licenses, a reduction in the use and acceptance of our services, or an increase in our compliance costs,
any of which may harm our business, financial condition, and operating results.
On the other hand, if
the measures we have taken to detect illegal, improper or fraudulent activities are too restrictive and/or inadvertently prevent or delay
proper transactions, this could result in suspension of legitimate customer activity on our payment system, deter new and existing customers
or otherwise diminish our customer experience, any of which could harm our business.
As a public company, we are obligated to
maintain effective internal controls over financial reporting. Our internal controls may be determined not to be effective, which may
adversely affect investor confidence in us and, as a result, decrease the value of our Common Stock.
The PRC has not adopted management and financial
reporting concepts and practices similar to those in the United States. We may have difficulty in hiring and retaining a sufficient number
of qualified financial and accounting employees who are familiar with US GAAP and reporting requirements to work in the PRC. As a result
of these factors, we may experience difficulty in establishing and maintaining accounting and financial controls, collecting financial
data, budgeting, managing our funds and preparing financial statements, books of account and corporate records and instituting business
practices that meet investors’ expectations in the United States.
Rules adopted by the SEC, or the Commission,
pursuant to Sarbanes-Oxley Section 404 require annual assessment of our internal controls over financial reporting. The standards
that must be met for management to assess the internal controls over financial reporting as effective are relatively new and complex,
and they require significant documentation, testing and possible remediation to meet the detailed standards. This assessment will need
to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. During
the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting as
we have done previously and this year, we will be unable to assert that our internal controls are effective. If we continue to be unable
to conclude that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness
of our financial reports, which could harm our business and cause the price of our stock to decline.
41
We may need additional capital to fund
our future operations and, if it is not available when needed, we may need to reduce our planned development and marketing efforts, which
may reduce our sales revenue.
We believe that our existing working capital
and cash available from operations will enable us to meet our working capital requirements for at least the next twelve months. However,
if cash from future operations is insufficient, or if cash is used for acquisitions or other currently unanticipated uses, we may need
additional capital. The development and marketing of new products and services and the expansion of our business and associated support
personnel require a significant commitment of resources. In addition, if the markets for our products and services develop more slowly
than anticipated, or if we fail to establish significant market share and achieve sufficient net revenues, we may continue to consume
significant amounts of capital. As a result, we could be required to raise additional capital. To the extent that we raise additional
capital through the sale of equity or convertible debt securities or other methods, the issuance of such securities could result in dilution
of the shares held by existing shareholders. If additional funds are raised through the issuance of debt securities, such securities
may provide the holders certain rights, preferences, and privileges senior to those of common shareholders, and the terms of such debt
could impose restrictions on our operations. We cannot guarantee that additional capital, if required, will be available on acceptable
terms, or at all. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our
planned business development and marketing efforts, which could harm our business, financial condition and operating results.
If our costs and demands upon management
increase disproportionately to the growth of our business and revenue as a result of complying with the laws and regulations affecting
public companies, our operating results could be harmed.
As a public company, we do and will continue
to incur significant legal, accounting, investor relations and other expenses, including costs associated with public company reporting
requirements. We also have incurred and will incur costs associated with current corporate governance requirements, including requirements
under Section 404 and other provisions of Sarbanes-Oxley, as well as rules implemented by the SEC and the stock exchange on which
our common stock is traded. The expenses incurred by public companies for reporting and corporate governance purposes have increased
dramatically over the past several years. These rules and regulations have increased our legal and financial compliance costs substantially
and make some activities more time consuming and costly. If our costs and demands upon management increase disproportionately to the
growth of our business and revenue, our operating results could be harmed.
There are inherent uncertainties involved
in estimates, judgments and assumptions used in the preparation of financial statements in accordance with generally accepted accounting
principles in the United States, or U.S. GAAP. Any changes in estimates, judgments and assumptions could have a material adverse effect
on our business, financial condition and operating results.
The preparation of financial statements in accordance
with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) involves making estimates, judgments and assumptions that
affect reported amounts of assets (including intangible assets), liabilities and related reserves, revenue, expenses and income. Estimates,
judgments and assumptions are inherently subject to change in the future, and any such changes could result in corresponding changes
to the amounts of assets, liabilities, revenue, expenses and income. Any such changes could have a material adverse effect on our business,
financial condition and operating results.
We may be exposed to litigation related
to the Sale Transaction on February 27, 2020 from the holders of our common stock.
Transactions such as the Sale Transaction are
often subject to lawsuits by stockholders. Particularly because the holders of our common stock will not receive any consideration from
the Sale Transaction, it is possible that they may sue the Company or the Board of Directors. Such lawsuits could result in substantial
costs and divert our management’s attention from other business concerns, which could seriously harm our business.
42
Risks Related to Doing Business in the PRC
Changes in China’s economic, political
or social conditions or government policies could have a material adverse effect on our business and results of operations.
A substantial of the Company’s operations
are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by
the political, economic, and legal environments in the PRC, in addition to the general state of the PRC economy. The Company’s
results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies
with respect to laws and regulations, cybersecurity, anti-monopoly, anti-inflationary measures, currency conversion and remittance abroad,
VIE structures, and rates and methods of taxation, among other things, and such change of rules and policies can happen quickly with
little advance notice.
A substantial of the Company’s sales, purchases
and expense transactions are in RMB. The RMB is not freely convertible into foreign currencies under the current law. In China, foreign
exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s
Bank of China, the central bank of China. Remittances in currencies other than RMB may require certain supporting documentation in order
to affect the remittance.
The Chinese economy differs from the economies
of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control
of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization
of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate
governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition,
the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese
government also exercises significant control over China’s economic growth through allocating resources, controlling payment of
foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.
While the Chinese economy has experienced significant
growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government
has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit
the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may
be adversely affected by government control over blockchain related financial technology, capital investments or changes in tax regulations.
In addition, in the past the Chinese government has implemented certain measures, including interest rate increases, to control the pace
of economic growth. These measures may cause decreased economic activity in China, and since 2012, China’s economic growth has
slowed down. Any prolonged slowdown in the Chinese economy may reduce the demand for our products and services and materially and adversely
affect our business and results of operations.
Furthermore, we and our China based operating
entities, as well as our investors, face uncertainty about future actions by the Chinese government that could significantly affect our
financial performance and operations, including the enforceability of the VIE contractual arrangements. If future laws, administrative
regulations or provisions mandate further actions to be taken by companies with respect to existing VIE contractual arrangements, we
may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and
appropriate measures to adapt to any of these or similar regulatory compliance challenges could materially and adversely affect our current
corporate structure and business operations.
43
If we become subject to additional scrutiny,
criticism and negative publicity involving U.S.-listed China-based companies, we may have to expend significant resources to investigate
and resolve the matter which could harm our business operations, any offering and our reputation and could result in a loss of your investment
in our shares, especially if such matter cannot be addressed and resolved favorably.
Recently, U.S. public companies that have substantially
operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators
and regulatory agencies. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting irregularities,
a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto
and, in some cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of
many U.S.-listed China-based companies has decreased in value and, in some cases, has become virtually worthless. Many of these companies
have been subject to shareholder lawsuits and SEC enforcement actions and have conducted internal and external investigations into the
allegations. The Company has received subpoenas from the SEC’s Division of Enforcement requiring us to produce documents and detailed
information relating to, among other things, the Company’s accounting procedures and treatment, management oversight, and the sale
of HeDeTang Holdings (HK) Ltd. to New Continent International Co., Ltd. The Company has provided responsive documents and information
and will continue to cooperate with regulator and produce requested documents and information. It is not clear what effect this sector-wide
scrutiny, criticism and negative publicity will have on us and our business. If we become the subject of any unfavorable allegations,
whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations
and/or defend our company. This situation may be a major distraction to our management. If such allegations are not proven to be groundless,
our business operations will be severely hindered and your investment in our shares could be rendered worthless.
Uncertainties and quick change in the interpretation
and enforcement of Chinese laws and regulations with little advance notice could result in a material and negative impact our business
operations, decrease the value of our shares of common stock and limit the legal protections available to us.
The PRC legal system is based on written statutes,
and prior court decisions have limited value as precedents. Since these laws and regulations are relatively new and the PRC legal system
continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these
laws, regulations and rules involves uncertainties. The enforcement of laws and that rules and regulations in China can change quickly
with little advance notice and the risk that the Chinese government may intervene or influence our operations at any time, or may exert
more control over offerings conducted overseas and/or foreign investment in China- based issuers, could result in a material change in
our operations and/or the value of our shares of common stock.
On July 6, 2021, the General Office of the Communist
Party of China Central Committee and the General Office of the State Council jointly issued an announcement to crack down on illegal
activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires
the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision
over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities
laws. Since this announcement is relatively new, uncertainties still exist in relation to how soon legislative or administrative regulation
making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified
or promulgated, if any, and the potential impact such modified or new laws and regulations will have on companies like us and our shares
of common stock.
44
On February 15, 2022, Cybersecurity Review Measures
published by Cyberspace Administration of China, National Development and Reform Commission, Ministry of Industry and Information Technology,
Ministry of Public Security, Ministry of State Security, Ministry of Finance, Ministry of Commerce, People’s Bank of China, State
Administration of Radio and Television, China Securities Regulatory Commission, State Secrecy Administration and State Cryptography Administration
became effective, which provides that, Critical Information Infrastructure Operators (“CIIOs”) that purchase internet products
and services and Online Platform Operators engaging in data processing activities that affect or may affect national security shall be
subject to the cybersecurity review by the Cybersecurity Review Office. On November 14, 2021, CAC published the Administration Measures
for Cyber Data Security (Draft for Public Comments), or the “Cyber Data Security Measure (Draft)”, which requires cyberspace
operators with personal information of more than 1 million users who want to list abroad to file a cybersecurity review with the Office
of Cybersecurity Review. As confirmed by our PRC counsel Fengdong Law Firm, we are currently not subject to cybersecurity review with
the Cyberspace Administration of China (“CAC”) under these new measures, because the VIE E-Commerce Tianjin is not a cyberspace
operator with personal information of more than 1 million users or has activities that affect or may affect national security. Nevertheless,
the aforementioned draft measures and any related implementation rules to be enacted may subject us to additional compliance requirement
in the future.
We cannot rule out the possibility that
the PRC government will institute a licensing regime or pre-approval requirement covering our industry at some point in the future. If
such a licensing regime or approval requirement were introduced, we cannot assure you that we would be able to obtain any newly required
license in a timely manner, or at all, which could materially and adversely affect our business and impede our ability to continue our
operations.
From time to time, we may have to resort to administrative
and court proceedings to enforce our legal rights. Since PRC administrative and court authorities have significant discretion in interpreting
and implementing statutory and contractual terms, however, it may be more difficult to evaluate the outcome of administrative and court
proceedings and the level of legal protection we enjoy in the PRC legal system than in more developed legal systems. Furthermore, the
PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at
all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after
the violation. Such uncertainties, including uncertainties over the scope and effect of our contractual, property (including intellectual
property) and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely
affect our business and impede our ability to continue our operations.
The Chinese government exerts substantial
influence over the manner in which we must conduct our business as well as more oversight and control over offerings that are conducted
overseas and/or foreign investment in China-based issuers, and may intervene or influence our operations at any time, which could result
in a material change in our operations, and significantly limit or completely hinder our ability to offer or continue to offer securities
to investors and, and cause the value of our shares of common stock to significantly decline or be worthless.
The Chinese government has exercised and continues
to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability
to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations,
land use rights, property and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations
or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance
with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support
recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic
policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest
ourselves of any interest we then hold in Chinese properties.
As such, our business is subject to various government
and regulatory interferences. We could be subject to regulation by various political and regulatory entities, including various local
and municipal agencies and government sub-divisions. The Company may incur increased costs necessary to comply with existing and newly
adopted laws and regulations or penalties for any failure to comply. Our operations could be adversely affected, directly or indirectly,
by existing or future laws and regulations relating to its business or industry, which could result in a material change in our operation
and the value of our shares of common stock.
45
On February 17, 2023, the CSRC released New Overseas
Listing Rules with five interpretive guidelines, which will take effect on March 31, 2023. The New Overseas Listing Rules require Chinese
domestic enterprises to complete filings with relevant governmental authorities and report related information under certain circumstances.
The required filing scope is not limited to the initial public offering, but also includes subsequent overseas securities offering, single
or multiple acquisition(s), share swap, transfer of shares or other means to seek an overseas direct or indirect listing and a secondary
listing or dual major listing of issuers already listed overseas. According to the Notice on Arrangements for Overseas Securities Offering
and Listing by Domestic Enterprises, published by the CSRC on February 17, 2023, a company that (i) has already completed overseas listing
or (ii) has already obtained the approval for the offering or listing from overseas securities regulators or exchanges but has not completed
such offering or listing before effective date of the new rules and also completes the offering or listing before September 30, 2023
will be considered as an existing listed company and is not required to make any filing until it conducts a new offering in the future.
Also, upon the occurrence of any of the material events specified below after an issuer has completed its offering and listed its securities
on an overseas stock exchange, the issuer shall submit a report thereof to the CSRC within 3 working days after the occurrence and public
disclosure of the event: (i) change of control; (ii) investigations or sanctions imposed by overseas securities regulatory agencies or
other competent authorities; (iii) change of listing status or transfer of listing segment; or (iv) voluntary or mandatory delisting.
On February 24, 2023, the CSRC revised the Provisions
on Strengthening the Management of Confidentiality and Archives Related to the Overseas Issuance of Securities and Overseas Listing by
Domestic Companies which were issued in 2009 (the “Archives Rules”). The revised Archives Rules took effect on March 31, 2023.
The revised Archives Rules expands their application to cover indirect overseas offering and listing, stipulating that a domestic company
which plans to publicly disclose any documents and materials containing state secrets or working secrets of government agencies, shall
first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level.
Furthermore, given recent statements by the Chinese
government indicating an intent to exert more oversight and control over offerings that are conducted overseas, although we are currently
not required to obtain permission from any of the PRC central or local government and has not received any denial to list on the U.S.
exchange, it is uncertain when and whether we will be required to obtain permission from the PRC government to list on U.S. exchanges
in the future, and even when such permission is obtained, whether it will be denied or rescinded, which could significantly limit or
completely hinder our ability to offer or continue to offer our securities to investors and cause the value of our shares to significantly
decline or be worthless.
There are uncertainties under the PRC Securities
Law relating to the procedures and requisite timing for the U.S. securities regulatory agencies to conduct investigations and collect
evidence within the territory of the PRC.
On December 28, 2019, the amended Securities
Law of the PRC (the “PRC Securities Law”) was promulgated, which became effective on March 1, 2020. According to Article 177 of
the PRC Securities Law (“Article 177”), the securities regulatory authority of the State Council may establish a regulatory
cooperation mechanism with securities regulatory authorities of another country or region for the implementation of cross-border supervision
and administration. Article 177 further provides that overseas securities regulatory authorities shall not engage
in activities pertaining to investigations or evidence collection directly conducted within the territories of the PRC, and that no Chinese
entities or individuals shall provide documents and information in connection with securities business activities to any organizations
and/or persons aboard without the prior consent of the securities regulatory authority of the State Council and the competent departments
of the State Council.
As advised by our PRC counsel Fengdong Law Firm, Article 177 is only
applicable where the activities of overseas authorities constitute a direct investigation or evidence collection by such authorities
within the territory of the PRC. A substantial of our business operation is conducted in the PRC. In the event that the U.S. securities
regulatory agencies carry out an investigation on us such as an enforcement action by the Department of Justice, the SEC or other authorities,
such agencies’ activities will constitute conducting an investigation or collecting evidence directly within the territory of the
PRC and accordingly fall within the scope of Article 177. In that case, the U.S. securities regulatory agencies may have
to consider establishing cross-border cooperation with the securities regulatory authority of the PRC by way of judicial assistance,
diplomatic channels or establishing a regulatory cooperation mechanism with the securities regulatory authority of the PRC. However,