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
There is substantial doubt of our ability to
continue as a going concern.
We have incurred net losses since our
inception. In the twelve months ended December 31, 2024 and 2023, we incurred operating losses of $2,393,803 and $4,159,354,
respectively. As at December 31, 2024, we have working capital of $641,256 and had an accumulated deficit of $21,238,881. In their
audit report for the fiscal year ended December 31, 2024 included in this report, our auditors have expressed their concern as
to our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate
cashflows from operations and obtain financing. We intend to continue funding our operations through equity and debt financing
arrangements, which may be insufficient to fund our capital expenditures, working capital and other cash requirements in the long
term. There can be no assurance that the steps management is taking will be successful.
We have a limited operating history in an evolving
industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
We have a limited operating history on which to base
an evaluation of its business and prospects. We are subject to all the risks inherent in a small company seeking to develop, market and
distribute new services, particularly companies in evolving markets. The likelihood of our success must be considered, in light of the
problems, expenses, difficulties, complications and delays frequently encountered in connection with the development, introduction, marketing
and distribution of new products and services in a competitive environment.
Such risks for us include, but are not limited to,
dependence on the success and acceptance of our services and the management of growth. In view of our limited operating history, we believe
that period-to-period comparisons of its operating results are not necessarily meaningful and should not be relied upon as an indication
of future performance.
We are therefore subject to many of the risks common
to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial, and other
resources and lack of revenues.
If we fail to raise capital when needed it will
have a material adverse effect on our business, financial condition and results of operations.
We have limited revenue-producing operations and will
require proceeds from future offerings to execute its full business plan. A failure to raise capital when needed would have a material
adverse effect on our business, financial condition and results of operations. In addition, debt and other debt financing may involve
a pledge of assets and may be senior to interests of equity holders. Any debt financing secured in the future could involve restrictive
covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for us
to obtain additional capital or to pursue business opportunities, including potential acquisitions. If adequate funds are not obtained,
we may be required to reduce, curtail or discontinue operations.
Our ability to obtain additional capital on acceptable
terms is subject to a variety of uncertainties, including:
· investors’ perception of, and demand for, our securities;
· our future results of operations, financial condition and cash flow.
Our failure to successfully market our brands
could result in adverse financial consequences.
We believe that continuing to strengthen our brands
is critical to achieving our widespread acceptance, particularly in light of the competitive nature of the market in which we operate.
Promoting and positioning its brands will depend largely on the success of our marketing efforts and our ability to provide high quality
services. There can be no assurance that brand promotion activities will yield increased revenues or that any such revenues would offset
the expenses incurred us in building our brand. If we fail to promote and maintain our brand or incur substantial expenses in an attempt
to promote and maintain our brand or if our existing or future strategic relationships fail to promote our brand or increase brand awareness,
our business, results of operations and financial condition would be materially adversely affected.
We may not generate the same level of revenues
from general construction projects.
Our revenues for the year ended December 31, 2024
and for the year ended December 31, 2023 were approximately $17.01 million and $23.9 million, respectively. There were five customers
(Sano Morio, Handou Syuji, Ming-Chi Chen, Kai-Ling Chen and Sano Morimoto) who represented approximately 81.8% of our total revenue for
the year ended December 31, 2024 of our total revenue for the prior year period. These customers are not located in mainland China or
Hong Kong. Our future plan of operations is to shift away from general construction services to the construction of fish farms and fish
trading business. There can be no guarantee that such shift in operations will generate the same levels of revenues previously generated
through our variable interest entities.
There is no assurance that we will be profitable.
There is no assurance that we will earn profits in
the future, or that profitability will be sustained. There is no assurance that future revenues will be sufficient to generate the funds
required to continue our business development and marketing activities. If we do not have sufficient capital to fund our operations, we
may be required to reduce our sales and marketing efforts or forego certain business opportunities.
We may not have the ability to manage our growth.
We anticipate that significant expansion will be required
to address potential growth in our customer base and market opportunities. Our anticipated expansion is expected to place a significant
strain on our management, operational and financial resources. To manage any material growth of its operations and personnel, we may be
required to improve existing operational and financial systems, procedures and controls and to expand, train and manage our employee base.
There can be no assurance that our planned personnel, systems, procedures and controls will be adequate to support our future operations,
that management will be able to hire, train, retain, motivate and manage required personnel or that our management will be able to successfully
identify, manage and exploit existing and potential market opportunities. If we are unable to manage growth effectively, our business,
prospects, financial condition and results of operations may be materially adversely affected.
We will need additional financing in order to
grow our business.
From time to time, in order to expand operations to
meet customer demand, we will need to incur additional capital expenditures. These capital expenditures are intended to be funded from
third party sources, including the incurring of debt and/or the sale of additional equity securities. In addition to requiring additional
financing to fund capital expenditures, we may require additional financing to fund working capital, research and development, sales and
marketing, general and administrative expenditures and operating losses. The incurrence of debt creates additional financial leverage
and therefore an increase in the financial risk of our operations. The sale of additional equity securities will be dilutive to the interests
of current equity holders. In addition, there can be no assurance that such additional financing, whether debt or equity, will be available
to us or that it will be available on acceptable commercial terms. Any inability to secure such additional financing on appropriate terms
could have a materially adverse impact on our business, financial condition and operating results.
We rely on our executive officers.
Our success is dependent on our current executive
officers. Our success also depends in large part on the continued service of our key operational and management personnel. We face intense
competition from our competitors, customers and other companies throughout the industry. The loss of any our executive officers, specifically
Mr. Andy Jin, our Chief Executive Officer, or any failure on our part to hire, train and retain a sufficient number of qualified professionals
could impair our business.
We rely on the performance of highly skilled
personnel, and if we are unable to attract, retain and motivate well-qualified employees, our business could be harmed.
We are, and will be, heavily dependent on the skill,
acumen and services of our management and other employees. Our future success depends on our continuing ability to attract, develop, motivate
and retain highly qualified and skilled employees. Qualified individuals are in high demand, and we may incur significant costs to attract
them. In addition, the loss of any of our senior management or key employees could materially adversely affect our ability to execute
our business plan, and we may not be able to find adequate replacements. We cannot ensure that we will be able to retain the services
of any members of our senior management or other key employees. If we do not succeed in attracting well-qualified employees or retaining
and motivating existing employees, our business could be harmed.
We may have inadvertently violated Section 13(k)
of the Exchange Act (implementing Section 402 of the Sarbanes-Oxley Act of 2002) and may be subject to sanctions as a result.
Section 13(k) of the Exchange Act provides that it
is unlawful for a company that has a class of securities registered under Section 12 of the Exchange Act to, directly or indirectly, including
through any subsidiary, extend or maintain credit in the form of a personal loan to or for any of its directors or executive officers.
In 2019, we did not have a corporate bank account established in Hong Kong or the U.S., and certain funds that were supposed to be deposited
into such corporate bank account were instead deposited into the personal bank account of our former Chairman of the Board of Directors
of the Company (“Board”), President, Chief Executive Officer and Director, Yin-Chieh Cheng, which was considered to be a personal
loan made by us to Yin-Chieh Cheng and may have violated Section 13(k) of the Exchange Act. The receivable was repaid to us in January
2020. Issuers that are found to have violated Section 13(k) of the Exchange Act may be subject to civil sanctions, including injunctive
remedies and monetary penalties, as well as criminal sanctions. The imposition of any of such sanctions on us could have a material adverse
effect on our business, financial position, results of operations or cash flows.
Future acquisitions may have an adverse effect
on our ability to manage our business.
Selective acquisitions currently form part of our
strategy to further expand our business. If we are presented with appropriate opportunities, we may acquire additional businesses, services
or products that are complementary to our core business. Future acquisitions and the subsequent integration of new companies into ours
would require significant attention from our management. Future acquisitions would also expose us to potential risks, including risks
associated with the assimilation of new operations, services and personnel, unforeseen or hidden liabilities, the diversion of resources
from our existing businesses and technologies, the inability to generate sufficient revenue to offset the costs and expenses of acquisitions
and potential loss of, or harm to, relationships with employees as a result of integration of new businesses. The diversion of our management’s
attention and any difficulties encountered in any integration process could have a material adverse effect on our ability to manage our
business.
The value of seafood which we sell (e.g., eel)
is subject to fluctuation which may result in volatility of our results of operations and the value of an investment in us.
Our business is partly dependent upon the sale of
eel which value is subject to fluctuation and which value greatly fluctuates. Our net sales and operating results vary significantly due
to the volatility of the value of eel and any other seafood that we sell which may result in the volatility of the market price of our
common stock.
We are highly susceptible to changes in market
demand for the types of seafood for which our recirculating aquaculture systems are used.
A significant portion of our revenues are derived
from constructing recirculating aquaculture systems for fish farming. We therefore are highly susceptible to changes in market demand
for the seafood for which our systems are used, which may be impacted by factors over which we have limited or no control. Factors that
could lead to a decline in market demand for seafood in general and specifically the type of fish farmed using our systems include economic
conditions and evolving consumer preferences. A substantial downturn in market demand for such seafood may have a material adverse effect
on our business and on our results of operations.
A portion of our revenues are derived from a
single product, eel and therefore we are highly susceptible to changes in market demand, which may be affected by factors over which we
have limited or no control.
Approximately 98% of our revenues are derived from
a single product, eel. We therefore are highly susceptible to changes in market demand, which may be impacted by factors over which we
have limited or no control. Factors that could lead to a decline in market demand for eel include economic conditions and evolving consumer
preferences. A substantial downturn in market demand for eel may have a material adverse effect on our business and on our results of
operations.
There are risks associated with outsourced production
that may result in a decrease in our profit.
The possibility of delivery delays, product defects
and other production-side risks stemming from outsourcers cannot be eliminated. In particular, inadequate production capacity among outsourced
manufacturers could result in us being unable to supply enough product amid periods of high product demand, the opportunity costs of which
could be substantial.
We have limited insurance coverage.
We do not have any business liability, disruption
or litigation insurance coverage for our operations in Taiwan. Any uninsured occurrence of loss or litigation or business disruption may
result in the incurrence of substantial costs and the diversion of resources, which could have an adverse effect on our operating results.
Competitors and potential competitors may develop
products and technologies that make ours obsolete or garner greater market share than ours.
Our ability to compete successfully will depend on
our ability to demonstrate that our products are superior to and/or less expensive than other products available in the market. Some of
our competitors have the benefit of marketing their products under brand names that have better market recognition than ours or have stronger
marketing and distribution channels than we do. Increased competition as to any of our products could result in price reduction, reduced
margins and loss of market share, which could negatively affect our profitability.
Certain of our competitors may benefit from government
support and other incentives that are not available to us. As a result, our competitors may be able to develop competing and/or superior
products and compete more aggressively and sustain that competition over a longer period of time than we can. As more companies develop
new intellectual property in our markets, a competitor could acquire patent or other rights that may limit our ability to successfully
market our product.
We may produce products of inferior quality
which would cause us to lose customers.
Although we make an effort to ensure the quality of
our RASs, they could from time to time contain defects, anomalies or malfunctions that are undetectable at the time of shipment, installation
and initial testing. These defects, anomalies or malfunctions could be discovered after our products are shipped to customers and installed
and tested at the site, resulting in the return or exchange of our products or discontinuation of the use of our products, which could
negatively impact our operating results.
If our technologies or products are stolen,
misappropriated, or reverse engineered, others could use the technologies to produce competing technologies or products.
Third parties, including our collaborators, contractors,
and others involved in our business often have access to our technologies. If our technologies or products were stolen, misappropriated,
or reverse engineered, they could be used by other parties that may be able to reproduce our technologies or products using our technologies
for their own commercial gain. If this were to occur, it would be difficult for us to challenge this type of use, especially since we
do not own any patents or other intellectual property rights with respect to our technologies and products.
We are subject to certain risks by virtue of
our international operations.
We mainly operate in Taiwan and plan to expand in
other international countries and in the United States. We expect to expand our operations significantly by accessing new markets abroad
and expanding our services offerings. Our ability to manage our business and conduct our operations in other international countries and
in the United States requires considerable management attention and resources and is subject to the particular challenges of supporting
a growing business in an environment of multiple languages, cultures, customs, legal systems, alternative dispute systems, regulatory
systems and commercial infrastructures. Furthermore, in most international markets, we would not be the first entrant, and our competitors
may be better positioned than we are to succeed. Expanding in other international countries and in the United States may subject us to
risks that we have either not faced before or increase our exposure to risks that we currently face, including risks associated with:
· 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.
We and/or its directors and officers may be subject
to a variety of civil or other legal proceedings, with or without merit. From time to time in the ordinary course of its business, we
may become involved in various legal proceedings, including commercial, employment and other litigation and claims, as well as governmental
and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources and
cause us to incur significant expenses. Furthermore, because litigation is inherently unpredictable, the results of any such actions may
have a material adverse effect on our business, operating results or financial condition.
Even if the claims are without merit, the costs associated
with defending these types of claims may be substantial, both in terms of time, money, and management distraction. The results of litigation
and claims to which we may be subject cannot be predicted with certainty. Even if these matters do not result in litigation or are resolved
in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them,
could harm our business, results or operations and reputation.
Third parties may assert that our employees
or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets.
We employ individuals who previously worked with other
companies, including our competitors or potential competitors. Although we try to ensure that our employees and consultants do not use
the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants
or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary
information, of a former employer or other third party. Litigation may be necessary to defend against these claims. If we fail in defending
any such claims or settling those claims, in addition to paying monetary damages or a settlement payment, we may lose valuable intellectual
property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs
and be a distraction to management and other employees.
We currently, and may in the future, have assets
held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation, the loss of
such assets would have a severe negative affect on our operations and liquidity.
We may maintain our cash assets at certain financial
institutions in the U.S. in amounts that may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit
of $250,000. In the event of a failure of any financial institutions where we maintain our deposits or other assets, we may incur a loss
to the extent such loss exceeds the FDIC insurance limitation, which could have a material adverse effect upon our liquidity, financial
condition and our results of operations.
Regulatory Risks
We must comply with the Foreign Corrupt Practices
Act while many of our competitors do not.
We are required to comply with the United States Foreign
Corrupt Practices Act, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the
purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions.
Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time to time in Taiwan. If our competitors engage
in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing
business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. Although
we inform our personnel that such practices are illegal, we cannot assure you that our employees or other agents will not engage in such
conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could
suffer severe penalties.
Future laws, regulations and standards relating
to corporate governance and public disclosure may create uncertainty for public companies, which may increase legal and financial compliance
costs and make some activities more time consuming.
Future laws, regulations and standards relating to
corporate governance and public disclosure are subject to varying interpretations, in many cases due to their lack of specificity, and,
as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could
result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance
practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased
general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance
activities. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing
bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be
harmed.
Being listed on a national exchange makes it more
expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially
higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our
Board.
Relations between the PRC and Taiwan could negatively
affect our business and financial status and therefore the market value of your investment.
Taiwan has a unique international political status.
The PRC does not recognize the sovereignty of Taiwan. Although significant economic and cultural relations have been established in recent
years between Taiwan and the PRC, relations have often been strained. The government of the PRC has threatened to use military force to
gain control over Taiwan in limited circumstances. Our principal executive offices are located in Taiwan and a substantial majority of
our net revenues are derived from our operations in Taiwan. Therefore, factors affecting military, political or economic conditions in
Taiwan could have a material adverse effect on our results of operations.
A significant disruption in the operations of
our suppliers in Taiwan, such as a trade war or political unrest, could materially adversely affect our business, financial condition
and results of operations.
Any disruption in the operations of our suppliers
in Taiwan or in their ability to meet our needs, whether as a result of a natural disaster or other causes, could impair our ability to
operate our business on a day-to-day basis. Furthermore, since many of these third parties are located outside the U.S., we are exposed
to the possibility of disruption and increased costs in the event of changes in the policies of the U.S. or foreign governments, political
unrest or unstable economic conditions in any of the countries where we conduct such activities. For example, a trade war could lead to
higher tariffs. Any of these matters could materially and adversely affect our development timelines, business and financial condition.
Our business, including our costs and supply
chain, is subject to risks associated with manufacturing.
In the event of a significant disruption in the supply
of the raw materials used in the manufacture of the components of the products we offer, the suppliers that we work with might not be
able to locate alternative suppliers of materials of comparable quality at an acceptable price. For example, natural disasters may increase
raw material costs and impact pricing with our suppliers, and cause shipping delays for the components of our products. Any delays, interruption,
damage to, or increased costs in the manufacture of the components of the products we offer could result in higher prices to acquire the
components of the products or non-delivery of the components of the products altogether, and could adversely affect our operating results.
If we remain identified as a Commission-Identified
Issuer for three consecutive years (or if the AHFCAA is enacted, two years), our securities will be delisted or prohibited from trading
on Nasdaq or any other national securities exchange or the over-the-counter trading market under the Holding Foreign Companies Accountable
Act. The delisting or the cessation of trading on Nasdaq or any other national securities exchange or the over-the-counter trading market
of our securities, or the threat of their being delisted or prohibited, may materially and adversely affect the value and/or liquidity
of your investment. Additionally, the inability of the PCAOB to conduct full inspections or investigations of our auditor deprives our
investors of the benefits of such inspections or investigations.
The Holding Foreign Companies Accountable Act was
enacted on December 18, 2020. The HFCAA states that if the SEC determines that an issuer has filed audit reports issued by a registered
public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years, the SEC shall prohibit the
securities of the issuer from being traded on a national securities exchange or in the over-the-counter trading market in the United States.
The Company’s auditor, the independent registered
public accounting firm that issues the audit report included elsewhere in this prospectus, as an auditor of companies that are traded
publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB
conducts regular inspections to assess its compliance with the applicable professional standards. Since our auditor is located in Hong
Kong, it is included on a list of audit firms the PCAOB determined it is unable to inspect or investigate completely because of a position
taken by one or more authorities in Hong Kong, and is therefore subject to the PCAOB’s determination and currently not inspected by the
PCAOB.
On March 24, 2021, the SEC adopted interim final rules
relating to the implementation of certain disclosure and documentation requirements of the HFCAA. We would be required to comply with
these rules if the SEC identifies it as having a “non-inspection” year under a process to be subsequently established by the
SEC. The SEC is assessing how to implement other requirements of the HFCAA, including the listing and trading prohibition requirements
described above.
In May 2021, the PCAOB issued a proposed rule 6100, Board
Determinations Under the Holding Foreign Companies Accountable Act, for public comment. The proposed rule is related to the PCAOB’s
responsibilities under the HFCAA, which would establish a framework for the PCAOB to use when determining whether the PCAOB is unable
to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken
by one or more authorities in that jurisdiction. The proposed rule was adopted by the PCAOB on September 22, 2021 and approved by
the SEC on November 5, 2021. On December 2, 2021, the SEC adopted final amendments implementing the disclosure and submission requirements
under the HFCAA, pursuant to which the SEC will identify a “Commission-Identified Issuer” if an issuer has filed an annual report
containing an audit report issued by a registered public accounting firm that the PCAOB has determined it is unable to inspect or investigate
completely because of a position taken by an authority in the foreign jurisdiction, and will then impose a trading prohibition on an issuer
after it is identified as and remains a Commission-Identified Issuer for three consecutive years. If we remain identified as a Commission-Identified
Issuer and have a “non-inspection” year, there is no assurance that we will be able to take remedial measures in a timely manner.
On December 16, 2021, the PCAOB issued a report on
its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland
China and Hong Kong, because of positions taken by PRC authorities in such jurisdictions.
On June 22, 2021, the U.S. Senate passed the Accelerating
Holding Foreign Companies Accountable Act, which, if passed by the U.S. House of Representatives and signed into law, would amend the
HFCAA and reduce the number of consecutive non-inspection years required for triggering the listing and trading prohibitions under
the HFCAA from three years to two years.
The SEC may propose additional rules or guidance that
could impact us if our auditor is not subject to PCAOB inspection. For example, on August 6, 2020, the President’s Working Group
on Financial Markets (the “PWG”), issued the Report on Protecting United States Investors from Significant Risks from Chinese
Companies to the then President of the United States. This report recommended that the SEC implement five recommendations to address companies
from jurisdictions that do not provide the PCAOB with sufficient access to fulfil its statutory mandate. Some of the concepts of these
recommendations were implemented with the enactment of the HFCAA. However, some of the recommendations were more stringent than the HFCAA.
For example, if a company was not subject to PCAOB inspection, the report recommended that the transition period before a company would
be delisted would end on January 1, 2022.
The SEC has announced that the SEC staff is preparing
a consolidated proposal for the rules regarding the implementation of the HFCAA and to address the recommendations in the PWG report.
It is unclear when the SEC will complete its rulemaking and when such rules will become effective and what, if any, of the PWG recommendations
will be adopted. The SEC has also announced amendments to various annual report forms to accommodate the certification and disclosure
requirements of the HFCAA. There could be additional regulatory or legislative requirements or guidance that could impact us if our auditor
is not subject to PCAOB inspection. The implications of this possible regulation or guidance in addition to the requirements of the HFCAA
are uncertain, and such uncertainty could cause the market price of our securities to be materially and adversely affected.
Since the PCAOB is unable to conduct inspections or
full investigations of our auditor, in May 2022, we were added to the SEC’s conclusive lists of issuers identified under the HFCAA, or
a Commission-Identified Issuer. We will be delisted and our securities will be prohibited from being traded on The Nasdaq Stock Market
LLC (“Nasdaq”) or any other national securities exchange or the over-the-counter trading market if we remain identified as a
Commission-Identified Issuer for three consecutive years (or two if the AHFCAA is enacted). Such a delisting would substantially impair
your ability to sell or purchase our securities when you wish to do so, and the risk and uncertainty associated with a potential delisting
could have a negative impact on the price of our securities. Also, such a delisting could significantly affect our ability to raise capital
on acceptable terms, or at all, which would have a material adverse effect on our business, financial condition and prospects.
Inspections of other audit firms that the PCAOB has
conducted outside the PRC have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed
as part of the inspection process to improve future audit quality. If the PCAOB were unable to conduct inspections or full investigations
of our auditor, we and our investors would be deprived of the benefits of such PCAOB inspections. In addition, the inability of the PCAOB
to conduct inspections or full investigations of auditors would make it more difficult to evaluate the effectiveness of our independent
registered public accounting firm’s audit procedures or quality control procedures as compared to auditors that are subject to the PCAOB
inspections, which could cause investors and potential investors to lose confidence in the audit procedures and reported financial information
and the quality of our financial statements.
Our contractual arrangements may not be as effective
in providing operational control as direct ownership and our VIE shareholders may fail to perform their obligations under our contractual
arrangements.
Since the laws of Taiwan limit foreign equity ownership
in certain businesses in Taiwan, we operate such business in Taiwan through our VIE (variable interest entity), Meixin Institutional Food
Development Co., Ltd., a Taiwan corporation (“Meixin”), in which we have no ownership interest and rely on a series of contractual
arrangements with Meixin and its respective equity holders to control and operate the VIE. Our revenue and cash flows from such business
are attributed to our VIE. The contractual arrangements may not be as effective as direct ownership in providing us with control over
our VIE. Direct ownership would allow us, for example, to directly or indirectly exercise our rights as a shareholder to effect changes
in the board of directors of our VIE, which, in turn, could effect changes, subject to any applicable fiduciary obligations at the management
level. However, under the contractual arrangements, as a legal matter, if our VIE or its equity holders fail to perform their respective
obligations under the contractual arrangements, we may have to incur substantial costs and expend significant resources to enforce those
arrangements and resort to litigation or arbitration and rely on legal remedies under the laws of Taiwan. These remedies may include seeking
specific performance or injunctive relief and claiming damages, any of which may not be effective. In the event we are unable to enforce
these contractual arrangements or we experience significant delays or other obstacles in the process of enforcing these contractual arrangements,
we may not be able to exert effective control over our VIE and may lose control over the assets owned by our VIE. As a result, we may
be unable to consolidate our VIE in our consolidated financial statements, which could materially and adversely affect our financial condition
and results of operations.
We may lose the ability to use, or otherwise
benefit from licenses and assets held by one of our VIEs, which could render us unable to conduct some or all of our business operations
and constrain our growth.
One of our VIEs, Meixin, holds assets, approvals and
licenses that are necessary for the operation of a certain portion of our business to which foreign investments are typically restricted
or prohibited under the laws of Taiwan. Without our applicable VIE, and if we are unable to maintain the license that is necessary for
us to conduct our operations in Taiwan or fail to obtain any other required licenses, we will be unable to operate in Taiwan. The contractual
arrangements contain terms that specifically obligate the equity holders of our applicable 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 applicable
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 applicable 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.
In February 2022, 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 and geopolitical shifts and could materially adversely affect global trade, currency exchange rates, regional
economies and the global economy. In addition, the ongoing conflicts in the Middle East may further impact global economic conditions
and market sentiments. This, in turn, could adversely affect the trading price of our shares of common stock and investor interest in
us.
The Russia-Ukraine war and conflicts in the Middle
East remain uncertain, and while it is difficult to predict the impact of any of the foregoing, the conflict and actions taken in response
to the conflict could increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional
capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition and results of operations.
We continue to expand
our international footprint and operations, and we may expand further in the future, which subjects us to a variety of risks and complexities
which, if not effectively managed, could negatively affect our business.
We currently maintain operations
in Taiwan, and may in the future expand, or seek to expand, our operations to additional foreign jurisdictions.
For example, operating in
Europe exposes us to political, legal and economic risks. In addition, a significant percentage of the production, downstream processing
and sales of our products occurs outside the United States or with vendors, suppliers or customers located outside the United States.
If tariffs or other restrictions are placed by the United States on foreign imports from Taiwan or other countries where we operate or
seek to operate, or any related countermeasures are taken, our business, financial condition, results of operations and growth prospects
may be harmed. Tariffs may increase our cost of goods, which could result in lower gross margins on certain of our products. If we raise
prices to account for any such increase in costs of goods, the competitiveness of the affected products could potentially be reduced.
In either case, increased tariffs on imports from Taiwan or other countries where we operate or seek to operate could materially and adversely
affect our business, financial condition and results of operations. Trade restrictions and sanctions implemented by the United States
or other countries, including sanctions imposed on Russia by the United States and other countries due to Russia’s recent invasion of
Ukraine, could materially and adversely affect our business, financial condition and results of operations.
We are
increasingly dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity and data
leakage risks.
Significant disruptions to our information technology
systems or breaches of information security could adversely affect our business. In the ordinary course of business, we collect, store
and transmit large amounts of confidential information, and it is critical that we do so in a secure manner to maintain the confidentiality
and integrity of such information. We have also outsourced significant elements of our information technology infrastructure; as a result,
we manage independent vendor relationships with third parties who are responsible for maintaining significant elements of our information
technology systems and infrastructure and who may or could have access to our confidential information. The size and complexity of our
information technology systems, and those of our third-party vendors, make such systems potentially vulnerable to service interruptions
and security breaches from inadvertent or intentional actions by our employees, partners or vendors. These systems are also vulnerable
to attacks by malicious third parties and may be susceptible to intentional or accidental physical damage to the infrastructure maintained
by us or by third parties. Maintaining the secrecy of confidential, proprietary and/or trade secret information is important to our competitive
business position. While we have taken steps to protect such information and have invested in systems and infrastructures to do so, there
can be no guarantee that our efforts will prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent
wrongful use or disclosure of confidential information that could adversely affect our business operations or result in the loss, dissemination
or misuse of critical or sensitive information. A breach our security measures or the accidental loss, inadvertent disclosure, unapproved
dissemination, misappropriation or misuse of trade secrets, proprietary information or other confidential information, whether as a result
of theft, hacking, fraud, trickery or other forms of deception, or for any other cause, could enable others to produce competing products,
use our proprietary technology or information and/or adversely affect our business position. Further, any such interruption, security
breach, loss or disclosure of confidential information could result in financial, legal, business and reputational harm to us and could
have a material adverse effect on our business, financial position, results of operations and/or cash flow.
Evolving U.S. trade regulations and policies
with China may in the future have a material and adverse effect on our business, financial condition and results of operations.
The U.S. government has recently imposed multiple
rounds of tariffs on imports from China, among others, and there is an increasing risk of further tariff increases. Any restrictions or
tariffs imposed on products that we or our suppliers import for sale or production in the United States would adversely and directly impact
our cost of goods sold and could force us to seek alternative suppliers, which may not be as cost effective or readily available. In addition,
changes in U.S. trade regulations and policies could have an adverse impact on trade relations between the United States and certain foreign
countries, which could materially and adversely affect our relationships with our international suppliers and reduce the supply of goods
available to us. Further, we cannot predict the extent to which the United States will adopt changes to existing trade regulations and
policies, which creates uncertainties in planning our sourcing strategies and forecasting our margins. If additional tariffs are imposed
on our products, or other retaliatory trade measures are taken, our costs could increase, and we may be required to raise our prices,
which could materially and adversely affect our results. In addition, extended trade tensions and regulatory uncertainties may disrupt
our supply chain, delay production or negatively impact our ability to compete in the market.
Risks Related to our Securities
Our common stock has been listed on Nasdaq under
the alternative initial listing standard which could suppress the trading price of our securities and the liquidity of your investment.
Since the price per unit in the Public Offering was
$3.50, our common stock is listed on The Nasdaq Capital Market under the alternative initial listing standard pursuant to Nasdaq Rule
5550(a)(1)(B). A company that qualifies only for initial listing under Nasdaq’s alternative listing standard could become a “penny
stock” if it later fails the net tangible assets and revenue tests after listing and does not satisfy any of the other exclusions
from being a penny stock contained in Rule 3a51-1 under the Exchange Act. In order to assist brokers’ and dealers’ compliance with the
requirements of the penny stock rules, Nasdaq monitors companies listed under the alternative requirement and publishes on its website
on a daily basis a list of any company that was initially listed under the alternative initial listing standard, which no longer satisfies
the net tangible assets or revenue test contained in Nasdaq Rule 5505(a)(1)(B), and which does not satisfy any of the other exclusions
from being a penny stock contained in Rule 3a51-1 under the Exchange Act. If a company initially lists with a bid price below $4.00 under
the alternative initial listing standard contained in Nasdaq Rule 5505(a)(1)(B), but subsequently achieves a $4.00 closing price for at
least five consecutive business days and, at the same time, satisfies all other initial listing criteria, it will no longer be considered
as having listed under the alternative requirement, and Nasdaq will notify the company that it has qualified for listing under the price
requirement contained in Rule 5505(a)(1)(A). Although we satisfy the other listing requirements of The Nasdaq Capital Market, there is
no guarantee that our common stock will achieve a $4.00 closing price for at least five consecutive trading days and that will be deemed
to not have been listed under the Nasdaq alternative listing standard. Until we are no longer considered to have been listed under Nasdaq’s
alternative initial listing standard, the trading prices and liquidity of your securities might be adversely affected.
We have identified material weaknesses in our
internal control over financial reporting. Failure to maintain effective internal controls could cause our investors to lose confidence
in us and adversely affect the market price of our common stock. If our internal controls are not effective, we may not be able to accurately
report our financial results or prevent fraud.
Section 404 of the Sarbanes-Oxley Act of 2002 (“Section
404”) requires that we maintain internal control over financial reporting that meets applicable standards. We may err in the design
or operation of our controls, and all internal control systems, no matter how well designed and operated, can provide only reasonable
assurance that the objectives of the control system are met. Because there are inherent limitations in all control systems, there can
be no assurance that all control issues have been or will be detected.
As of December
31, 2024, we did not maintain effective controls over the control environment. Our weaknesses related to a lack of a sufficient
number of personnel with appropriate training and experience in U.S. general acceptable accounting principles (GAAP) and SEC rules and
regulations with respect to financial reporting functions. Furthermore, we lack robust accounting systems as well as sufficient resources
to hire such staff and implement these accounting systems.
If we are unable, or are perceived as unable, to produce
reliable financial reports due to internal control deficiencies, investors could lose confidence in our reported financial information
and operating results, which could result in a negative market reaction and a decrease in our stock price.
We have a large number of authorized but unissued
shares of our common stock which will dilute your ownership position when issued.
Our authorized capital stock consists of 200,000,000
shares of common stock, of which approximately 178,232,053 shares are available for issuance. Our management will continue to have broad discretion
to issue shares of our common stock in a range of transactions, including capital-raising transactions, mergers, acquisitions and other
transactions, without obtaining stockholder approval, unless stockholder approval is required under law or under Nasdaq Rule 5635(b) which
requires stockholder approval for change of control transactions where a stockholder acquires 20% of a Nasdaq-listed company’s common
stock or securities convertible into common stock, calculated on a post-transaction basis. If our management determines to issue shares
of our common stock from the large pool of authorized but unissued shares for any purpose in the future and is not required to obtain
stockholder approval, your ownership position would be diluted without your further ability to vote on that transaction.
Sales of our currently issued and outstanding
shares of common stock and shares of common stock underlying warrants may become freely tradable pursuant to Rule 144 and may dilute the
market for your shares and have a depressive effect on the price of the shares of our common stock.
Approximately 7,520,408 of the shares of common stock are
“restricted securities” within the meaning of Rule 144 under the Securities Act (“Rule 144”). As restricted securities,
these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable
exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides in essence
that a non-affiliate who has held restricted securities for a period of at least six months may sell their shares of common stock.
Under Rule 144, affiliates who have held restricted
securities for a period of at least six months may, under certain conditions, sell every three months, in brokerage transactions, a number
of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volume
during the four calendar weeks prior to the sale. A sale under Rule 144 or under any other exemption from the Securities Act, if available,
or pursuant to subsequent registrations of our shares of common stock, may have a depressive effect upon the price of our shares of common
stock in any active market that may develop.
An active, liquid, and orderly market for our
common stock may not develop.
Our common stock is listed on Nasdaq. An active trading
market for our common stock may never develop or be sustained. If an active market for our common stock does not continue to develop or
is not sustained, it may be difficult for investors to sell their shares of common stock without depressing the market price and investors
may not be able to sell their securities at all. An inactive market may also impair our ability to raise capital by selling our securities
and may impair our ability to acquire other businesses, applications, or technologies using our securities as consideration, which, in
turn, could materially adversely affect our business and the market prices of your shares of common stock.
Shares of our common stock may continue to be
subject to illiquidity because our shares may continue to be thinly traded and may never become eligible for trading on a national securities
exchange.
While our common stock is listed on The Nasdaq Capital
Market, we cannot assure you that we will be able to maintain listing on Nasdaq. There are continuing eligibility requirements for Nasdaq-listed
companies. If we are unable to satisfy the continuing eligibility requirements of Nasdaq, our common stock could be delisted. This could
result in a lower trading price for our common stock and may limit your ability to sell your shares, any of which could result in you
losing some or all of your investments.
We may issue preferred stock in different series
with terms that could dilute the voting power or reduce the value of our common stock.
While we have no specific plan to issue preferred
stock in different series, our amended and restated articles of incorporation, as amended (“Articles of Incorporation”) authorizes
us to issue, without the approval of our stockholders, one or more series of preferred stock having such designation, relative powers,
preferences (including preferences over our common stock respecting dividends and distributions), voting rights, terms of conversion or
redemption, and other relative, participating, optional, or other special rights, if any, of the shares of each such series of preferred
stock and any qualifications, limitations, or restrictions thereof, as our Board may determine. The terms of one or more classes or series
of preferred stock could dilute the voting power or reduce the value of our common stock. For example, the repurchase or redemption rights
or liquidation preferences we could assign to holders of a specific preferred stock class could affect the residual value of the common
stock.
The market valuation of our business may fluctuate