Climate Change Data

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Substantial reliance on related party suppliers (Longrich Group, accounting for approximately 87% and 90% of total purchases in 2020 and 2019 respectively).
• Reliance on a limited number of vendors.
• Potential for additional scrutiny, criticism, and negative publicity involving U.S.-listed China-based companies.
• Fierce competition in the health and nutritional supplements and cosmetic markets in China.
• Dependence on third-party logistics and express delivery companies.
• Internet or network system limitations or failures.
• Failure to adopt new technologies or adapt to changing customer requirements.
• Risk of counterfeit products being sold on the internet platform.
• Potential product liability claims.
• Data privacy and security breaches.
• Risks related to health epidemics, severe weather conditions, and other outbreaks.
• Lack of public company experience of the management team.
• Potential non-compliance of VIE arrangements with PRC regulations.
• Reliance on contractual arrangements with VIE, which may not be as effective as direct ownership.
• Potential conflicts of interest with VIE shareholders.
• Changes in China’s economic, political, or social conditions or government policies.
• Uncertainties in the interpretation and enforcement of Chinese laws and regulations.
• Difficulties in bringing actions against the company or its officers and directors in the U.S. or enforcing judgments.
• Dual-class share structure limiting shareholder influence.
• Thinly traded Ordinary Shares.
• Exemption from certain NASDAQ corporate governance standards.
• Potential for substantial tax liabilities.
• Allegations, lawsuits, and negative publicity related to counterfeit or substandard products.
• Lack of business insurance coverage.
• Increased costs associated with being a public company.
• Potential material weaknesses in internal control over financial reporting.
• Substantial influence of Chairman and CEO (Mr. Zhiwei Xu).
• Complexity and uncertainties in PRC regulations of internet-related businesses.
• Reliance on dividends from PRC subsidiary for funding.
• PRC regulations on loans to and direct investment in PRC entities by offshore holding companies.
• Fluctuations in exchange rates.
• Limited hedging options in China.
• Governmental control of currency conversion.
• Failure to comply with PRC regulations regarding employee benefit plans.
• Potential requirement for China Securities Regulatory Commission approval.
• Complex procedures for acquisitions of Chinese companies.
• PRC regulations relating to offshore investment activities by PRC residents.
• Regulatory uncertainties restricting the ability to adopt additional incentive plans.
• Potential classification as a PRC resident enterprise for tax purposes.
• Limited ability of U.S. regulatory bodies to conduct investigations in China.
• Uncertainty regarding PRC tax reporting obligations for indirect transfers of equity interests.
• Anti-takeover provisions in the memorandum and articles of association.
• Potential for securities litigation.
• Potential difficulties in protecting shareholder interests under Cayman Islands law.
• Exemption from certain provisions applicable to U.S. domestic public companies.
• Potential classification as a passive foreign investment company (PFIC).

Mitigation Strategies

• Audit Committee review and approval of all related party transactions.
• Efforts to locate replacement vendors.
• Investigation and defense against unfavorable allegations.
• Focus on technology, customer service, and brand recognition to compete.
• Contractual arrangements with third-party delivery companies.
• Investment in research and development to enhance technology.
• Measures to verify the authenticity of products and remove counterfeit products.
• Data security policies and measures.
• Contingency plans for health epidemics and other outbreaks.
• Implementation of programs and policies to comply with increased legal, regulatory, and reporting requirements.
• VIE Agreements designed to provide effective control over the VIE.
• Efforts to resolve conflicts of interest with VIE shareholders.
• Monitoring of PRC legal and regulatory developments.
• Compliance with applicable laws and regulations.
• Dual-class share structure providing concentrated control.
• Implementation of strict quality assurance and control procedures.
• Development and maintenance of proper and effective internal control over financial reporting.
• Implementation of new internal controls and procedures.
• Hiring of accounting or internal audit staff.
• Efforts to maintain corporate culture.
• Implementation of cost-effective marketing campaigns.
• Development of additional authorized physical stores.
• Strict selection process for suppliers and third-party merchants.
• Periodic laboratory tests on product samples.
• Diligent examination of product sourcing channels.
• Implementation of measures to prevent data failure and loss.
• Development of a disaster tolerant system.
• Adoption of rigorous security policies and measures.
• Private placement and IPO to raise capital.
• Use of trade notes payable to conserve cash.

Supply Chain Management

Climate-Related Risks & Opportunities