Item 1A. Risk Factors
Item
1A. Risk Factors.
An
investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other
information in this Report before making a decision to invest in our common stock. If any of the following risks and uncertainties develop
into actual events, our business, results of operations and financial condition could be adversely affected. In those cases, the trading
price of our common stock could decline and you may lose all or part of your investment. As a “smaller
reporting company”, the Company is not required to provide the information required by this item, but below are the risk factors
the Company believes investors should consider before purchasing any of the Company’s securities.
Risks
Related to Our Company
Management
has identified a material weakness in the design and effectiveness of our internal controls, which, if not remediated, could affect the
accuracy and timeliness of our financial reporting and result in misstatements in our financial statements.
In
connection with the preparation of our Report on Form 10-K, an evaluation was carried out by management, with the participation of our
Co-Chief Executive Officers and Co-Chief Financial Officers, of the effectiveness of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of December 31, 2023.
Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under
the Exchange Act is recorded, processed, summarized and reported within the time periods specified, and that such information is accumulated
and communicated to management, including the Co-Chief Executive Officers and Co-Chief Financial Officers, to allow timely decisions
regarding required disclosure.
During
evaluation of our disclosure controls and procedures as of December 31, 2023, conducted as part of our annual audit and preparation of
our annual financial statements, management conducted an evaluation of the effectiveness of the design and operations of our disclosure
controls and procedures and concluded that our disclosure controls and procedures were not effective. Management determined that at December
31, 2023, we had a material weakness that relates to the relatively small number of staff. This limited number of staff prevents us from
segregating duties within our internal control system and restricts our ability to timely evaluate the accuracy and completeness of our
financial statement disclosures.
This
material weakness, which remained unremedied by the Company as of December 31, 2023, could result in a misstatement to the accounts and
disclosures that would result in a material misstatement to our annual or interim consolidated financial statements that would not be
prevented or detected. If we do not remediate the material weakness or if other material weaknesses are identified in the future, we
may be unable to report our financial results accurately or to report them on a timely basis, which could result in the loss of investor
confidence and have a material adverse effect on our stock price as well as our ability to access capital and lending markets. We are
presently taking efforts to remediate this weakness.
Risks
Relating to Our Business
We
have a history of annual net losses which may continue and which may negatively impact our ability to achieve our business objectives.
For
the years ended December 31, 2023 and 2022, we had revenue of $22,088,507 and $4,480,442, respectively, and net losses of $61,278,733
and $46,212,505 in the years ended December 31, 2023 and 2022, respectively. Our failure to increase our revenues or improve our gross
margins will harm our business. We may not be able to achieve, sustain or increase profitability on a quarterly or annual basis in the
future. If our revenue grows more slowly than we anticipate, our gross margins fail to improve or our operating expenses exceed our expectations,
our operating results will suffer. The prices we charge for our properties, products and services may decrease, which would reduce our
revenues and harm our business. If we are unable to sell our properties, products and services at acceptable prices relative to our costs,
or if we fail to develop and introduce on a timely basis new products or services from which we can derive additional revenues, our financial
results will suffer.
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We
cannot ensure the long-term successful operation of our business or the execution of our growth strategy.
Our
prospects must be considered in light of the risks, expenses and difficulties frequently encountered by growing companies in new and
rapidly evolving markets. We may meet many challenges including:
●
establishing
and maintaining broad market acceptance of our products and services and converting that acceptance into direct and indirect sources
of revenue;
●
establishing
and maintaining adoption of our technology on a wide variety of platforms and devices;
●
timely
and successfully developing new products and services and increasing the features of existing products and services;
●
developing
products and services that result in high degrees of customer satisfaction and high levels of customer usage;
●
successfully
responding to competition, including competition from emerging technologies and solutions;
●
developing
and maintaining strategic relationships to enhance the distribution, features, content and utility of our products and services;
and
●
identifying,
attracting and retaining talented technical and sales services staff at reasonable market compensation rates in the markets in which
we operate.
Our
growth strategy may be unsuccessful and we may be unable to address the risks we face in a cost-effective manner, if at all. If we are
unable to successfully address these risks our business will be harmed.
We
have a holding company ownership structure and will depend on distributions from our majority-owned and/or controlled operating subsidiaries
to meet our obligations. Contractual or legal restrictions applicable to our subsidiaries could limit payments or distributions from
them.
We
are a holding company and derive all of our operating income from, and hold substantially all of our assets through, our U.S. and foreign
subsidiaries, some of which are publicly held and traded. The effect of this structure is that we will depend on the earnings of our
subsidiaries, and the payment or other distributions to us of these earnings, to meet our obligations and make capital expenditures.
Provisions of U.S. and foreign corporate and tax law, like those requiring that dividends are paid only out of surplus, and provisions
of any future indebtedness, may limit the ability of our subsidiaries to make payments or other distributions to us. Certain of our subsidiaries
are minority owned and the assets of these companies are not included in our consolidated balance sheets. Additionally, in the event
of the liquidation, dissolution or winding up of any of our subsidiaries, creditors of that subsidiary (including trade creditors) will
generally be entitled to payment from the assets of that subsidiary before those assets can be distributed to us.
16
Our
significant ownership interests in public companies listed on limited public trading markets subjects us to risks relating to the sale
of their shares and the fluctuations in their stock prices.
We
own indirect interests in several publicly traded companies – most significantly, Alset International Limited, whose shares are
listed on the Singapore Stock Exchange, DSS, Inc., whose shares are listed on the NYSE American LLC Exchange, Holista CollTech Limited,
whose shares are listed on the Australian Stock Exchange, Sharing Services, whose shares are listed on OTCQB Venture Market of the OTC
Markets Group, Inc., Value Exchange International Inc., whose shares are listed on OTCQB Venture Market of the OTC Markets Group, Inc.
and HWH International Inc., whose shares are trading on the Nasdaq Global Markets; (LiquidValue Development Inc. and Hapi Metaverse Inc.
are not currently traded on any exchange). The average trading volume of the public shares is limited for some of these companies. In
view of the limited public trading markets for some of these shares, there can be no assurance that we would succeed in obtaining a price
for these shares equal to the price quoted for such shares in their respective trading markets at the time of sale or that we would not
incur a loss on our shares should we determine to dispose our shareholding in any of these companies in the future. Additionally, on
an ongoing basis, fluctuations in the stock prices of these companies are likely to be reflected in the market price of our common stock.
Given the limited public trading markets in some of these public companies, stock price fluctuations in our price may be significant.
General
political, social and economic conditions can adversely affect our business.
Demand
for our products and services depends, to a significant degree, on general political, social and economic conditions in our markets.
Worsening economic and market conditions, downside shocks, or a return to recessionary economic conditions could serve to reduce demand
for our products and services and adversely affect our operating results. In addition, an economic downturn could impact the valuation
and collectability of certain long-term receivables held by us. We could also be adversely affected by such factors as changes in foreign
currency rates and weak economic and political conditions in each of the countries in which we operate.
Disruptions
in the financial markets and uncertain economic conditions could adversely affect the value of our real estate investments.
Disruptions
in the financial markets could adversely affect the value of our real estate investments. Concerns over economic recession interest rate
increases, policy priorities of the U.S. presidential administration, trade wars, labor shortages, or inflation may contribute to increased
volatility and diminished expectations for the economy and markets. Additionally, concern over geopolitical issues may also contribute
to prolonged market volatility and instability. For example, the conflict between Russia and Ukraine has led to disruption, instability
and volatility in global markets and industries. The U.S. government and other governments in jurisdictions have imposed severe economic
sanctions and export controls against Russia and Russian interests, have removed Russia from the SWIFT system, and have threatened additional
sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, is unknown. Such conditions could
impact real estate fundamentals and result in lower occupancy, lower rental rates, and declining values in our real estate portfolio
and in the collateral securing our loan investments. As a result, the value of our property investments could decrease below the amounts
paid for such investments, the value of collateral securing our loans could decrease below the outstanding principal amounts of such
loans, and revenues from our properties could decrease due to fewer and/or delinquent tenants or lower rental rates. These factors would
significantly harm our revenues, results of operations, financial condition, business prospects and our ability to make distributions
to our stockholders.
We
have made and expect to continue to make acquisitions as a primary component of our growth strategy. We may not be able to identify suitable
acquisition candidates or consummate acquisitions on acceptable terms, which could disrupt our operations and adversely impact our business
and operating results.
A
primary component of our growth strategy has been to acquire complementary businesses to grow our company. We intend to continue to pursue
acquisitions of complementary technologies, products and businesses as a primary component of our growth strategy to expand our operations
and customer base and provide access to new markets and increase benefits of scale. Acquisitions involve certain known and unknown risks
that could cause our actual growth or operating results to differ from our expectations. For example:
●
we
may not be able to identify suitable acquisition candidates or to consummate acquisitions on acceptable terms;
●
we
may pursue international acquisitions, which inherently pose more risks than domestic acquisitions;
●
we
compete with others to acquire complementary products, technologies and businesses, which may result in decreased availability of,
or increased price for, suitable acquisition candidates;
●
we
may not be able to obtain the necessary financing, on favorable terms or at all, to finance any or all of our potential acquisitions;
and
●
we
may ultimately fail to consummate an acquisition even if we announce that we plan to acquire a technology, product or business.
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We
may be unable to successfully integrate acquisitions, which may adversely impact our operations.
Acquired
technologies, products or businesses may not perform as we expect and we may fail to realize anticipated revenue and profits. In addition,
our acquisition strategy may divert management’s attention away from our existing business, resulting in the loss of key customers
or employees, and expose us to unanticipated problems or legal liabilities, including responsibility as a successor for undisclosed or
contingent liabilities of acquired businesses or assets.
If
we fail to conduct due diligence on our potential targets effectively, we may, for example, not identify problems at target companies
or fail to recognize incompatibilities or other obstacles to successful integration. Our inability to successfully integrate future acquisitions
could impede us from realizing all of the benefits of those acquisitions and could severely weaken our business operations. The integration
process may disrupt our business and, if new technologies, products or businesses are not implemented effectively, may preclude the realization
of the full benefits expected by us and could harm our results of operations. In addition, the overall integration of new technologies,
products or businesses may result in unanticipated problems, expenses, liabilities and competitive responses. The difficulties integrating
an acquisition include, among other things:
●
issues
in integrating the target company’s technologies, products or businesses with ours;
●
incompatibility
of marketing and administration methods;
●
maintaining
employee morale and retaining key employees;
●
integrating
the cultures of our companies;
●
preserving
important strategic customer relationships;
●
consolidating
corporate and administrative infrastructures and eliminating duplicative operations; and
●
coordinating
and integrating geographically separate organizations.
In
addition, even if the operations of an acquisition are integrated successfully, we may not realize the full benefits of the acquisition,
including the synergies, cost savings or growth opportunities that we expect. These benefits may not be achieved within the anticipated
time frame, or at all.
Acquisitions
which we complete may have an adverse impact on our results of operations.
Acquisitions
may cause us to:
●
issue
common stock that would dilute our current stockholders’ ownership percentage;
●
use
a substantial portion of our cash resources;
●
increase
our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition;
18
●
assume
liabilities for which we do not have indemnification from the former owners; further, indemnification obligations may be subject
to dispute or concerns regarding the creditworthiness of the former owners;
●
record
goodwill and non-amortizable intangible assets that are subject to impairment testing and potential impairment charges;
●
experience
volatility in earnings due to changes in contingent consideration related to acquisition earn-out liability estimates;
●
incur
amortization expenses related to certain intangible assets;
●
lose
existing or potential contracts as a result of conflict-of-interest issues;
●
become
subject to adverse tax consequences or deferred compensation charges;
●
incur
large and immediate write-offs; or
●
become
subject to litigation.
Our
resources may not be sufficient to manage our expected growth; failure to properly manage our potential growth would be detrimental to
our business.
We
may fail to adequately manage our anticipated future growth. Any growth in our operations will place a significant strain on our administrative,
financial and operational resources and increase demands on our management and on our operational and administrative systems, controls
and other resources. We cannot assure you that our existing personnel, systems, procedures or controls will be adequate to support our
operations in the future or that we will be able to successfully implement appropriate measures consistent with our growth strategy.
As part of this growth, we may have to implement new operational and financial systems, procedures and controls to expand, train and
manage our employee base, and maintain close coordination among our technical, accounting, finance, marketing and sales. We cannot guarantee
that we will be able to do so, or that if we are able to do so, we will be able to effectively integrate them into our existing staff
and systems. There may be greater strain on our systems as we acquire new businesses, requiring us to devote significant management time
and expense to the ongoing integration and alignment of management, systems, controls and marketing. If we are unable to manage growth
effectively, such as if our sales and marketing efforts exceed our capacity to design and produce our products and services or if new
employees are unable to achieve performance levels, our business, operating results and financial condition could be materially and adversely
affected.
Our officers will allocate some of their
time to other business ventures including but not limited to subsidiaries of our Company, thereby limiting the amount of time they are
able to devote to our affairs. This potential time management conflict could have a negative impact on our operations.
Several of our officers and directors also serve as officers and directors of entities where we are the direct
or indirect majority stockholder, including but not limited to Alset International Limited, HWH International Inc., Liquidvalue Development
Inc. and Hapi Metaverse Inc. In addition, some of our officers and directors also serve as officers and directors of other businesses,
including business that we hold a non-majority position in. These officers may not commit their full time to our affairs, which may result
in a conflict of interest in allocating their time between our operations and the operations of our subsidiaries or other business ventures.
These officers are not obligated to contribute any specific number of hours per week to our affairs. While we do not believe that the
time devoted to other affairs will undermine their ability to fulfill their duties with respect to our Company, if the business affairs
of our subsidiaries or other ventures require them to devote substantial amounts of time to such affairs, it could limit their ability
to devote time to our affairs which may have a negative impact on our operations.
Our
officers, including our Chairman, Chief Executive Officer Chan Heng Fai, will allocate some of their time to HWH International Inc.,
thereby causing potential conflicts of interest in their determination as to how much time to devote to our affairs. This potential conflict
of interest could have a negative impact on our operations.
Mr.
Wei, our Chief Financial Officer, also serves in this position for HWH International Inc., and Mr. Chan, our Chairman, serves as a director
of HWH International. These officers may not commit their full time to our affairs, which may result in a conflict of interest in allocating
their time between our operations and HWH International’s operations. These officers are engaged in HWH International and are not
obligated to contribute any specific number of hours per week to our affairs. While we do not believe that the time devoted to HWH International
will undermine their ability to fulfill their duties with respect to our Company, if the business affairs of HWH International require
them to devote substantial amounts of time to such affairs, it could limit their ability to devote time to our affairs which may have
a negative impact on our operations.
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Our
international operations are subject to increased risks which could harm our business, operating results and financial condition.
In
addition to uncertainty about our ability to expand our international market position, there are risks inherent in doing business internationally,
including:
●
trade
barriers, tariffs and changes in trade regulations;
●
difficulties
in developing, staffing and simultaneously managing a large number of varying foreign operations as a result of distance, language
and cultural differences;
●
the
need to comply with varied local laws and regulations;
●
longer
payment cycles;
●
possible
credit risk and higher levels of payment fraud;
●
profit
repatriation restrictions and foreign currency exchange restrictions;
●
political
or social unrest, economic instability or human rights issues;
●
geopolitical
events, including acts of war and terrorism;
●
import
or export regulations;
●
compliance
with U.S. laws (such as the Foreign Corrupt Practices Act), and local laws prohibiting corrupt payments to government officials;
●
laws
and business practices that favor local competitors or prohibit foreign ownership of certain businesses; and
●
different
and more stringent data protection, privacy and other laws.
Our
failure to manage any of these risks successfully could harm our international operations and our overall business, and results of our
operations.
If
we are unable to retain the services of Chan Heng Fai or if we are unable to successfully recruit qualified personnel, we may not be
able to continue operations.
Our
success depends to a significant extent upon the continued service of Chan Heng Fai, our founder, Chairman and Chief Executive Officer.
The loss of the services of Chan Heng Fai could have a material adverse effect on our growth, revenues and prospective business. If Chan
Heng Fai was to resign or we are unable to retain his services, the loss could result in loss of sales, delays in new product development
and diversion of management resources. We could face high costs and substantial difficulty in hiring a qualified successor and could
experience a loss in productivity while any such successor obtains the necessary training and experience. Chan Heng Fai has committed
that the majority of his time will be devoted to managing the affairs of our company; however, Chan Heng Fai may engage in other business
ventures, including other technology-related businesses.
In
order to successfully implement and manage our businesses, we are also dependent upon successfully recruiting qualified personnel. In
particular, we must hire and retain experienced management personnel to help us continue to grow and manage each business, and skilled
engineering, product development, marketing and sales personnel to further our research and product development efforts. Competition
for qualified personnel is intense. If we do not succeed in attracting new personnel or in retaining and motivating our current personnel,
our business could be harmed.
20
If
we do not successfully develop new products and services, our business may be harmed.
Our
business and operating results may be harmed if we fail to expand our various product and service offerings (either through internal
product or capability development initiatives or through partnerships and acquisitions) in such a way that achieves widespread market
acceptance or that generates significant revenue and gross profits to offset our operating and other costs. We may not successfully identify,
develop and market new product and service offerings in a timely manner. If we introduce new products and services, they may not attain
broad market acceptance or contribute meaningfully to our revenue or profitability. Competitive or technological developments may require
us to make substantial, unanticipated capital expenditures in new products and technologies or in new strategic partnerships, and we
may not have sufficient resources to make these expenditures. Because the markets for many of our products and services are subject to
rapid change, we may need to expand and/or evolve our product and service offerings quickly. Delays and cost overruns could affect our
ability to respond to technological changes, evolving industry standards, competitive developments or customer requirements and harm
our business and operating results.
Your
investment return may be reduced if we are required to register as an investment company under the Investment Company Act; if we or our
majority-owned and/or controlled operating subsidiaries become an unregistered investment company, then we would need to modify our business
philosophy and/or make other changes to our asset composition.
Neither
we nor any of our majority-owned and/or controlled subsidiaries intends to register as an investment company under the Investment Company
Act of 1940. If we or our subsidiaries were obligated to register as investment companies, then we would have to comply with a variety
of regulatory requirements under the Investment Company Act that impose, among other things:
●
limitations
on capital structure;
●
restrictions
on specified investments;
●
prohibitions
on transactions with affiliates; and
●
compliance
with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating
expenses.
Under
the relevant provisions of Section 3(a)(1) of the Investment Company Act, an investment company is any issuer that:
●
pursuant
to Section 3(a)(1)(A), is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing,
reinvesting or trading in securities (the “primarily engaged test”); or
●
pursuant
to Section 3(a)(1)(C), is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in
securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of such
issuer’s total assets (exclusive of United States government securities and cash items) on an unconsolidated basis (the “40%
asset test”). “Investment securities” exclude United States government securities and securities of majority-owned
subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment
company under Section 3(c)(1) or Section 3(c)(7) (relating to private investment companies).
Neither
we nor any of our majority-owned and/or controlled subsidiaries should be required to register as an investment company under either
of the tests above. With respect to the 40% asset test, most of the entities through which we and our majority-owned and/or controlled
subsidiaries will own assets will in turn be majority-owned and/or controlled subsidiaries that will not themselves be investment companies
and will not be relying on the exceptions from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) (relating
to private investment companies).
21
With
respect to the primarily engaged test, we, together with our majority-owned and/or controlled subsidiaries, are a holding company and
do not intend to invest or trade in securities. Rather, through our majority-owned and/or controlled subsidiaries, we will be primarily
engaged in the non-investment company businesses of these subsidiaries, namely, real estate, digital transformation technology and biohealth.
To
maintain compliance with the Investment Company Act, our majority-owned and/or controlled operating subsidiaries may be unable to sell
assets we would otherwise want them to sell and may need to sell assets we would otherwise wish them to retain. In addition, our subsidiaries
may have to acquire additional assets that they might not otherwise have acquired or may have to forego opportunities to buy minority
equity interests that we would otherwise want them to make and would be important to our business philosophy. Moreover, the SEC or its
staff may issue interpretations with respect to various types of assets that are contrary to our views and current SEC staff interpretations
are subject to change, which increases the risk of non-compliance and the risk that we may be forced to make adverse changes to our asset
composition. If we were required to register as an investment company but failed to do so, we would be prohibited from engaging in our
current business and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless
a court required enforcement and a court could appoint a receiver to take control of our company and liquidate our business.
If
we do not adequately protect our intellectual property rights, we may experience a loss of revenue and our operations may be materially
harmed.
We
rely on and expect to continue to rely on a combination of confidentiality and license agreements with our employees, consultants and
third parties with whom we have relationships, as well as patent, trademark, copyright and trade secret protection laws, to protect our
intellectual property and proprietary rights. We cannot assure you that we can adequately protect our intellectual property or successfully
prosecute potential infringement of our intellectual property rights. Also, we cannot assure you that others will not assert rights in,
or ownership of, trademarks and other proprietary rights of ours or that we will be able to successfully resolve these types of conflicts
to our satisfaction. Our failure to protect our intellectual property rights may result in a loss of revenue and could materially harm
our operations and financial condition.
New
legislation, regulations or rules related to obtaining patents or enforcing patents could significantly increase our operating costs
and decrease our revenue.
We
spend a significant number of resources to enforce our patent assets. If new legislation, regulations or rules are implemented either
by Congress, the U.S. Patent and Trademark Office (the “USPTO”), any state or the courts that impact the patent application
process, the patent enforcement process or the rights of patent holders, these changes could negatively affect our expenses and revenue
and any reductions in the funding of the USPTO could negatively impact the value of our assets.
A
number of states have adopted or are considering legislation to make the patent enforcement process more difficult for non-practicing
entities, such as allowing such entities to be sued in state court and setting higher standards of proof for infringement claims. We
cannot predict what, if any, impact these state initiatives will have on the operation of our enforcement business. However, such legislation
could increase the uncertainties and costs surrounding the enforcement of our patented technologies, which could have a material adverse
effect on our business and financial condition.
In
addition, the U.S. Department of Justice has conducted reviews of the patent system to evaluate the impact of patent assertion entities
on industries in which those patents relate. It is possible that the findings and recommendations of the Department of Justice could
impact the ability to effectively license and enforce standards-essential patents and could increase the uncertainties and costs surrounding
the enforcement of any such patented technologies.
Finally,
new rules regarding the burden of proof in patent enforcement actions could significantly increase the cost of our enforcement actions,
and new standards or limitations on liability for patent infringement could negatively impact any revenue we might derive from such enforcement
actions.
22
For
our real estate business, the market for real estate is subject to fluctuations that may impact the value of the land or housing inventory
that we hold, which may impact the price of our common stock.
Investors
should be aware that the value of any real estate we own may fluctuate from time to time in connection with broader market conditions
and regulatory issues, which we cannot predict or control, including interest rates, the availability of credit, the tax benefits of
homeownership and wage growth, unemployment and demographic trends in the regions in which we may conduct business. Should the price
of real estate decline in the areas in which we have purchased land, the price at which we will be able to sell lots to home builders,
or if we build houses, the price at which we can sell such houses to buyers, will decline.
Zoning
and land use regulations impacting the land development and homebuilding industries may limit our activities and increase our expenses,
which would adversely affect our financial results.
We
must comply with zoning and land use regulations impacting the land development and home building industries. We will need to obtain
the approval of various government agencies to expand our operations into new areas and to commence the building of homes. Our ability
to gain the necessary approvals is not certain, and the expense and timing of approval processes may increase in ways that adversely
impact our profits.
Health
and safety incidents that occur in connection with our potential expansion into the homebuilding business could be costly with uninsured
losses.
If
we commence operations in the homebuilding business, we will be exposed to the danger of health and safety risks to our employees and
contractors. Health and safety incidents could result in the loss of the services of valued employees and contractors and expose us to
significant litigation and fines. Insurance may not cover, or may be insufficient to cover, such losses, and premiums may rise.
Adverse
weather conditions, natural disasters and man-made disasters may delay our real estate development projects or cause additional expenses.
The
land development operations which we currently conduct and the construction projects which we may become involved in at a later date
may be adversely impacted by unexpected weather and natural disasters, including storms, hurricanes, tornados, floods, blizzards, fires
and earthquakes. Man-made disasters including terrorist attacks, electrical outages and cyber-security incidents may also impact the
costs and timing of the completion of our projects. Cyber-security incidents, including those that result in the loss of financial or
other personal data, could expose us to litigation and reputational damage. If insurance is unavailable to us on acceptable terms, or
if our insurance is not adequate to cover business interruptions and losses from the conditions described above and similar incidents,
our results of operations will be adversely affected. In addition, damage to new homes caused by these conditions may cause our insurance
costs to increase.
We
may face liability for information displayed on or accessible via our website, and for other content and commerce-related activities,
which could reduce our net worth and working capital and increase our operating losses.
We
could face claims for errors, defamation, negligence or copyright or trademark infringement based on the nature and content of information
displayed on or accessible via our website, which could adversely affect our financial condition. Even to the extent that claims made
against us do not result in liability, we may incur substantial costs in investigating and defending such claims.
Our
insurance, if any, may not cover all potential claims to which we are exposed or may not be adequate to indemnify us for all liabilities
that may be exposed. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage would reduce
our net worth and working capital and increase our operating losses.
23
Any
failure of our network could lead to significant disruptions in our businesses, which could damage our reputation, reduce our revenues
or otherwise harm our businesses.
All
of our businesses and, in particular, our digital transformation technology business unit, are dependent upon providing our customers
with fast, efficient and reliable services. A reduction in the performance, reliability or availability of our network infrastructure
may harm our ability to distribute our products and services to our customers, as well as our reputation and ability to attract and retain
customers and content providers. Our systems and operations are susceptible to, and could be damaged or interrupted by outages caused
by fire, flood, power loss, telecommunications failure, Internet or mobile network breakdown, earthquakes and similar events. Our systems
are also subject to human error, security breaches, power losses, computer viruses, break-ins, “denial of service” attacks,
sabotage, intentional acts of vandalism and tampering designed to disrupt our computer systems and network communications, and our systems
could be subject to greater vulnerability in periods of high employee turnover. A sudden and significant increase in traffic on our customers’
websites or demand from mobile users could strain the capacity of the software, hardware and telecommunications systems that we deploy
or use. This could lead to slower response times or system failures. Our failure to protect our network against damage from any of these
events could harm our business.
Public
scrutiny of Internet privacy and security issues may result in increased regulation and different industry standards, which could deter
or prevent us from providing our current products and solutions to our members and customers, thereby harming our business.
The
regulatory framework for privacy and security issues worldwide is evolving and is likely to remain in flux for the foreseeable future.
Practices regarding the collection, use, storage, display, processing, transmission and security of personal information by companies
offering online services have recently come under increased public scrutiny. The U.S. government, including the White House, the Federal
Trade Commission, the Department of Commerce and many state governments, are reviewing the need for greater regulation of the collection,
use and storage of information concerning consumer behavior with respect to online services, including regulation aimed at restricting
certain targeted advertising practices and collection and use of data from mobile devices. The Federal Trade Commission in particular
has approved consent decrees resolving complaints and their resulting investigations into the privacy and security practices of a number
of online, social media companies. Similar actions may also impact us directly.
Our
business, including our ability to operate and expand internationally or on new technology platforms, could be adversely affected if
legislation or regulations are adopted, interpreted, or implemented in a manner that is inconsistent with our current business practices
that may require changes to these practices, the design of our websites, mobile applications, products, features or our privacy policy.
In particular, the success of our business is expected to be driven by our ability to responsibly use the data that our members share
with us. Therefore, our business could be harmed by any significant change to applicable laws, regulations or industry standards or practices
regarding the storage, use or disclosure of data our members choose to share with us, or regarding the manner in which the express or
implied consent of consumers for such use and disclosure is obtained. Such changes may require us to modify our products and features,
possibly in a material manner, and may limit our ability to develop new products and features that make use of the data that we collect
about our members.
Particularly
with regard to our biohealth business, product reliability, safety and effectiveness concerns can have significant negative impacts on
sales and results of operations, lead to litigation and cause reputational damage.
Concerns
about product safety, whether raised internally or by litigants, regulators or consumer advocates, and whether or not based on scientific
evidence, can result in safety alerts, product recalls, governmental investigations, regulatory action on the part of the FDA (or its
counterpart in other countries), private claims and lawsuits, payment of fines and settlements, declining sales and reputational damage.
These circumstances can also result in damage to brand image, brand equity and consumer trust in our products. Product recalls could
in the future prompt government investigations and inspections, the shutdown of manufacturing facilities, continued product shortages
and related sales declines, significant remediation costs, reputational damage, possible civil penalties and criminal prosecution.
24
Significant
challenges or delays in our innovation and development of new products, technologies and indications could have an adverse impact on
our long-term success.
Our
continued growth and success depend on our ability to innovate and develop new and differentiated products and services that address
the evolving health care needs of patients, providers and consumers. Development of successful products and technologies is also necessary
to offset revenue losses when our existing products lose market share due to various factors such as competition and loss of patent exclusivity.
We cannot be certain when or whether we will be able to develop, license or otherwise acquire companies, products and technologies, whether
particular product candidates will be granted regulatory approval, and, if approved, whether the products will be commercially successful.
We
pursue product development through internal research and development as well as through collaborations, acquisitions, joint ventures
and licensing or other arrangements with third parties. In all of these contexts, developing new products, particularly biotechnology
products, requires a significant commitment of resources over many years. Only a very few biopharmaceutical research and development
programs result in commercially viable products. The process depends on many factors, including the ability to discern patients’
and healthcare providers’ future needs; develop new compounds, strategies and technologies; achieve successful clinical trial results;
secure effective intellectual property protection; obtain regulatory approvals on a timely basis; and, if and when they reach the market,
successfully differentiate our products from competing products and approaches to treatment. New products or enhancements to existing
products may not be accepted quickly or significantly in the marketplace for healthcare providers, and there may be uncertainty over
third-party reimbursement. Even following initial regulatory approval, the success of a product can be adversely impacted by safety and
efficacy findings in larger real world patient populations, as well as market entry of competitive products.
Our
competitors may have greater financial and other resources than we do and those advantages could make it difficult for us to compete
with them.
Our
three principal businesses, real estate, digital transformation technology and biohealth activities are each highly competitive and constantly
changing. We expect that competition will continue to intensify. Increased competition may result in price reductions, reduced margins,
loss of customers, and changes in our business and marketing strategies, any of which could harm our business. Current and potential
competitors may have longer operating histories, greater name recognition, more employees and significantly greater financial, technical,
marketing, public relations and distribution resources than we do. In addition, new competitors with potentially unique or more desirable
products or services may enter the market at any time. The competitive environment may require us to make changes in our products, pricing,
licensing, services or marketing to maintain and extend our current brand and technology. Price concessions or the emergence of other
pricing, licensing and distribution strategies or technology solutions of competitors may reduce our revenue, margins or market share,
any of which will harm our business. Other changes we have to make in response to competition could cause us to expend significant financial
and other resources, disrupt our operations, strain relationships with partners, or release products and enhancements before they are
thoroughly tested, any of which could harm our operating results and stock price.
Since
some members of our board of directors are not residents of the United States and certain of our assets are located outside of the United
States, you may not be able to enforce a U.S. judgment for claims you may bring against such directors or assets.
Several
members of our senior management team, including Chan Heng Fai, have their primary residences and business offices in Asia, and a portion
of our assets and a substantial portion of the assets of these directors are located outside the United States. As a result, it may be
more difficult for you to enforce a lawsuit within the United States against these non-U.S. residents than if they were residents of
the United States. Also, it may be more difficult for you to enforce any judgment obtained in the United States against our assets or
the assets of our non-U.S. resident management located outside the United States than if these assets were located within the United
States. We cannot assure you that foreign courts would enforce liabilities predicated on U.S. federal securities laws in original actions
commenced in such foreign jurisdiction, or judgments of U.S. courts obtained in actions based upon the civil liability provisions of
U.S. federal securities laws.
25
We
may be required to record a significant charge to earnings if our real estate properties become impaired.
Our
policy is to obtain an independent third-party valuation for each major project in the United States to identify triggering events for
impairment. Our management may use a market comparison method to value other relatively small projects, such as the project in Perth,
Australia. In addition to the annual assessment of potential triggering events in accordance with ASC 360 – Property Plant and
Equipment (“ASC 360”), we apply a fair value-based impairment test to the net book value assets on an annual basis and on
an interim basis if certain events or circumstances indicate that an impairment loss may have occurred.
Fluctuations
in foreign currency exchange rates affect our operating results.
A
portion of our revenues arises from international operations. Revenues generated and expenses incurred by our international subsidiaries
are often denominated in the currencies of the local countries. As a result, our consolidated U.S. dollar financial statements are subject
to fluctuations due to changes in exchange rates as the financial results of our international subsidiaries are translated from local
currencies into U.S. dollars. In addition, our financial results are subject to changes in exchange rates that impact the settlement
of transactions in non-local currencies.
The
effect of foreign exchange rate changes on the intercompany loans (under ASC 830), which mostly consist of loans from Singapore to the
United States and were approximately $23 million and $51 million on December 31, 2023 and 2022, respectively, are the reason for the
significant fluctuation of foreign currency transaction Gain or Loss on the Consolidated Statements of Operations and Other Comprehensive
Income. Because the intercompany loan balances between Singapore and United States will remain at approximately $23 million over the
next year, we expect this fluctuation of foreign exchange rates to still significantly impact the results of operations in 2024, especially
given that the foreign exchange rate may and is expected to be volatile. If the amount of intercompany loans is lowered in the future,
the effect will also be reduced. However, at this moment, we do not expect to repay the intercompany loans in the short term.
Our
international operations expose us to additional legal and regulatory risks, which could have a material adverse effect on our business,
results of operations and financial conditions.
At
the present time, the majority of our activities are conducted in the United States (particularly with regard to our real estate operations).
However, we also have operations worldwide through employees, contractors and agents, as well as those companies to which we outsource
certain of our business operations. Compliance with foreign and U.S. laws and regulations that apply to our international operations
increase our cost of doing business. These numerous and sometimes conflicting laws and regulations include, among others, labor relations
laws, tax laws, anti-competition regulations, import and trade restrictions, data privacy requirements, export requirements, and anti-bribery
and anti-corruption laws.
Our
business activities currently are subject to no particular regulation by governmental agencies in the United States or the other countries
in which we operate other than that routinely imposed on corporate businesses, and no such regulation is currently anticipated. As our
operations expand, we anticipate that we will need to comply with laws and regulations in additional jurisdictions.
There
is a risk that we may inadvertently breach some provisions which apply to us at the present time or which may apply to us in the future.
Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, requirements
to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs, and prohibitions
on the conduct of our business. Violations of laws and regulations also could result in prohibitions on our ability to operate in one
or more countries and could materially damage our reputation, our ability to attract and retain employees, or our business, results of
operations and financial condition.
26
If
tariffs or other restrictions are placed on foreign imports or any related counter-measures are taken by other countries, our business
and results of operations could be harmed.
At
the present time, we do not sell any products produced in China and have no plans to commence manufacturing in China; however, this may
change at some point in the future. The current administration has put into place tariffs and other trade restrictions. The current or
future administrations may additionally alter trade agreements and terms between the United States and China, among other countries,
including limiting trade and/or imposing tariffs on imports from such countries. In addition, China, among others, has either threatened
or put into place retaliatory tariffs of their own. Should we commence manufacturing in China, and if tariffs or other restrictions are
placed on foreign imports, including on any of our products manufactured overseas for sale in the United States, or any related counter-measures
are taken by other countries, our business and results of operations may be materially harmed.
These
tariffs have the potential to significantly raise the cost of any products we may manufacture in China. In such a case, there can be
no assurance that we will be able to shift manufacturing and supply agreements to non-impacted countries, including the United States,
to reduce the effects of the tariffs. As a result, we may suffer margin erosion or be required to raise our prices, which may result
in the loss of customers, negatively impact our results of operations, or otherwise harm our business. Additionally, the imposition of
tariffs on products that we export to international markets could make such products more expensive compared to those of our competitors
if we pass related additional costs on to our customers, which may also result in the loss of customers, negatively impact our results
of operations, or otherwise harm our business.
We
are an “emerging growth company” and our election to delay adoption of new or revised accounting standards applicable to
public companies may result in our consolidated financial statements not being comparable to those of some other public companies. As
a result of this and other reduced disclosure requirements applicable to emerging growth companies, our shares may be less attractive
to investors.
As
a company with less than $1.07 billion in revenue during our last completed fiscal year, we qualify as an “emerging growth company”
under the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements that are otherwise generally
applicable to public companies. In particular, as an emerging growth company, we:
●
are
not required to obtain an attestation and report from our auditors on our management’s assessment of our internal control over
financial reporting pursuant to the Sarbanes-Oxley Act;
●
are
not required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing
how those elements fit with our principles and objectives (commonly referred to as “compensation discussion and analysis”);
●
are
not required to obtain a non-binding advisory vote from our stockholders on executive compensation or golden parachute arrangements
(commonly referred to as the “say-on-pay,” “say-on-frequency” and “say-on-golden-parachute” votes);
●
are
exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and CEO pay ratio disclosure;
●
may
present only two years of audited financial statements and only two years of related Management’s Discussion & Analysis
of Financial Condition and Results of Operations, or MD&A; and
●
are
eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the
JOBS Act.
We
intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the
adoption of new or revised financial accounting standards under §107 of the JOBS Act. Our election to use the phase-in periods may
make it difficult to compare our consolidated financial statements to those of non-emerging growth companies and other emerging growth
companies that have opted out of the phase-in periods under §107 of the JOBS Act.
Certain
of these reduced reporting requirements and exemptions were already available to us due to the fact that we also qualify as a “smaller
reporting company” under SEC rules. For instance, smaller reporting companies are not required to obtain an auditor attestation
and report regarding management’s assessment of internal control over financial reporting, are not required to provide a compensation
discussion and analysis, are not required to provide a pay-for-performance graph or CEO pay ratio disclosure, and may present only two
years of audited financial statements and related MD&A disclosure.
27
Under
the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after our
initial sale of common equity pursuant to a registration statement declared effective under the Securities Act, or such earlier time
that we no longer meet the definition of an emerging growth company. In this regard, the JOBS Act provides that we would cease to be
an “emerging growth company” if we have more than $1.07 billion in annual revenue, have more than $700 million in market
value of our common stock held by non-affiliates, or issue more than $1.0 billion in principal amount of non-convertible debt over a
three-year period. Under current SEC rules, however, we will continue to qualify as a “smaller reporting company” for so
long as we have a public float (i.e., the market value of common equity held by non-affiliates) of less than $250 million as of the last
business day of our most recently completed second fiscal quarter.
Investors
may find our shares less attractive due to our reliance on these exemptions. This could impact our ability to raise funds in the future.
We
will incur increased costs as a result of being a U.S. public company, and our management expects to devote substantial time to public
company compliance programs.
As
a public company, we incur significant legal, insurance, accounting and other expenses that we did not incur as a private company. The
Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, Nasdaq Capital Market listing requirements and other
applicable securities rules and regulations impose various requirements on public companies. Our management and administrative staff
need to devote a substantial amount of time to comply with these requirements. For example, in connection with becoming a public company,
we will need to adopt additional internal controls and disclosure controls and procedures and bear all of the internal and external costs
of preparing periodic and current public reports in compliance with our obligations under the securities laws. We intend to commit resources
to comply with evolving laws, regulations and standards, and this commitment will result in increased general and administrative expenses
and may divert management’s time and attention away from product development activities. If for any reason our efforts to comply
with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies, regulatory authorities
may initiate legal proceedings against us and our business may be harmed.
Additionally,
in order to comply with the requirements of being a public company, we may need to undertake various actions, including implementing
new internal controls and procedures and hiring new accounting or internal audit staff. The Sarbanes-Oxley Act requires that we maintain
effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our
disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that
we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms,
and that information required to be disclosed in reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
is accumulated and communicated to our principal executive and financial officers. Any failure to develop or maintain effective controls
could adversely affect the results of our periodic management evaluations. In the event that we are not able to demonstrate compliance
with the Sarbanes-Oxley Act, that our internal control over financial reporting is perceived as inadequate, or that we are unable to
produce timely or accurate consolidated financial statements, investors may lose confidence in our operating results and the price of
our common stock could decline. In addition, if we are unable to continue to meet these requirements, we could be subject to sanctions
or investigations by Nasdaq, the SEC or other regulatory authorities, and we may not be able to remain listed on the Nasdaq Capital Market.
Prior
to becoming a public company, we were not required to comply with the SEC’s rules that implement Section 404 of the Sarbanes-Oxley
Act, and therefore were not required to make a formal assessment of the effectiveness of our internal control over financial reporting
for that purpose. We are now required to comply with certain of these rules, which require management to certify financial and other
information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control
over financial reporting commencing with our second annual report. This assessment needs to include the disclosure of any material weaknesses
in our internal control over financial reporting identified by our management or our independent registered public accounting firm. To
achieve compliance with Section 404 within the prescribed period, we are engaged in a costly and challenging process to document and
evaluate our internal control over financial reporting. In this regard, we need to continue to dedicate internal resources, potentially
engage outside consultants and adopt a detailed work plan to assess and document the adequacy of our internal control over financial
reporting. We also need to continue to improve our control processes as appropriate, validate through testing that our controls are functioning
as documented and implement a continuous reporting and improvement process for our internal control over financial reporting. Despite
our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control
over financial reporting is effective as required by Section 404.
28
If
we are unable to address the weaknesses in our internal control over financial reporting, investors may lose confidence in our company
and it could result in material errors in our financial statements.
We
have identified material weaknesses in our internal control over financial reporting. If we do not remediate the material weaknesses
in our internal control over financial reporting, we may not be able to accurately report our financial results or file our periodic
reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline
in the market price of our common stock.
Our
business is subject to reporting requirements that continue to evolve and change, which could continue to require significant compliance
effort and resources.
Because
our common stock is publicly traded, we will be subject to certain rules and regulations of federal, state and financial market exchange
entities charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities,
including the Public Company Accounting Oversight Board (PCAOB), the SEC and the Nasdaq Capital Market, periodically issue new requirements
and regulations and legislative bodies also review and revise applicable laws. As interpretation and implementation of these laws and
rules and promulgation of new regulations continues, we will continue to be required to commit significant financial and managerial resources
and incur additional expenses to address such laws, rules and regulations, which could in turn reduce our financial flexibility and create
distractions for management.
Any
of these events, in combination or individually, could disrupt our business and adversely affect our business, financial condition, results
of operations and cash flows.
Risks
Related to Ownership of Our Common Stock
Our
stock price may be volatile and your investment could decline in value.
The
market price of our common stock may fluctuate substantially as a result of many factors, some of which are beyond our control. These
fluctuations could cause you to lose all or part of the value of your investment in our common stock. Factors that could cause fluctuations
in the market price of our common stock include the following:
●
quarterly
variations in our results of operations;
●
results
of operations that vary from the expectations of securities analysts and investors;
●
results
of operations that vary from those of our competitors;
●
changes
in expectations as to our future financial performance, including financial estimates by securities analysts;
●
publication
of research reports about us or the industries in which we participate;
●
announcements
by us or our competitors of significant contracts, acquisitions or capital commitments;
●
announcements
by third parties of significant legal claims or proceedings against us;
29
●
changes affecting the availability of financing for smaller publicly traded companies like us;
●
regulatory
developments in the real estate, digital transformation technology or biohealth businesses;
●
significant
future sales of our common stock, and additions or departures of key personnel;
●
the
realization of any of the other risk factors presented in this Report; and
●
general
economic, market and currency factors and conditions unrelated to our performance.
In
addition, the stock market in general has experienced significant price and volume fluctuations that have often been unrelated or disproportionate
to operating performance of individual companies. These broad market factors may seriously harm the market price of our common stock,
regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities,
securities class action litigation has often been instituted. A class action suit against us could result in significant liabilities
and, regardless of the outcome, could result in substantial costs and the diversion of our management’s attention and resources.
Investors
purchasing our common stock may be diluted by the issuance of stock options.
To
the extent stock options are issued pursuant to our 2018 Incentive Compensation Plan in the future and ultimately exercised, there will
be further dilution of the common stock. See “Dilution”.
Future
sales, or the perception of future sales, of a substantial amount of our shares of common stock could depress the trading price of our
common stock.
If
we or our stockholders sell substantial amounts of our shares of common stock in the public market or if the market perceives that these
sales could occur, the market price of shares of our common stock could decline. These sales may make it more difficult for us to sell
equity or equity-related securities in the future at a time and price that we deem appropriate, or to use equity as consideration for
future acquisitions.
As
of April 1, 2024, we have 250,000,000 shares of common stock authorized, and 9,235,119 shares of common stock outstanding. Of these
shares, 6,077,357 shares are freely tradable.
If
securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they
change their recommendations regarding our stock adversely, or if our actual results differ significantly from our guidance, our stock
price and trading volume could decline.
The
trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about
us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our stock
adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline. If any analyst
who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial
markets, which in turn could cause our stock price or trading volume to decline.
In
addition, from time to time, we may release earnings guidance or other forward-looking statements in our earnings releases, earnings
conference calls or otherwise regarding our future performance that represent our management’s estimates as of the date of release.
Some or all of the assumptions of any future guidance that we furnish may not materialize or may vary significantly from actual future
results. Any failure to meet guidance or analysts’ expectations could have a material adverse effect on the trading price or volume
of our stock.
30
Anti-takeover
provisions in our charter documents could discourage, delay or prevent a change in control of our company and may affect the trading
price of our common stock.
Our
corporate documents and the Texas Business Organizations Code contain provisions that may enable our board of directors to resist a change
in control of our company even if a change in control were to be considered favorable by you and other stockholders. These provisions
include:
●
authorize
the issuance of “blank check” preferred stock that could be issued by our board of directors to help defend against a
takeover attempt;
●
establish
that advance notice requirements for nominating directors and proposing matters to be voted on by stockholders at stockholder meetings
will be as provided in the bylaws; and
●
provide
that stockholders are only entitled to call a special meeting upon written request by 50% of the outstanding common stock.
In
addition, Section 21.606 of the Texas Business Organizations Code prohibits large stockholders, in particular those owning 20% or more
of our outstanding voting stock, from merging or consolidating with us within a three-year period immediately following the shareholder’s
acquisition of shares except under certain circumstances. These provisions and other provisions under Texas law could discourage, delay
or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make
it more difficult for you and other stockholders to elect directors of your choosing and cause us to take other corporate actions you
desire.
Concentration
of ownership of our common stock by our principal stockholder will limit new investors from influencing significant corporate decisions.
As
of April 1, 2024, our principal stockholder Chan Heng Fai owns approximately 53.5% of our outstanding shares of common stock. He will
be able to make decisions such as (i) making amendments to our certificate of incorporation and bylaws, (ii) whether to issue additional
shares of common stock and preferred stock, including to himself, (iii) employment decisions, including compensation arrangements, (iv)
whether to enter into material transactions with related parties, (v) election and removal of directors and (vi) any merger or other
significant corporate transactions. The interests of Chan Heng Fai may not coincide with our interests or the interests of other stockholders.
We
do not expect to pay any dividends on our common stock for the foreseeable future.
We
currently expect to retain all future earnings, if any, for future operation, expansion and debt repayment and have no current plans
to pay any cash dividends to holders of our common stock for the foreseeable future. Any decision to declare and pay dividends in the
future will be made at the discretion of our board of directors and will depend on, among other things, our operating results, financial
condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant. In addition,
our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur.
As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater
than that which you paid for it.
We
have 25,000,000 authorized unissued shares of preferred stock, and our board has the ability to designate the rights and preferences
of this preferred stock without your vote.
Our
certificate of incorporation authorizes our board of directors to issue “blank check” preferred stock and to fix the rights,
preferences, privileges and restrictions, including voting rights, of these shares, without further stockholder approval. The rights
of the holders of common stock will be subject to and may be adversely affected by the rights of holders of any preferred stock that
may be issued in the future. As indicated in the preceding risk factor, the ability to issue preferred stock without stockholder approval
could have the effect of making it more difficult for a third party to acquire a majority of the voting stock of our company thereby
discouraging, delaying or preventing a change in control of our company. We currently have no outstanding shares of preferred stock,
or plans to issue any such shares in the future.
31
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.