ITEM 1A. RISK FACTORS
Our business is subject to many risks and uncertainties,
which may affect our future financial performance. If any of the events or circumstances described below occur, our business and financial
performance could be adversely affected, our actual results could differ materially from our expectations, and the price of our securities
could decline. The risks and uncertainties discussed below are not the only ones we face. There may be additional risks and uncertainties
not currently known to us or that we currently do not believe are material that may adversely affect our business and financial performance.
The statements contained in this Annual Report on Form 10-K that are not historic facts are forward-looking statements that are subject
to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking
statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed.
In that case, the trading price of our securities could decline, and investors in our securities may lose all or part of their investment.
Risks Related to Our Business
Our business may be materially adversely
affected by the coronavirus (COVID-19) outbreak.
The current outbreak of COVID-19 has globally
resulted in loss of life, business closures, restrictions on travel, and widespread cancellation of social gatherings. The extent to which
the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted at this
time, including:
· new information which may emerge concerning the severity of the disease;
· the duration and spread of the outbreak;
· other business disruptions that affect our workforce;
· the impact on capital and financial markets; and
In addition, the current outbreak of COVID-19
has resulted in a widespread global health crisis and adversely affected global economies and financial markets, and similar public health
threats could do so in the future.
Substantially all our revenues are concentrated
in Taiwan pending expansion into other international markets. Consequently, our results of operations will likely be adversely, and may
be materially affected, to the extent that the COVID-19 pandemic or any epidemic harms Taiwan’s economy and society and the global
economy in general. Any potential impact to our results will depend on, to a large extent, future developments and new information that
may emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by government authorities and other entities
to contain the COVID-19 pandemic or treat its impact, almost all of which are beyond our control. If the disruptions posed by the COVID-19
pandemic or other matters of global concern continue for an extensive period of time, the operations of our business may be materially
adversely affected.
To the extent the COVID-19 pandemic or a similar
public health threat has an impact on our business, it is likely to also have the effect of heightening many of the other risks described
in this “Risk Factors” section.
We have a limited operating history in an
evolving industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
The Company has a limited operating history on
which to base an evaluation of its business and prospects. The Company is subject to all the risks inherent in a small company seeking
to develop, market and distribute new services, particularly companies in evolving markets. The likelihood of the Company’s success
must be considered, in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with
the development, introduction, marketing and distribution of new products and services in a competitive environment.
Such risks for the Company include, but are not
limited to, dependence on the success and acceptance of the Company’s services and the management of growth. In view of the Company’s
limited operating history, the Company believes that period-to-period comparisons of its operating results are not necessarily meaningful
and should not be relied upon as an indication of future performance.
The Company is therefore subject to many of the
risks common to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial,
and other resources and lack of revenues.
If we fail to raise capital when needed
it will have a material adverse effect on the Company’s business, financial condition and results of operations.
The Company has limited revenue-producing operations
and will require proceeds from future offerings to execute its full business plan. A failure to raise capital when needed would have a
material adverse effect on the Company’s business, financial condition and results of operations. In addition, debt and other debt
financing may involve a pledge of assets and may be senior to interests of equity holders. Any debt financing secured in the future could
involve restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more
difficult for the Company to obtain additional capital or to pursue business opportunities, including potential acquisitions. If adequate
funds are not obtained, the Company may be required to reduce, curtail or discontinue operations.
Our ability to obtain additional capital on acceptable
terms is subject to a variety of uncertainties, including:
· investors’ perception of, and demand for, our securities;
· our future results of operations, financial condition and cash flow.
The Company’s failure to successfully
market its brands could result in adverse financial consequences.
The Company believes that continuing to strengthen
its brands is critical to achieving widespread acceptance of the Company, particularly in light of the competitive nature of the Company’s
market in which it operates. Promoting and positioning its brands will depend largely on the success of the Company’s marketing
efforts and the ability of the Company to provide high quality services. There can be no assurance that brand promotion activities will
yield increased revenues or that any such revenues would offset the expenses incurred by the Company in building its brand. If the Company
fails to promote and maintain its brand or incurs substantial expenses in an attempt to promote and maintain its brand or if the Company’s
existing or future strategic relationships fail to promote the Company’s brand or increase brand awareness, the Company’s
business, results of operations and financial condition would be materially adversely affected.
We may not generate the same level of revenues
from general construction projects.
Our revenues for the year ended December 31, 2021
and for the year ended December 31, 2020 were approximately $10 million and $1 million, respectively. There was one customer, The
Fifth District Management Office of Taiwan Water Corporation, who represented approximately 58% of the Company’s total revenue for
the year ended December 31, 2021, and two customers (JC Development Co., Ltd (“JCD”) and Pan Li) who represented 96% of the
Company’s total revenue for the prior year period. These customers are not located in mainland China or Hong Kong. Our future plan
of operations is to shift away from general construction services to the construction of fish and solar power farms. There can be no guarantee
that such shift in operations will generate the same levels of revenues previously generated through our VIE.
There is no assurance that the Company will
be profitable.
There is no assurance that we will earn profits
in the future, or that profitability will be sustained. There is no assurance that future revenues will be sufficient to generate the
funds required to continue our business development and marketing activities. If we do not have sufficient capital to fund our operations,
we may be required to reduce our sales and marketing efforts or forego certain business opportunities.
The Company may not have the ability to
manage its growth.
The Company anticipates that significant expansion
will be required to address potential growth in its customer base and market opportunities. The Company’s anticipated expansion
is expected to place a significant strain on the Company’s management, operational and financial resources. To manage any material
growth of its operations and personnel, the Company may be required to improve existing operational and financial systems, procedures
and controls and to expand, train and manage its employee base. There can be no assurance that the Company’s planned personnel,
systems, procedures and controls will be adequate to support the Company’s future operations, that management will be able to hire,
train, retain, motivate and manage required personnel or that the Company’s management will be able to successfully identify, manage
and exploit existing and potential market opportunities. If the Company is unable to manage growth effectively, its business, prospects,
financial condition and results of operations may be materially adversely affected.
We will need additional financing in order
to grow our business.
From time to time, in order to expand operations
to meet customer demand, the Company will need to incur additional capital expenditures. These capital expenditures are intended to be
funded from third party sources, including the incurring of debt and/or the sale of additional equity securities. In addition to requiring
additional financing to fund capital expenditures, the Company may require additional financing to fund working capital, research and
development, sales and marketing, general and administrative expenditures, and operating losses. The incurrence of debt creates additional
financial leverage and therefore an increase in the financial risk of the Company’s operations. The sale of additional equity securities
will be dilutive to the interests of current equity holders. In addition, there can be no assurance that such additional financing, whether
debt or equity, will be available to the Company or that it will be available on acceptable commercial terms. Any inability to secure
such additional financing on appropriate terms could have a materially adverse impact on the business, financial condition and operating
results of the Company.
We rely on our executive officers.
The Company’s success is dependent on our
current executive officers. The Company’s success also depends in large part on the continued service of its key operational and
management personnel. The Company faces intense competition from its competitors, customers and other companies throughout the industry.
The loss of any our executive officers, specifically Mr. Yin-Chieh (“Jeff”) Cheng, our CEO, or any failure on the Company’s
part to hire, train and retain a sufficient number of qualified professionals could impair the business of the Company.
We rely on the performance of highly skilled
personnel, and if we are unable to attract, retain and motivate well-qualified employees, our business could be harmed.
The Company is, and will be, heavily dependent
on the skill, acumen and services of the management and other employees of the Company. Our future success depends on our continuing ability
to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand, and we may
incur significant costs to attract them. In addition, the loss of any of our senior management or key employees could materially adversely
affect our ability to execute our business plan, and we may not be able to find adequate replacements. We cannot ensure that we will be
able to retain the services of any members of our senior management or other key employees. If we do not succeed in attracting well-qualified
employees or retaining and motivating existing employees, our business could be harmed.
We may have inadvertently violated Section
13(k) of the Exchange Act (implementing Section 402 of the Sarbanes-Oxley Act of 2002) and may be subject to sanctions as a result.
Section 13(k) of the Exchange Act provides that
it is unlawful for a company that has a class of securities registered under Section 12 of the Exchange Act to, directly or indirectly,
including through any subsidiary, extend or maintain credit in the form of a personal loan to or for any director or executive officer
of the Company. In 2019, the Company did not have a corporate bank account established in Hong Kong or the U.S., and certain funds that
were supposed to be deposited into such corporate bank account were instead deposited into the personal bank account of our principal
stockholder as well as Chairman of the Board of Directors of the Company (“Board”), President, Chief Executive Officer and
Director, Yin-Chieh Cheng, which was considered to be a personal loan made by the Company to Yin-Chieh Cheng and may have violated Section
13(k) of the Exchange Act. The receivable was repaid to us in January 2020. Issuers that are found to have violated Section 13(k) of the
Exchange Act may be subject to civil sanctions, including injunctive remedies and monetary penalties, as well as criminal sanctions. The
imposition of any of such sanctions on us could have a material adverse effect on our business, financial position, results of operations
or cash flows.
Future acquisitions may have an adverse
effect on our ability to manage our business.
Selective acquisitions currently form part of
our strategy to further expand our business. If we are presented with appropriate opportunities, we may acquire additional businesses,
services or products that are complementary to our core business. Future acquisitions and the subsequent integration of new companies
into ours would require significant attention from our management. Future acquisitions would also expose us to potential risks, including
risks associated with the assimilation of new operations, services and personnel, unforeseen or hidden liabilities, the diversion of resources
from our existing businesses and technologies, the inability to generate sufficient revenue to offset the costs and expenses of acquisitions
and potential loss of, or harm to, relationships with employees as a result of integration of new businesses. The diversion of our management’s
attention and any difficulties encountered in any integration process could have a material adverse effect on our ability to manage our
business.
The value of seafood which the Company sells
(e.g., eel) is subject to fluctuation which may result in volatility of our results of operations and the value of an investment in the
Company.
Our business is partly dependent upon the sale
of eel which value is subject to fluctuation and which value greatly fluctuates. Our net sales and operating results vary significantly
due to the volatility of the value of eel and any other seafood that we sell which may result in the volatility of the market price of
our common stock.
We are highly susceptible to changes in
market demand for the types of seafood for which our recirculating aquaculture systems are used.
A significant portion of our revenues are derived
from constructing recirculating aquaculture systems for fish farming. We therefore are highly susceptible to changes in market demand
for the seafood for which our systems are used, which may be impacted by factors over which we have limited or no control. Factors that
could lead to a decline in market demand for seafood in general and specifically the type of fish farmed using our systems include economic
conditions and evolving consumer preferences. A substantial downturn in market demand for such seafood may have a material adverse effect
on our business and on our results of operations.
A portion of our revenues are derived from
a single product, eel, and therefore we are highly susceptible to changes in market demand, which may be affected by factors over which
we have limited or no control.
Approximately 30% of our revenues are derived
from a single product, eel. We therefore are highly susceptible to changes in market demand, which may be impacted by factors over which
we have limited or no control. Factors that could lead to a decline in market demand for eel include economic conditions and evolving
consumer preferences. A substantial downturn in market demand for eel may have a material adverse effect on our business and on our results
of operations.
There are risks associated with outsourced
production that may result in a decrease in our profit.
The possibility of delivery delays, product defects
and other production-side risks stemming from outsourcers cannot be eliminated. In particular, inadequate production capacity among outsourced
manufacturers could result in the Company being unable to supply enough product amid periods of high product demand, the opportunity costs
of which could be substantial.
We have limited insurance coverage.
We do not have any business liability, disruption
or litigation insurance coverage for our operations in Taiwan. Any uninsured occurrence of loss or litigation or business disruption may
result in the incurrence of substantial costs and the diversion of resources, which could have an adverse effect on our operating results.
Competitors and potential competitors may
develop products and technologies that make ours obsolete or garner greater market share than ours.
Our ability to compete successfully will depend
on our ability to demonstrate that our products are superior to and/or less expensive than other products available in the market. Some
of our competitors have the benefit of marketing their products under brand names that have better market recognition than ours or have
stronger marketing and distribution channels than we do. Increased competition as to any of our products could result in price reduction,
reduced margins and loss of market share, which could negatively affect our profitability.
Certain of our competitors may benefit from government
support and other incentives that are not available to us. As a result, our competitors may be able to develop competing and/or superior
products and compete more aggressively and sustain that competition over a longer period of time than we can. As more companies develop
new intellectual property in our markets, a competitor could acquire patent or other rights that may limit our ability to successfully
market our product.
We may produce products of inferior quality
which would cause us to lose customers.
Although we make an effort to ensure the quality
of our RASs, they could from time to time contain defects, anomalies or malfunctions that are undetectable at the time of shipment, installation
and initial testing. These defects, anomalies or malfunctions could be discovered after our products are shipped to customers and installed
and tested at the site, resulting in the return or exchange of our products or discontinuation of the use of our products, which could
negatively impact our operating results.
If our technologies or products are stolen,
misappropriated, or reverse engineered, others could use the technologies to produce competing technologies or products.
Third parties, including our collaborators, contractors,
and others involved in our business often have access to our technologies. If our technologies or products were stolen, misappropriated,
or reverse engineered, they could be used by other parties that may be able to reproduce our technologies or products using our technologies
for their own commercial gain. If this were to occur, it would be difficult for us to challenge this type of use, especially since we
do not own any patents or other intellectual property rights with respect to our technologies and products.
We are subject to certain risks by virtue
of our international operations.
We mainly operate in Taiwan and plan to expand
in other international countries and in the United States. We expect to expand our operations significantly by accessing new markets abroad
and expanding our services offerings. Our ability to manage our business and conduct our operations in other international countries and
in the United States requires considerable management attention and resources and is subject to the particular challenges of supporting
a growing business in an environment of multiple languages, cultures, customs, legal systems, alternative dispute systems, regulatory
systems and commercial infrastructures. Furthermore, in most international markets, we would not be the first entrant, and our competitors
may be better positioned than we are to succeed. Expanding in other international countries and in the United States may subject us to
risks that we have either not faced before or increase our exposure to risks that we currently face, including risks associated with:
· providing solutions in different languages for different cultures;
· credit risk and higher levels of payment fraud;
· compliance with anti-bribery laws;
· currency exchange rate fluctuations;
· political and economic instability in some countries;
· higher costs of doing business in other international countries.
Natural disasters or other catastrophic
events could harm our operations.
Our operations in the U.S. and Taiwan could be
subject to significant risk of natural disasters, including earthquakes, hurricanes, typhoons, flooding and tornadoes, as well as other
catastrophic events, such as terrorist attacks or wars. For example, our manufacturers are all located in Taiwan, which is susceptible
to typhoons and earthquakes. Any disruption in our manufacturers’ manufacturing facilities arising from these and other natural
disasters or other catastrophic events could cause significant delays in the production or shipment of the components of our products
until such manufacturers are able to shift production to different facilities or until we are able to arrange for other third party manufacturers
to manufacture the components of our products. The affected manufacturers may not be able to obtain alternate capacity to manufacture
the components of our products or we may not be able to arrange for other third party manufacturers to manufacture the components of our
products on favorable terms or at all. The occurrence of any of these circumstances may adversely affect our financial condition and results
of operation.
The primary substantial portion of our revenues
will be derived from Taiwan.
We anticipate that sales of our services in Taiwan
will represent our primary revenues in the near future. Any significant decline in the condition of the economy of Taiwan could adversely
affect consumer demand of our services, among other things, which in turn would have a material adverse effect on our business and financial
condition.
Currency fluctuations may adversely affect
our business and if the NT dollar were to decline in value, that would reduce our revenue in U.S. dollar terms.
Our reporting currency is the U.S. dollar and
our operations in Taiwan use their local currency as their functional currencies. Substantially all of our revenue and expenses are in
NT dollars. We are subject to the effects of exchange rate fluctuations with respect to any of such currency. For example, the value of
the NT dollar depends to a large extent on Taiwan government policies and Taiwan’s domestic and international economic and political
developments, as well as supply and demand in the local market.
The income statements of our operations are translated
into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies,
the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for
our international operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign
currency denominated transactions results in increased revenue, operating expenses and net income for our international operations. We
are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars
in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial
statements into U.S. dollars will lead to a translation gain or loss which is recorded as a component of other comprehensive income. In
addition, we have certain assets and liabilities that are denominated in currencies other than the relevant entity’s functional
currency. Changes in the functional currency value of these assets and liabilities create fluctuations that will lead to a transaction
gain or loss. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in
the future. The availability and effectiveness of any hedging transaction may be limited, and we may not be able to successfully hedge
our exchange rate risks.
We may be subject to product liability claims
if people or properties are harmed by the services sold by us.
The components of our products intended to be
sold by us, as part of our services, are manufactured by third parties. The components of our products may be defectively designed or
manufactured. As a result, sales of the products could expose us to liability claims relating to personal injury or property damage and
may require product recalls or other actions. Third parties subject to such injury or damage may bring claims or legal proceedings against
us as the reseller of the products. We do not currently maintain any third-party liability insurance or products liability insurance in
relation to products we intend to sell in conjunction with our services. As a result, any material products liability claim or litigation
could have a material and adverse effect on our business, financial condition and results of operations. Even unsuccessful claims could
result in the expenditure of funds and managerial efforts in defending them and could have a negative impact on our reputation.
Risk of litigation.
The Company and/or its directors and officers
may be subject to a variety of civil or other legal proceedings, with or without merit. From time to time in the ordinary course of its
business, we may become involved in various legal proceedings, including commercial, employment and other litigation and claims, as well
as governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention
and resources and cause us to incur significant expenses. Furthermore, because litigation is inherently unpredictable, the results of
any such actions may have a material adverse effect on our business, operating results or financial condition.
Even if the claims are without merit, the costs
associated with defending these types of claims may be substantial, both in terms of time, money, and management distraction. The results
of litigation and claims to which we may be subject cannot be predicted with certainty. Even if these matters do not result in litigation
or are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate
or resolve them, could harm our business, results or operations and reputation.
Third parties may assert that our employees
or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets.
We employ individuals who previously worked with
other companies, including our competitors or potential competitors. Although we try to ensure that our employees and consultants do not
use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants
or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary
information, of a former employer or other third party. Litigation may be necessary to defend against these claims. If we fail in defending
any such claims or settling those claims, in addition to paying monetary damages or a settlement payment, we may lose valuable intellectual
property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs
and be a distraction to management and other employees.
Regulatory Risks
We must comply with the Foreign Corrupt
Practices Act while many of our competitors do not.
We are required to comply with the United States
Foreign Corrupt Practices Act, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials
for the purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions.
Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in Taiwan. If our competitors engage
in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing
business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. Although
we inform our personnel that such practices are illegal, we cannot assure that our employees or other agents will not engage in such conduct
for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer
severe penalties.
Relations between the PRC and Taiwan could
negatively affect our business and financial status and therefore the market value of your investment.
Taiwan has a unique international political status.
The PRC does not recognize the sovereignty of Taiwan. Although significant economic and cultural relations have been established during
recent years between Taiwan and the PRC, relations have often been strained. The government of the PRC has threatened to use military
force to gain control over Taiwan in limited circumstances. Our principal executive officers are located in Taiwan and a substantial majority
of our net revenues are derived from our operations in Taiwan. Therefore, factors affecting military, political or economic conditions
in Taiwan could have a material adverse effect on our results of operations.
A significant disruption in the operations
of our suppliers in Taiwan, such as a trade war or political unrest, could materially adversely affect our business, financial condition
and results of operations.
Any disruption in the operations of our suppliers
in Taiwan or in their ability to meet our needs, whether as a result of a natural disaster or other causes, could impair our ability to
operate our business on a day-to-day basis. Furthermore, since many of these third parties are located outside the U.S., we are exposed
to the possibility of disruption and increased costs in the event of changes in the policies of the U.S. or foreign governments, political
unrest or unstable economic conditions in any of the countries where we conduct such activities. For example, a trade war could lead to
higher tariffs. Any of these matters could materially and adversely affect our development timelines, business and financial condition.
Our business, including our costs and supply
chain, is subject to risks associated with manufacturing.
In the event of a significant disruption in the
supply of the raw materials used in the manufacture of the components of the products we offer, the suppliers that we work with might
not be able to locate alternative suppliers of materials of comparable quality at an acceptable price. For example, natural disasters
may increase raw material costs and impact pricing with our suppliers, and cause shipping delays for the components of our products. Any
delays, interruption, damage to or increased costs in the manufacture of the components of the products we offer could result in higher
prices to acquire the components of the products or non-delivery of the components of the products altogether, and could adversely affect
our operating results.
Our contractual arrangements may not be
as effective in providing operational control as direct ownership and our VIE shareholders may fail to perform their obligations under
our contractual arrangements.
Since the laws of Taiwan limit foreign equity
ownership in certain businesses in Taiwan, we operate such business in Taiwan through our VIE, XFC, in which we have no ownership interest
and rely on a series of contractual arrangements with XFC and its respective equity holders to control and operate the VIE. Our revenue
and cash flows from such business are attributed to our VIE. The contractual arrangements may not be as effective as direct ownership
in providing us with control over our VIE. Direct ownership would allow us, for example, to directly or indirectly exercise our rights
as a shareholder to effect changes in the board of directors of our VIE, which, in turn, could effect changes, subject to any applicable
fiduciary obligations at the management level. However, under the contractual arrangements, as a legal matter, if our VIE or its equity
holders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend
significant resources to enforce those arrangements and resort to litigation or arbitration and rely on legal remedies under the laws
of Taiwan. These remedies may include seeking specific performance or injunctive relief and claiming damages, any of which may not be
effective. In the event we are unable to enforce these contractual arrangements or we experience significant delays or other obstacles
in the process of enforcing these contractual arrangements, we may not be able to exert effective control over our VIE and may lose control
over the assets owned by our VIE. As a result, we may be unable to consolidate our VIE in our consolidated financial statements, which
could materially and adversely affect our financial condition and results of operations.
We may lose the ability to use, or otherwise
benefit from licenses and assets held by our VIE, which could render us unable to conduct some or all of our business operations and constrain
our growth.
Our VIE, XFC, holds assets, approvals and licenses
that are necessary for the operation of a certain portion of our business to which foreign investments are typically restricted or prohibited
under the laws of Taiwan. Without our VIE, and if we are unable to maintain the Class A construction license that is necessary for us
to conduct our operations in Taiwan or fail to obtain any other required licenses, we will be unable to operate in Taiwan. The contractual
arrangements contain terms that specifically obligate the equity holders of our VIE to ensure the valid existence of our VIE and restrict
the disposition of material assets or any equity interest of our VIE. However, in the event the equity holders of our VIE breach the terms
of these contractual arrangements and voluntarily liquidate our VIE, or our VIE declares bankruptcy and all or part of its assets become
subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may be unable to operate some
or all of our business or otherwise benefit from the assets held by our VIE, which could have a material adverse effect on our business,
financial condition, and results of operations. Furthermore, if our VIE undergoes a voluntary or involuntary liquidation proceeding, its
equity holders or unrelated third-party creditors may claim rights to some or all of the assets of our VIE, thereby hindering our ability
to operate our business as well as constrain our growth.
Geopolitical conditions,
including trade disputes and direct or indirect acts of war or terrorism, could have an adverse effect on our operations and financial
results.
Since we operate on a
global basis, our operations could be disrupted by geopolitical conditions, trade disputes, international boycotts and sanctions, political
and social instability, acts of war, terrorist activity or other similar events. From time to time, we could have a large investment in
a particular asset type, a large revenue stream associated with a particular customer or industry, or a large number of customers located
in a particular geographic region. Decreased demand from a discrete event impacting a specific asset type, customer, industry, or region
in which we have a concentrated exposure could negatively impact our results of operations.
Recently, Russia initiated
significant military action against Ukraine. In response, the U.S. and certain other countries imposed significant sanctions and export
controls against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business, and financial
organizations, and the U.S. and certain other countries could impose further sanctions, trade restrictions, and other retaliatory actions
should the conflict continue or worsen. It is not possible to predict the broader consequences of the conflict, including related geopolitical
tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof as well as any counter measures
or retaliatory actions by Russia or Belarus in response, including, for example, potential cyberattacks or the disruption of energy exports,
is likely to cause regional instability, geopolitical shifts, and could materially adversely affect global trade, currency exchange rates,
regional economies and the global economy. The situation remains uncertain, and while it is difficult to predict the impact of any of
the foregoing, the conflict and actions taken in response to the conflict could increase our costs, disrupt our supply chain, reduce our
sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely
affect our business, financial condition, and results of operations.
We continue to
expand our international footprint and operations, and we may expand further in the future, which subjects us to a variety of risks and
complexities which, if not effectively managed, could negatively affect our business.
We currently maintain
operations in Taiwan, and may in the future expand, or seek to expand, our operations to additional foreign jurisdictions. For example,
operating in Europe and China exposes us to political, legal and economic risks. In particular, the political, legal and economic climate
in China, both nationally and regionally, is fluid and unpredictable. Our ability to operate in China may be adversely affected by changes
in U.S. and Chinese laws and regulations such as those related to taxation, import and export tariffs, environmental regulations, genetically
modified microorganisms (GMM), land use rights, product testing requirements, intellectual property, currency controls, network security,
and other matters. In addition, we may not obtain or retain the requisite permits to operate in China, and costs or operational limitations
may be imposed in connection with obtaining and complying with such permits. In addition, Chinese trade regulations are in a state of
flux, and we may become subject to other forms of taxation, tariffs and duties in China. Furthermore, our counterparties in China may
use or disclose our confidential information or intellectual property to competitors or third parties, which could result in the illegal
distribution and sale of counterfeit versions of our products. If any of these events occur, our business, financial condition and results
of operations could be materially and adversely affected.
In addition, a significant
percentage of the production, downstream processing and sales of our products occurs outside the United States or with vendors, suppliers
or customers located outside the United States. If tariffs or other restrictions are placed by the United States on foreign imports from
Taiwan or other countries where we operate or seek to operate, or any related counter-measures are taken, our business, financial condition,
results of operations and growth prospects may be harmed. Tariffs may increase our cost of goods, which could result in lower gross margin
on certain of our products. If we raise prices to account for any such increase in costs of goods, the competitiveness of the affected
products could potentially be reduced. In either case, increased tariffs on imports from Taiwan or other countries where we operate or
seek to operate could materially and adversely affect our business, financial condition and results of operations. Trade restrictions
and sanctions implemented by the United States or other countries, including sanctions imposed on Russia by the United States and other
countries due to Russia’s recent invasion of Ukraine, could materially and adversely affect our business, financial condition and
results of operations.
Risks Related to Our Securities
We have identified material weaknesses in
our internal control over financial reporting. Failure to maintain effective internal controls could cause our investors to lose confidence
in us and adversely affect the market price of our common stock. If our internal controls are not effective, we may not be able to accurately
report our financial results or prevent fraud.
Section 404 of the Sarbanes-Oxley Act of 2002
(“Section 404”) requires that we maintain internal control over financial reporting that meets applicable standards. We may
err in the design or operation of our controls, and all internal control systems, no matter how well designed and operated, can provide
only reasonable assurance that the objectives of the control system are met. Because there are inherent limitations in all control systems,
there can be no assurance that all control issues have been or will be detected.
In this
Annual Report on Form 10-K, we identified certain material weaknesses in our internal controls. Specifically, we did not maintain
effective controls over the control environment. Our weaknesses related to a lack of a sufficient number of personnel with appropriate
training and experience in U.S. general acceptable accounting principles (GAAP). Furthermore, we have not developed and effectively communicated
to our employees the accounting policies and procedures necessary to maintain effective controls over the control environment. and
lack staffing in accounting and finance operations.
If we are unable, or are perceived as unable,
to produce reliable financial reports due to internal control deficiencies, investors could lose confidence in our reported financial
information and operating results, which could result in a negative market reaction and a decrease in our stock price.
Our stock price
has been, and may continue to be, volatile.
The market price of our common stock has been, and may continue to be, subject to material volatility. Such fluctuations could be in response
to, among other things, the factors described in this “Risk Factors” section, or other factors, some of which are beyond
our control, such as:
· changes in the prices of commodities associated with our business;
· litigation involving us or our general industry;
· additions or departures of key personnel; and
· changes in general economic, industry and market conditions.
Furthermore, stock markets
have experienced price and volume fluctuations that have affected, and continue to affect, the market prices of equity securities of many
companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad
market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rate changes and international
currency fluctuations, may negatively affect the market price of our common stock.
Additionally, the global
economy and financial markets may be adversely affected by geopolitical events, including the current or anticipated impact of military
conflict and related sanctions imposed on Russia by the United States and other countries due to Russia’s recent invasion of Ukraine.
In
the past, many companies that have experienced volatility and sustained declines in the market price of their stock have become subject
to securities class action and derivative action litigation. Securities litigation against us could result in substantial costs and divert
our management’s attention from other business concerns, which could materially harm our business. Any insurance we maintain may
not provide adequate coverage against potential losses from such securities litigation, and if claims or losses exceed our liability
insurance coverage, our business would be adversely impacted. In addition, insurance coverage may become more expensive, which would
harm our financial condition and results of operations.
There may not be sufficient liquidity in
the market for our securities in order for investors to sell their securities.
Our common stock is currently quoted on the OTC
Pink Sheets. Historically, there has been limited volume of sales of our common stock. There can be no assurances that an active market
will be develop, or if developed, maintained. This could result in stockholders being unable to sell their stock through OTC Markets.
Our common stock may be considered a “penny
stock” and may be difficult to sell.
The SEC has adopted regulations which generally
define a “penny stock” to be an equity security that has a market price of less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to specific exemptions. The market price of our common stock is less than $5.00 per share and, therefore,
it may be designated as a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these
securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that
the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our
common stock and may affect the ability of investors to sell their shares.
The market for penny stocks has experienced
numerous frauds and abuses, which could adversely impact investors in our stock.
OTC Pink Sheet securities are frequent targets
of fraud or market manipulation, both because of their generally low prices and because OTC Pink Sheet reporting requirements are less
stringent than those of the stock exchanges or NASDAQ.
Patterns of fraud and abuse include:
Our management is aware of the abuses that have
occurred historically in the penny stock market.
The market valuation of our business may
fluctuate due to factors beyond our control and the value of your investment may fluctuate correspondingly.
The market valuation of smaller reporting companies,
such as us, frequently fluctuate due to factors unrelated to the past or present operating performance of such companies. Our market valuation
may fluctuate significantly in response to a number of factors, many of which are beyond our control, including:
· fluctuations in related commodities prices; and
· additions or departures of key personnel.
As a result, the value of any investment in us
may fluctuate.
We have not paid dividends in the past and
do not expect to pay dividends in the foreseeable future and any return on investment may be limited to the value of our stock.
We currently do not expect to declare any dividends
on our common stock in the foreseeable future. Instead, we anticipate that all of our earnings in the foreseeable future will be used
to provide working capital, to support our operations and to finance the growth and development of our business. Any determination to
declare or pay dividends in the future will be at the discretion of our Board, subject to applicable laws and dependent upon a number
of factors, including our earnings, capital requirements and overall financial conditions. In addition, terms of any future debt or preferred
securities may further restrict our ability to pay dividends on our common stock.
We are an “emerging growth company”
under the JOBS Act and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our
common stock less attractive to investors.
We are an “emerging growth company,”
as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are not applicable
to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply
with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic
reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and
stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock
less attractive because we may rely on these exemptions. If some investors find our securities less attractive as a result, there may
be a less active trading market for our common stock and warrants and the price of such securities may be more volatile.
In addition, Section 107 of the JOBS Act also
provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B)
of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company”
can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing
to take advantage of the extended transition period for complying with new or revised accounting standards.
We will remain an “emerging growth company”
until the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an
effective registration statement under the Securities Act, although we will lose that status sooner if our revenues exceed $1.07 billion,
if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held
by non-affiliates exceeds $700 million as of the last day of our most recently completed second fiscal quarter.
Our status as an “emerging growth
company” under the JOBS Act may make it more difficult to raise capital as and when we need it.
Because of the exemptions from various reporting
requirements provided to us as an “emerging growth company” and because we will have an extended transition period for complying
with new or revised financial accounting standards, we may be less attractive to investors, and it may be difficult for us to raise additional
capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that
our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and
when we need it, our financial condition and results of operations may be materially and adversely affected.
The elimination of personal liability against
our directors and officers under Nevada law and the existence of indemnification rights held by our directors, officers and employees
may result in substantial expenses.
Our amended and restated Articles of Incorporation
and our amended and restated bylaws (“Bylaws”) eliminate the personal liability of our directors and officers to us and our
stockholders for damages for breach of fiduciary duty as a director or officer to the extent permissible under Nevada law. Further, our
Articles of Incorporation and our Bylaws provide that we are obligated to indemnify each of our directors or officers to the fullest extent
authorized by Nevada law and, subject to certain conditions, advance the expenses incurred by any director or officer in defending any
action, suit or proceeding prior to its final disposition. Those indemnification obligations could expose us to substantial expenditures
to cover the cost of settlement or damage awards against our directors or officers, which we may be unable to afford. Further, those provisions
and resulting costs may discourage us or our stockholders from bringing a lawsuit against any of our current or former directors or officers
for breaches of their fiduciary duties, even if such actions might otherwise benefit our stockholders.
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to any charter provision,
by law or otherwise, the registrant has been advised that in the opinion of the U.S. Securities and Exchange Commission (the “SEC”),
such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
If securities or industry analysts do not
publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our securities will depend
in part on the research and reports that securities or industry analysts publish about us or our business. Several analysts may cover
our stock. If one or more of those analysts downgrade our stock or publish inaccurate or unfavorable research about our business, our
stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly,
demand for our stock could decrease, which might cause our stock price and trading volume to decline.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our headquarter is located at 3F (Building B),
No. 185, Sec. 1, Datong Rd., Xizhi Dist., New Taipei City 221, Taiwan (R.O.C.). The office is rented by Taiwan Grand Smooth Enterprise
Co., Ltd., a company 100% controlled by Yin-Chieh Cheng, our President CEO and Chairman of the Board. Mr. Cheng sub-leases this space
to us, which is free of charge.
We do not own any real property.
ITEM 3. LEGAL PROCEEDINGS
We are currently not a party to any legal or administrative
proceedings and are not aware of any pending or threatened legal or administrative proceedings against us in all material aspects. We
may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
Market Information
Our common stock, par value $0.001, is listed
for quotation in the OTC Pink Market under the symbol “NCRA.”
Quarter Ended High Low High Low
Stockholders
As of March 31, 2022, we had approximately 478
stockholders of record of our common stock, not including shares held in street name.
Dividends
We do not expect to declare or pay any cash dividends
on our common stock in the foreseeable future, and we currently intend to retain future earnings, if any, to finance the expansion of
our business. The decision whether to pay cash dividends on our common stock will be made by our Board, at its discretion, and will depend
on our financial condition, operating results, capital requirements and other factors that the Board considers significant.
We did not pay cash dividends in the years ended December 31, 2021
or 2020.
Transfer Agent
The transfer agent and registrar for our common stock is Mountain Share
Transfer, LLC.
Securities Authorized for Issuance under Equity Compensation Plans
In 2018, the Board and stockholders adopted the
Company’s 2018 Stock Option and Award Incentive Plan, effective December 31, 2018 (the “2018 Plan”). The 2018 Plan provides
for the grant of the following types of stock awards: (i) incentive stock options, (ii) non-statutory stock options, and (iii) stock purchase
rights. The 2018 Plan is intended to help the Company secure and retain the services of eligible award recipients, provide incentives
for such persons to exert maximum efforts for the success of the Company and any affiliate and provide a means by which the eligible recipients
may benefit from increases in value of the common stock. The 2018 Plan is administered by the Compensation Committee. The Board reserved
10,000,000 shares of common stock under the 2018 Plan. No awards have been granted to any employees or consultants pursuant to the 2018
Plan.
Unregistered Sales of Equity Securities
Issuance of Common Stock
The foregoing securities were issued in reliance
on the exclusion from registration provided by either (i) Rule 903 of Regulation S under the Securities Act of the Securities
Act because the recipient was a non-U.S. Person (as defined under Rule 902 Section (k)(2)(i) of Regulation S), or (ii) Section 4(a)(2)
of the Securities Act due to the fact the issuance did not involve a public offering of securities to a U.S. Person.
Issuance of Warrants
The foregoing securities were issued in reliance
on the exclusion from registration provided by either (i) Rule 903 of Regulation S under the Securities Act of the Securities