Company Structure and Regulatory Risks - The company operates as a Marshall Islands holding company, conducting almost all operations through subsidiaries in China and Hong Kong, which poses unique risks to investors holding shares of its Common Stock[26]. - The company has obtained necessary licenses and approvals for its operations in China, but there is no assurance that it will always be able to renew these licenses in a timely manner[45]. - Recent regulatory actions by the Chinese authorities may impact the company's operations, including enhanced supervision over companies listed overseas and anti-monopoly enforcement[47]. - The company may face significant risks if the PRC government disallows its holding company structure, potentially leading to a material change in operations and a decline in the value of its shares[48]. - The Holding Foreign Companies Accountable Act may result in the company's securities being prohibited from trading on U.S. exchanges if its auditor is not subject to PCAOB inspection for two consecutive years[33]. - The China Securities Regulatory Commission (CSRC) introduced the Overseas Listing Trial Measures effective March 31, 2023, requiring domestic companies to file for overseas listings[50]. - Non-compliance with CSRC regulations could lead to penalties, adversely affecting the ability to list on U.S. exchanges and potentially causing a significant decline in securities value[52]. - The company faces uncertainties regarding the interpretation and application of PRC laws related to its previous VIE structure, which could lead to severe penalties[142]. - The PCAOB has determined it is unable to inspect or investigate registered public accounting firms in mainland China and Hong Kong, which could adversely affect the company's operations and stock value[181]. - The SEC approved Nasdaq's revised proposals to impose stricter criteria on companies operating in "Restrictive Markets," which may impact the company's listing status[178]. Financial Performance and Dividend Distribution - The company has not established cash management policies, and no dividends or distributions have been made to shareholders as of the date of the Annual Report[37]. - Current PRC regulations permit PRC operating subsidiaries to pay dividends only out of accumulated profits, which may restrict the ability to distribute dividends to the holding company[38]. - A withholding tax of 10% applies to dividends payable by Chinese companies to non-PRC-resident enterprises, which may reduce the amount of dividends received by the holding company from its PRC subsidiaries[42]. - The company relies on dividends from its PRC subsidiaries for cash and financing requirements, and any limitations on these distributions could adversely affect its liquidity[38]. - The company’s ability to pay dividends in the future depends on the financial performance of its PRC subsidiaries, which must meet specific reserve fund requirements[149]. - The company relies on dividends from its PRC subsidiaries for cash requirements, and any limitations on these payments could materially affect its business operations[146]. Market and Competitive Environment - The largest customer, Hefei Liantuo Tianji E-commence Corporation Ltd., accounted for 42% of revenue at $21,003,414 for the year ended December 31, 2024, down from 74% at $23,621,588 for the year ended December 31, 2023[76]. - The company faces intense competition in the cross-border merchandise and tourism industries, which may negatively affect its market share and financial results[66]. - The company’s growth may strain existing resources, leading to challenges in managing operational, administrative, and financial capabilities[68]. - Negative publicity regarding the company or its products could adversely affect its reputation and stock price, regardless of accuracy[71]. - The company is vulnerable to natural disasters and geopolitical uncertainties, which could disrupt operations and adversely affect financial results[117]. Operational Risks and Challenges - The company relies on its supply chain management to minimize inventory risks and maintain operational efficiency, but inaccuracies in demand forecasting could lead to inventory write-offs or shortages[77]. - The company’s technology infrastructure is critical for operations, and any disruptions could materially affect business results[80]. - The company’s brand portfolio is essential for attracting and retaining customers, and failure to maintain it could harm business prospects[70]. - The company allows order cancellations and product returns, which could negatively impact inventory turnover and cash flow if rates increase significantly[84]. - The company relies on third-party product suppliers and manufacturers, which may affect its operational efficiency if they fail to meet standards[86]. - Inventory management is critical, as mismanagement could lead to adverse operating results due to demand fluctuations and seasonality[89]. - The company faces risks of inventory obsolescence and write-downs if favorable credit terms with suppliers are not negotiated[91]. - The company’s dependence on third-party platforms for sales means that disruptions or adverse changes in those platforms could harm its operations[82]. Regulatory Compliance and Legal Risks - Regulatory compliance is essential, as failure to obtain necessary licenses could result in administrative penalties and operational disruptions[92]. - Risks include potential severe penalties if VIE contractual arrangements are deemed non-compliant with PRC regulations[63]. - The evolving PRC regulatory environment regarding cybersecurity and data protection poses challenges that could materially impact business operations[64]. - The company may face penalties for non-compliance with PRC regulations regarding employee benefits and tax withholdings[8]. - The company must implement new operational and financial systems to accommodate growth, which may strain resources and affect the ability to meet increased demand[131]. Economic and Trade Environment - Changes in international trade policies and tariffs could materially affect financial performance and operations in China[64]. - The Chinese economy's growth has been uneven and slowing, which may adversely affect the company's business and operating results[154]. - The company is closely monitoring potential changes in international trade policy and assessing their impact on business operations and financial performance due to rising tariffs and trade disputes, particularly between the U.S. and China[155]. - Recent U.S. tariffs on goods imported from China have increased costs, potentially necessitating price increases for U.S. customers, which could affect competitiveness[159]. - The uncertain nature of global economic conditions, including the ongoing Russia-Ukraine war and tensions in the Middle East, may lead to significant disruptions and rising commodity prices[155]. Cybersecurity and Data Protection - Cybersecurity threats are increasing, necessitating significant investment in security measures to protect sensitive information and maintain service reliability[101]. - The company utilizes third-party technology, which poses risks of cyber-attacks that could indirectly affect its operations[106]. - New regulations in China regarding personal information protection and cross-border data transfers may impose additional compliance costs and operational challenges[170][171]. - The evolving regulatory environment in China regarding cybersecurity and data protection poses risks that could materially affect the company's business operations and reputation[169]. - The company has not faced any investigations or sanctions related to personal information compliance as of the report date, but uncertainties remain regarding future regulatory interpretations[172]. Labor and Employment Regulations - Increases in labor costs and stricter labor laws in China may adversely impact profitability[207]. - Average wages in China have risen and are expected to continue increasing, affecting overall labor costs[207]. - Non-compliance with labor-related laws may lead to fines and adversely affect financial condition[209]. - Companies must participate in government-mandated employee benefit plans, which can vary by location[210]. - Failure to comply with SAFE regulations regarding stock incentive plans may result in fines and limit capital contributions[211]. Financial Liabilities and Insurance - The company does not carry key-man life insurance or product liability insurance, which could expose it to significant financial risks[137]. - The company may incur liabilities not covered by insurance, which could materially impact its financial condition[137]. - The PRC legal system's uncertainties, including rapid changes in laws and regulations, could limit legal protections for the company and affect its operations[166].