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. At the end of 2019, 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, UK and the U.S. In March 2020, the World Health Organization declared
COVID-19 a pandemic. The COVID-19 pandemic resulted in, among other things, quarantines, travel restrictions, and the temporary closure
of office buildings and facilities in China, Hong Kong, UK and in the U.S.
A large part of our revenues are generated in
China and Hong Kong. Consequently, our results of operations was adversely affected during the outbreak, especially between 2020 and 2022. There have been outbreaks of Omicron variant in various cities in China in 2022 which 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.
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 pandemic could materially negatively affect our business and the
value of our common stock.
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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.
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 in China, would likely result in reduced demand for our products and services. To the extent an 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 facing 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 delay, unexpected or adverse developments in this sector may adversely and materially affect our operational and financial
performances. As market develops, 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.
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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/deliver 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 their 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 service 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.
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.
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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.
The brokerage and
investment banking service industry are intensely competitive in Hong Kong. If we are unable to compete effectively, we may lose our market
share and our results of operations and financial condition may be materially and adversely affected.
The financial services
industry, including the brokerage and investment banking services industry in Hong Kong, is intensely competitive, highly fragmented,
and subject to rapid change, and we expect it to remain so. We compete mostly in Hong Kong, and on the basis of a number of factors, including
the ability to adapt to evolving financial needs of a broad spectrum of clients, our ability to identify market demands and business opportunities
to win client mandates, the quality of our advice, our employees and deal execution, the range and price of our products and services,
our innovation, our reputation, and the strength of our relationships. We expect to continue to invest capital and resources in our businesses
in order to grow and develop them to a size where they are able to compete effectively in their markets, have economies of scale, and
are themselves able to produce or consolidate significant revenues and profit. We cannot assure you that the planned and anticipated growth
of our brokerage and investment banking business will be achieved or in what timescale. There may be difficulties securing financing for
investment for growth and in recruiting and retaining the skilled human resources required to compete effectively. If we fail to compete
effectively against our competitors, our business, financial conditions, results of operations, and prospects will be materially and adversely
affected.
As an provider of brokerage
and investment banking business services for Hong Kong and Chinese investors on a global basis, our business generally requires us to
react promptly to the evolving demand of our clients and be able to provide innovative financial solutions tailored to their needs. We
may not be able to compete effectively with our competitors at all times and always be able to provide appropriate financial solutions
that promptly and accurately address our clients’ needs. If this were to happen, our ability to attract new or retain existing clients
will suffer, which would materially and adversely affect our revenues and earnings.
We primarily compete
with other providers of financial services to Asian investors. We may face pricing pressure as some of our competitors may seek to obtain
higher market share by reducing fees and commissions. Some of our competitors include large global financial institutions or state-owned
PRC financial institutions operating or headquartered in Hong Kong, many of which have longer operating histories, far broader financial
and other resources, and significantly greater name recognition than us and have the ability to offer a wider range of products, which
may enhance their competitive position. They also regularly support services we do not provide, such as commercial lending, margin lending
and other financial services and products, which puts us at a competitive disadvantage and could result in pricing pressures or lost opportunities,
which in turn could materially and adversely affect our results of operations. In addition, we may be at a competitive disadvantage with
regard to some of our competitors that have larger customer bases and greater human resources.
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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 have completed acquisitions
of a money transfer company in UK and brokerage and investment banking firm in Hong Kong in 2023. In the event of any future acquisitions,
we may expend significant costs and 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.
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 and digital assets 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. We are currently developing digital
assets mining farms, 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 and digital assets 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.
Although we only provide hosting services to digital
assets miners, the security measures employed by our 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 services and mining farm 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.
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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.
Regulations of digital assets, cryptocurrencies,
crypto mining, blockchain technologies, are currently undeveloped and likely to rapidly evolve as government agencies take greater interest
in them. Regulations also vary 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, crypto currencies and digital assets 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 business depends on internet, our websites,
apps, network infrastructure and processing systems.
Our supply chain financing, money transfer, assets
management and digital mining services depend upon the widespread use of the internet. Factors which could reduce the widespread use of
the internet 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. 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. 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 supply chain financing, money transfer, assets
management and digital mining services are dependent on the secure operation of our website and systems as well as the operation of the
internet generally. Our business involves the storage of customers’ 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.
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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 customers’ proprietary information, cause
interruption in our operations, damage our computers or those of our customers, 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.
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 governments
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 or Hong Kong government or other relevant sanctions authorities are located
in a jurisdiction subject to comprehensive sanctions or an embargo by the UK, Hong Kong or other countries in which we operate or are
licensed to do business, and such services may not be in compliance with applicable economic sanctions regulations.
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.
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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.
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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.
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, and rates
and methods of taxation, among other things, and such change of rules and policies can happen quickly with little advance notice.
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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 more regulations on U.S. listed Chinese companies
and 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. Failure to take timely and appropriate measures to adapt to any of these or similar regulatory compliance
challenges could materially and adversely affect our business operations.
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. 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.
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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.
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 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.
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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.
On February 17, 2023, the CSRC released New Overseas
Listing Rules with five interpretive guidelines, which took effect on March 31, 2023. The New Overseas Listing Rules require Chinese domestic
enterprises to complete filings with CSRC and report related information under certain circumstances, such as: a) an issuer making an
application for initial public offering and listing in an overseas market; b) an issuer making an overseas securities offering after having
been listed on an overseas market; c) a domestic company seeking an overseas direct or indirect listing of its assets through single or
multiple acquisition(s), share swap, transfer of shares or other means. 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 are considered as an existing listed company and is not required to make any filing until it conducts a new offering in the future.
Furthermore, 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 business 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. The New Overseas Listing Rules stipulate the legal consequences to the companies for breaches, including failure to fulfill
filing obligations or filing documents having false statement or misleading information or material omissions, which may result in a fine
ranging from RMB1 million to RMB10 million, and in cases of severe violations, the relevant responsible persons may also be barred from
entering the securities market. The Company is still processing the filings with CSRC for its offerings since the effective
of New Overseas Listing Rules and has not complied the filing requirements yet which would subject the Company to fines and other penalties
for violation of New Overseas Listing Rules.
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.
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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, there is no
assurance that the U.S. securities regulatory agencies will succeed in establishing such cross-border cooperation in this particular case
and/or establish such cooperation in a timely manner.
Furthermore, as Article 177 is
still a recently promulgated provision and, as the date of this report, there have not been implementing rules or regulations regarding
the application of Article 177, it remains unclear as to how it will be interpreted, implemented or applied by the Chinese Securities
Regulatory Commission or other relevant government authorities. As such, there are uncertainties as 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. If the U.S.
securities regulatory agencies are unable to conduct such investigations, there exists a risk that they may determine to suspend or de-register
our registration with the SEC and may also delist our securities from Nasdaq or other applicable trading market within the U.S.
Under the PRC Enterprise Income Tax Law,
we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Such classification would likely
result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results of operations
and the value of your investment.
Under the PRC Enterprise Income Tax Law,
or the “EIT Law,” that became effective in January 2008, an enterprise established outside the PRC with “de facto management
bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally
subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation rules to the EIT Law, a “de
facto management body” is defined as a body that has material and overall management and control over the manufacturing and business
operations, personnel and human resources, finances, and properties of an enterprise. In addition, a circular, known as SAT Circular 82,
issued in April 2009 by the State Administration of Taxation, or the “SAT,” specifies that certain offshore incorporated enterprises
controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if the following are located or
resident in the PRC: senior management personnel and departments that are responsible for daily production, operation and management;
financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders’
meetings; and half or more of the senior management or directors having voting rights. Further to SAT Circular 82, the SAT issued a bulletin,
known as SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82 and clarify
the reporting and filing obligations of such “Chinese-controlled offshore incorporated resident enterprises.” SAT Bulletin
45 provides procedures and administrative details for the determination of resident status and administration on post-determination matters.