ABAC Renmin Tianli Group, Inc. (MM)

ITEM 1A. Risk Factors

The purchase of our common shares involves a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below and other information and our consolidated financial statements and related notes included elsewhere in this report. If any of the following events actually occurs, our financial condition or operating results may be materially and adversely affected, our business may be severely impaired, and the price of our common stock may decline, perhaps significantly. This means you could lose all or a part of your investment.

If there are any interruptions to or a decline in the amount or quality of our breeding stock or feed components, our production or sales could be materially and adversely affected.

Swine feed components and breeding stock are the principal raw materials used in our hog farming business. We purchase all of our swine feed components from a number of third-party suppliers. We generally breed and raise our own hogs and periodically purchase new breeding stock from third parties, including stock sourced from Europe and the United States. These third-party suppliers may not continue to be able or willing to satisfy our need for breeding stock and swine feed components. The supply of breeding stock may be affected by outbreaks of diseases or epidemics. Suppliers may not be able to provide live hogs or swine feed components of sufficient quantity or quality to meet our requirements. Any interruptions to or decline in the amount or quality of live hogs or swine feed components could materially disrupt our production and adversely affect our business. We are vulnerable to increases in the price of raw materials (particularly of swine feed components and occasionally live hogs) and other operating costs, and we may not be able to entirely offset increasing costs by increasing prices. If we are unable to entirely offset cost increases by raising prices, our profit margins and financial condition could be adversely affected.

If the pork market in the PRC does not grow as we expect, our results of operations and financial condition may be adversely affected.

We believe pork products have strong growth potential in the PRC and, accordingly, we have acquired farms. If the pork market in the PRC does not grow as we expect, our business may be harmed, we may need to adjust our growth strategy, and our results of operation may be adversely affected.

We may be unable to maintain our profitability in the face of a consolidating retail environment in the PRC.

We sell substantial amounts of our hogs to slaughterhouses, which sell to smaller retailers and supermarkets and large retailers. The supermarket and food retail industry in the PRC has been and is expected to continue consolidating.

As the supermarket and food retail industry continue to consolidate and retail customers grow larger and become more sophisticated, they may demand lower prices and increased promotional programs from our slaughterhouse customers, which may demand lower prices from us. If we are forced to lower prices in response to pressure from customers, our profitability could decline.

The hog farming industry in the PRC may face increased competition, as well as increased industry consolidation, which may affect our market share and profit margin.

The hog farming industry in the PRC is highly competitive. We believe that our ability to maintain our market share and grow our operations within this landscape of intense competition depends largely upon our ability to distinguish our hogs from our competitors’ hogs, especially as to our breeders.

We cannot assure you that our current or potential competitors will not develop hog breeding and farming technology of a quality comparable or superior to ours, or adapt more quickly than we do to evolving consumer preferences or market trends. In addition, our competitors may merge or form alliances among farms to achieve a scale of operations which would make it difficult for us to compete. Competition may also lead to price wars, which may adversely affect our market share and profit margin. We cannot assure you that we will be able to compete effectively with our current or potential competitors.

The outbreak of animal diseases could adversely affect our operations.

An occurrence of serious animal diseases or any outbreak of other animal epidemics in the PRC might result in material disruptions to our operations, to the operations of our customers or suppliers or a decline in our industry or a slowdown in economic growth in the PRC and surrounding regions, any of which could have a material adverse effect on our operations. In 2007, tens of millions of pigs were killed in China as a result of Blue Ear disease, which resulted in inflation in pork prices and affected 25 of China’s 33 provinces. While we take measures at each of our farms to prevent the outbreak of disease, there can be no assurance that our facilities or products will not be affected by an outbreak of disease in the future, or that the market for pork products in the PRC will not decline as a result of fear of disease. In either case, our business, results of operations and financial condition would be adversely and materially affected.

Outbreaks of swine flu could adversely affect our business, results of operations and financial condition.

An occurrence of a serious animal disease, such as swine influenza or H1N1 virus, a respiratory disease of pigs caused by influenza viruses, or any outbreak of other epidemics in the PRC affecting animals or humans might result in material disruptions to our operations, to the operations of our customers or suppliers or a decline in the supermarket or food retail industry or a slowdown in economic growth in the PRC and surrounding regions, any of which could have a material adverse effect on our operations and turnover.

Consumer concerns regarding the safety and quality of food products or health concerns could adversely affect sales of our products.

Our sales performance could be adversely affected if consumers lose confidence in the safety and quality of our products. Consumers in the PRC are increasingly conscious of food safety and nutrition. Consumer concerns about, for example, the safety of pork products could discourage them from buying pork products and cause our results of operations to suffer.

We may be subject to substantial liability should the consumption of pork products made from our hogs cause personal injury or illness and, unlike most food companies in the United States, we do not maintain product liability insurance to cover potential liabilities.

The sale of food products for human consumption involves an inherent risk of injury to consumers. Such injuries may result from tampering by unauthorized third parties or product contamination or degeneration, including the presence of foreign contaminants, chemical substances or other agents or residues during the various stages of the production process. While we are subject to governmental inspections and regulations, we cannot assure you that consumption of our products will not cause a health-related illness, or that we will not be subject to claims or lawsuits relating to such matters.

Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertions that our products caused personal injury or illness could adversely affect our reputation with customers and our corporate and brand image. Furthermore, our products could potentially suffer from product tampering, contamination or degeneration or be mislabeled or otherwise damaged. Under certain circumstances, our products may be recalled. Even if a situation does not necessitate a recall, we cannot assure you that product liability claims will not be asserted against us. A product liability judgment against us or a product recall could have a material adverse effect on our revenues, profitability and business reputation.

We purchase many commodities for raw materials and packaging, and price changes for the commodities we depend on may adversely affect our profitability.

We have not entered into long term contracts for the purchase of raw materials at fixed prices. The raw materials used in our feed are largely commodities that can experience significant price fluctuations caused by external conditions and changes in governmental agricultural programs over which we exercise no influence. We attempt to recover commodity cost increases by increasing hog prices and creating additional operating efficiencies, but cannot assure that we will always be successful in offsetting these cost increases.

Our hog farming business could be adversely affected by fluctuations in pork commodity prices.

The price at which hogs are sold is directly affected by the supply and demand for pork products and other meat products in the PRC, all of which are determined by market forces and other factors over which we have little or no control. A downward fluctuation in the demand for pork may adversely impact our results of operations.

Our operations are subject to various risks, including the risks of being expropriated, forced to shut down or modified by the local or central government.

Concepts regarding private property and the right to use land are in the development stage in China.  If the national or local government were to determine that the community at large would be better served if one of our farms were to alter or even cease its operations, or that the land on which one of our farms is located should be devoted to another purpose, it is likely that we would have no choice other than to comply with any order that might be issued. In such event, if we were to receive any compensation for the loss or interruption to our business, the amount of such it likely would likely be far less than the damages incurred.

We may require additional financing in the future and our operations could be curtailed if we are unable to obtain required additional financing when needed.

We may need to obtain additional debt or equity financing to fund future capital expenditures. Any additional equity financing may result in dilution to the holders of our shares of capital stock. Additional debt financing may include conditions that would restrict our freedom to operate our business, such as conditions that:

We cannot guarantee that we will be able to obtain any additional financing on terms that are acceptable to us, or at all.

Potential disruptions in the capital and credit markets may adversely affect our business, including the availability and cost of short-term funds for liquidity requirements, which could adversely affect our results of operations, cash flows and financial condition.

We may need to rely on the credit markets, particularly for short-term borrowings from banks within the PRC, as well as the capital markets, to meet our financial commitments and short-term liquidity needs if internal funds are not available from operations. Disruptions in the credit and capital markets could adversely affect our ability to draw on short-term bank facilities. Further, our access to funds under any such credit facilities is dependent on the ability of banks that are parties to those facilities to meet their funding commitments, which is dependent on governmental economic policies in the PRC. Banks that choose to enter into agreements with us may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests from us and other borrowers within a short period of time.

Our operating results may fluctuate from period to period.

Our operating results have fluctuated from period to period and are likely to continue to fluctuate as a result of a wide range of factors. For example, the pricing for hogs has experienced significant fluctuations. Additionally demand for pork in general is relatively high before the Chinese New Year in January or February and lower thereafter. Our production and sales are generally lower in the summer due to a slight drop in meat consumption during the warmer summer months.

The loss of any key customer could reduce our revenues and our profitability.

For our Hog Farming segment, our key customers are principally hog brokers, hog farmers and slaughterhouses in the PRC. For our Retail segment, our key customers include supermarkets, chain restaurants, hotels, and meat shops. There can be no assurance that we will maintain or improve the relationships with these customers or other customers, or that we will be able to continue to supply these customers at current levels or at all.

If we cannot maintain long-term relationships with our larger customers, the loss of our sales to them could have an adverse effect on our business, financial condition and results of operations.

Our bank accounts are not insured or protected against loss.

We maintain cash with various banks and trust companies located in the PRC and in Hong Kong. These cash accounts are not insured or otherwise protected. Should any bank or trust company holding our cash deposits become insolvent, or if we are otherwise unable to withdraw funds, we would lose the cash on deposit with that particular bank or trust company.

We are substantially dependent upon our senior management and key research and development personnel.

We are highly dependent on our senior management to manage our business and operations. In particular, we rely substantially on our Chief Executive Officer, Mr. Luchang Zhou, and Chief Financial Officer, Ms. Hanying Li, to manage our operations.

We also depend on our key research and development personnel for the development of new breeding, nutrition and farming technologies. We do not maintain key man life insurance on any of our senior management or key personnel. The loss of the services of one of them would have a material adverse effect on our business and operations. Competition for senior management and our other key personnel is intense and the pool of suitable candidates is limited. We may be unable to locate a suitable replacement for any senior management or key personnel that we lose. In addition, if any member of our senior management or key personnel joins a competitor or forms a competing company, they may compete with us for customers, business partners and other key professionals and staff members of our company. Although each of our senior management and key personnel has signed a confidentiality and non-competition agreement in connection with his employment with us, we cannot assure you that we will be able to successfully enforce these provisions in the event of a dispute between us and any member of our senior management or key personnel.

We compete for qualified personnel with other agricultural and technology companies and research institutions. Competition for these personnel could cause our compensation costs to increase, which could have a material adverse effect on our results of operations. Our future success and ability to grow our business will depend in part on our ability to identify, hire and retain additional qualified personnel. If we are unable to attract and retain qualified employees, we may be unable to meet our business and financial goals.

We may not be able to adequately protect and maintain our intellectual property, trade secrets, and brand names.

We rely on a combination of trademark, trade secret, nondisclosure agreement and patent laws to protect our trade secrets and other valuable intellectual property and in particular, our premix formula. Protecting our intellectual property is critical to its innovation efforts. We own a number of patents, trade names and other forms of intellectual property in its products and services. We also have exclusive and non-exclusive rights to intellectual property owned by others. Our intellectual property may be challenged or infringed upon by third parties or we may be unable to maintain, renew or enter into new license agreements with third-party owners of intellectual property on reasonable terms. In some cases, the Company’s ability to protect its intellectual property rights by legal recourse or otherwise may be limited, particularly in countries where laws or enforcement practices are inadequate or undeveloped. Unauthorized use of the Company’s intellectual property rights or the Company's inability to preserve existing intellectual property rights could adversely impact the Company’s competitive position and results of operations.

We may not pay dividends.

We have not previously paid any cash dividends, and we do not anticipate paying any dividends on our common shares.  Due to the seasonality and business cycles, we cannot assure you that our operations can bring in sufficient revenues to enable us to operate profitably or to generate positive cash flows every year. Furthermore, there is no assurance our Board of Directors will declare dividends even if we are profitable. Dividend policy is subject to the discretion of our Board of Directors and will depend on, among other things, our earnings, financial condition, capital requirements and other factors. If we determine to pay dividends on any of our common shares in the future, we will be dependent, in large part, on receipt of funds from our operations.

We may be subject to risks arising from litigation, legal and regulatory proceedings and obligations.

From time to time, the Company is subject to litigation or other commercial disputes and other legal and regulatory proceedings relating to its business. Due to the inherent uncertainties of any litigation, commercial disputes or other legal or regulatory proceedings, the Company cannot accurately predict their ultimate outcome, including the outcome of any related appeals. An unfavorable outcome could materially adversely impact the Company’s business, financial condition or results of operations. Furthermore, as required by U.S. generally accepted accounting principles (GAAP), the Company establishes reserves based on its assessment of contingencies, including contingencies related to legal claims asserted against it. Subsequent developments in legal proceedings may affect the Company's assessment and estimates of the loss contingency recorded as a reserve and require the Company to make payments in excess of our reserves, which could have an adverse effect on the Company's results of operations.

The Company is subject to national laws and regulations in China, relating to its business and its employees. Despite the Company's policies, procedures and compliance programs, its internal controls and compliance systems may not be able to protect the Company from prohibited acts willfully committed by its employees, agents or business partners that would violate such applicable laws and regulations. Any such improper acts could damage the Company's reputation, subject it to civil or criminal judgments, fines or penalties, and could otherwise disrupt the Company's business, and as a result, could materially adversely impact the Company's business, financial condition or results of operations.

We may be subject to risks relating to organizational changes.

We regularly execute organizational changes such as acquisitions, divestitures and realignments to support our growth and cost management strategies. We also engage in initiatives aimed to increase productivity, efficiencies and cash flow and to reduce costs. If we are unable to successfully manage these and other organizational changes, the ability to complete such activities and realize anticipated synergies or cost savings as well as the results of operations and financial condition could be materially adversely affected.

We may be subject to risks relating to changes in the demand for and supply of our products.

Demand for and supply of our products may be adversely affected by numerous factors, some of which the Company cannot predict or control. Such factors include:

A write-off of all or part of our goodwill or other intangible assets could adversely affect our operating results and net worth.

Intangible assets are a substantial portion of our assets. At December 31, 2017 and 2016, intangible assets were $2.3 million and $2.4 million of our total assets, respectively. Our intangible assets may increase in the future since our strategy includes growth through acquisitions. We may have to write off all or part of intangible assets if their value becomes impaired. Although this write-off would be a non-cash charge, it could reduce our earnings and net worth significantly.

If we fail to implement our expansion plans, our financial condition and results of operations could be materially and adversely affected.

An important part of our strategy is to grow our business by acquiring other hog farms or develop a pork processing business. In addition, the operation of our Hog Farming and Retail businesses may require a significant cash investment to finance purchases of inventories we intend to sell. We may need to raise additional financing to implement our expansion strategy to acquire other companies and finance the operations of our existing businesses. We may not have access to the funding required for these plans on acceptable terms. Our expansion plans may also suffer significant delays as a result of a variety of factors, such as legal and regulatory requirements, either of which could prevent us from completing our plans as currently expected. Any failure to successfully implement our business strategy, including for any of the above reasons, could materially and adversely affect our financial condition and results of operations. We may, in addition, decide to alter or discontinue certain aspects of our business strategy at any time.

As part of our growth strategy, we have acquired assets within the PRC. If any of our acquisitions are found not to comply with applicable laws or regulations, we might be required to make filings or submissions to PRC regulators or amend the terms of such acquisitions to meet PRC regulatory requirements.

We expect to continue to expand our operations in the PRC through identifying and acquiring hog farms or pork processing businesses with complementary products and services and have in recent years completed several farm acquisitions and acquisitions of new subsidiaries. While we believe that each of these acquisitions complied with all PRC laws and regulations, the regulatory environment that governs transactions in the PRC has continued to evolve in recent years and remains subject to interpretation by the agencies that have responsibility for reviewing or approving such transactions. If any of the acquisitions we completed were reviewed by a PRC regulator, it is possible that we may be required to demonstrate how the transaction complied with applicable PRC laws. This could require us to expend resources that would otherwise be used to manage our company. Further, if regulators determine that any of our transactions did not comply with applicable regulations, we may be required to renegotiate or revise the terms of the acquisition with the counterparties to the affected transaction. If such a scenario were to occur, we cannot be sure that our efforts to meet the regulator’s requirements would be successful, or that such efforts would not have an adverse effect on our operations.

Additionally, there can be no assurance that we will be able to find suitable businesses to purchase or to acquire such businesses. In addition, there is no assurance that we will be able to avoid acquiring or assuming unexpected liabilities, that we will be able to integrate successfully any businesses that it purchases into its existing business or that any acquired businesses will be profitable. The successful integration of new businesses depends on our ability to manage these new businesses and cut excess costs. If we are unable to avoid these risks, the results of operations and financial condition could be materially adversely affected.

Also, we will need to issue additional financing to implement our expansion strategy to acquire more businesses and finance the operations of our current operations. We may not have access to the funding required for these plans on acceptable terms. Our expansion plans may also suffer significant delays as a result of a variety of factors, such as legal and regulatory requirements, either of which could prevent us from completing our plans as currently expected. Our expansion plans may also result in other unanticipated adverse consequences, such as the diversion of management’s attention from our existing operations. Any failure to successfully implement our business strategy, including for any of the above reasons, could materially and adversely affect our financial condition and results of operations. We may, in addition, decide to alter or discontinue certain aspects of our business strategy at any time.

Foreign Operational Risks

We are dependent on the state of the PRC’s economy as all of our business is conducted in the PRC.

All of our business operations are conducted in the PRC, and all of our customers are also located in the PRC. Accordingly, our results of operations, financial condition and prospects are subject to economic, political and legal developments in China. China’s economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Any material slowdown in the PRC’s economy may cause a reduction in the demand and prices for our products, which may in turn lead to a decline in the demand for our products. Any to these could have a material adverse effect on our business, financial condition and results of operations.

Our business is located in China and subject to economic, political and legal developments in China.

The authorities in China have announced a crackdown on wasteful spending and illegal activities particularly in the financial industry.  The authorities in China have tremendous leeway in determining who to arrest and what actions to take as part of this crackdown.  Management has no reason to believe that any of our personnel other than Mr. Wang will be arrested as part of this crackdown and that there will be any other adverse impact on our Company as a result of this crackdown and the allegedly illegal activities of Mr. Wang.  Nevertheless, there can be no assurance that our Company will not be adversely impacted by the crackdown or the investigation into the activities of Mr. Wang.

Since our operations and assets are located in the PRC, shareholders may find it difficult to enforce a U.S. judgment against the assets of our company, our directors and executive officers.

Our operations and assets are located in the PRC. In addition, most of our executive officers and directors are non-residents of the U.S., and substantially all the assets of such persons are located outside the U.S. As a result, it could be difficult for investors to affect service of process in the U.S., or to enforce a judgment obtained in the U.S. against us or any of these persons.

Fluctuation of the Renminbi (RMB) may indirectly affect our financial condition by affecting the economy of the PRC and by affecting our reported US dollar results.

Although we use the United States dollar for financial reporting purposes, nearly all of the transactions affected by WFOE and Fengze are denominated in the PRC’s currency, the RMB. The value of the RMB fluctuates and is subject to changes in the PRC’s political and economic conditions. Such fluctuations could adversely impact our US dollar denominated financial reports. We do not currently engage in hedging activities to protect against foreign currency risks. Future movements in the exchange rate of the RMB could adversely affect the economy of the PRC and thus the market for our products.

If any dividend is declared in the future, you may be taxed on a larger amount in U.S. dollars than the U.S. dollar amount that you actually receive.

If you are a United States holder, you will be subjected to taxation on the U.S. dollar value of your dividends, if any, at the time you receive them. Specifically, if a dividend is declared and paid in a currency other than US dollars, the amount of the dividend distribution that you must include in your income as a U.S. holder will be the U.S. dollar value of the payments made in the foreign currency, determined at the spot rate of the foreign currency to the U.S. dollar on the date the dividend distribution is includible in your income, regardless of whether the payment is in fact converted into U.S. dollars. Thus, if the value of the foreign currency decreases before you actually convert the currency into U.S. dollars, you will be taxed on a larger amount in U.S. dollars than the U.S. dollar amount that you will actually ultimately receive.

We may become a passive foreign investment company, which could result in adverse U.S. tax consequences to U.S. investors.

Based upon the nature of our business activities, we may be classified as a passive foreign investment company (“PFIC”), by the U.S. Internal Revenue Service (“IRS”), for U.S. federal income tax purposes. Such characterization could result in adverse U.S. tax consequences to you if you are a U.S. investor. For example, if we are a PFIC, a U.S. investor will become subject to burdensome reporting requirements. The determination of whether or not we are a PFIC is made on an annual basis and will depend on the composition of our income and assets from time to time. Specifically, we will be classified as a PFIC for U.S. tax purposes if either:

We cannot assure you that we will not be a PFIC for any taxable year.

Introduction of new laws or changes to existing laws by the PRC government may adversely affect our business.

The PRC legal system is a codified legal system made up of written laws, regulations, circulars, administrative directives and internal guidelines. Unlike common law jurisdictions like the U.S., decided cases (which may be taken as reference) do not form part of the legal structure of the PRC and thus have no binding effect. Furthermore, in line with its transformation from a centrally planned economy to a more free market-oriented economy, the PRC government is still in the process of developing a comprehensive set of laws and regulations. As the legal system in the PRC is still evolving, laws and regulations or the interpretation of the same may be subject to further changes.

We do not have liability business interruption, litigation or natural disaster insurance.

The insurance industry in China is still at an early stage of development. In particular PRC insurance companies offer limited business products. As a result, we do not have any business liability or disruption insurance coverage for our operations in China. Any business interruption, litigation or natural disaster may result in our business incurring substantial costs not covered by insurance.

PRC laws and regulations governing our businesses are uncertain. If we are found to be in violation of such PRC laws and regulations, we could be subject to sanctions In addition, changes in such PRC laws and regulations may materially and adversely affect our business.

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations governing our business. Renmin Tianli and WFOE are considered foreign persons or foreign invested enterprises under PRC law. As a result, Renmin Tianli and WFOE are subject to limitations on foreign ownership of Chinese companies. These laws and regulations are relatively new and may be subject to change, and their interpretation and enforcement may involve substantial uncertainty. The effectiveness of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance by foreign investors. New laws and regulations that affect existing and proposed future businesses may be applied retroactively.

The PRC government has broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business and other licenses, and requiring actions necessary for compliance. In particular, licenses and permits issued or granted to us by relevant governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot assure you that our current ownership and operating structure would not be found in violation of any current or future PRC laws or regulations. As a result, we may be subject to sanctions, including fines, and could be required to restructure our operations or cease to provide certain services. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention. Any of these or similar actions could disrupt our business operations or restrict us from conducting a substantial portion of our business operations, which could materially and adversely affect our business, financial condition and results of operations.

Recent PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to personal liability and limit our ability to inject capital into WFOE, limit WFOE’s ability to increase its registered capital, distribute profits to us, or otherwise adversely affect us.

On October 21, 2005, the SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Reverse Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or Notice 75, which became effective as of November 1, 2005. This Notice and other regulations, which require our shareholders who are PRC residents to make various filings, may have various adverse impacts upon our company and its operations. The failure or inability of our PRC resident shareholders to make any required registrations or comply with other requirements may subject such shareholders to fines and legal sanctions and may also limit our ability to contribute additional capital into or provide loans to WFOE or Fengze, limit their ability to pay dividends or otherwise distribute profits to us, or otherwise adversely affect us.

Our business benefits from certain government incentives. Expiration, reduction or discontinuation of, or changes to, these incentives will increase our tax burden and reduce our net income.

The PRC government has provided tax incentives and subsidies to domestic companies in our industries to encourage the development of agricultural businesses in China. We have received business tax exemptions, subsidies and government incentives in connection with Fengze’s ownership of hog farms and WFOE’s management of these operations. An example is that both Fengze and WOFE were exempted from income taxes for 2015 and prior years.

The PRC government authorities may reduce or eliminate these incentives through new legislation at any time in the future. In the event that we are no longer exempt from income taxation, our applicable tax rate would increase from 0% to up to 25%, the standard business income tax rate in the PRC. Similarly, the termination of the government practice of partially subsidizing the cost of hog insurance could reduce our profits or cause such insurance to become more expensive as fewer farmers elected to purchase such insurance. The reduction or discontinuation of any of these economic incentives could negatively affect our company.

The PRC’s labor law restricts our ability to reduce our workforce in the PRC in the event of an economic downturn and may increase our production costs.

Current law provides for specific standards and procedures for the termination of an employment contract and places the burden of proof on the employer. In addition, the law requires the payment of a statutory severance pay upon the termination of an employment contract in most cases, including the case of the expiration of a fixed-term employment contract. Further, downsizing of more than 20 people or more than 10% of the workforce may occur only under specified circumstances. To date, there has been very little guidance and precedents as to how such specified circumstances for downsizing will be interpreted and enforced by the relevant PRC authorities. All of our employees working for us exclusively within the PRC are covered by the new law and thus our ability to adjust the size of our operations when necessary may be curtailed. Accordingly, if we face periods of decline in business activity or adverse economic periods specific to our business, this new law could exacerbate the adverse effect of the economic environment on our results of operations and financial condition.

If relations between the United States and China deteriorate, our share price may decrease and we may have difficulty accessing U.S. capital markets.

At various times during recent years, the United States and China have had disagreements over political, economic and other issues. Controversies may arise in the future between these two countries. Any political or trade controversies between the United States and China could adversely affect the market price of our common shares and our ability to access U.S. capital markets.

The Chinese government could change its policies toward private enterprise or even nationalize or expropriate private enterprises, which could result in the total loss of our investment in China.

Our business may be adversely affected by political, economic and social developments in China. For many years, the Chinese government has pursued economic reform policies including the encouragement of private economic activity and greater economic decentralization. However in the future the Chinese government may decide not to pursue these policies or may alter them to our detriment with little, if any, prior notice. Nationalization or expropriation could even result in the total loss of our investment in China and in the total loss of your investment in us.

Because our operations are located in China, information about our operations are not readily available from independent third-party sources.

Because WFOE and Fengze are based in China, our shareholders may have greater difficulty in obtaining information about them on a timely basis than would shareholders of a U.S.-based company. Information available from newspapers, trade journals, or local, regional or national regulatory agencies such as issuance of construction permits and contract awards for development projects will not be readily available to shareholders and, where available, will likely be available only in Chinese. Shareholders will be dependent upon management for reports of their progress, development, activities and expenditure of proceeds.

Our failure to obtain prior approval of the China Securities Regulatory Commission (“CSRC”) of the listing and trading of our common shares on a foreign stock exchange could have a material adverse effect upon our business, operating results, reputation and trading price of our common shares.

On August 8, 2006, six PRC regulatory agencies, including the Ministry of Commerce, the State Assets Supervision and Administration Commission, the State Administration of Taxation, the State Administration for Industry and Commerce, the CSRC and SAFE, jointly issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “New M&A Rule”). The New M&A Rule became effective on September 8, 2006. This regulation contains provisions that purport to require that an offshore special purpose vehicle (“SPV”) formed for listing purposes and controlled directly or indirectly by PRC companies or individuals shall obtain the approval of the CSRC prior to the listing and trading of such SPV’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published procedures specifying documents and materials required to be submitted to it by SPVs seeking CSRC approval of overseas listings.

However, the application of the New M&A Rule remains unclear with no consensus currently existing among leading PRC law firms regarding the scope and applicability of the CSRC approval requirement.

If prior CSRC approval for our structure and initial public offering was required, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory authorities. These authorities may impose fines and penalties upon our operations in the PRC, limit our operating privileges in the PRC, or take other actions that could have a material adverse effect upon our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our common shares.

Risks Relating to our Common Stock and our Status as a Public Company

The market price for our common shares may be volatile, which could result in substantial losses to investors.

The market price for our common shares may be volatile and subject to wide fluctuations in response to factors including the following:

In addition, the securities markets have from time to time experienced price and volume fluctuations that are not related to the operating performance of particular companies. As a result, to the extent shareholders sell our shares, they may not receive a price per share that is based solely upon our business performance. We cannot guarantee that shareholders will not lose some of their entire investment in our common shares.

If our financial condition deteriorates, we may not meet continued listing standards of the NASDAQ Capital Market and our shareholders could find it difficult to sell our shares.

Our common shares are listed on the NASDAQ Capital Market. The NASDAQ Capital Market requires companies to fulfill specific requirements in order for their shares to continue to be listed. If we fail to continue to meet NASDAQ’s continued listing requirements and if our shares are delisted from the NASDAQ Capital Market at some later date, our shareholders could find it difficult to sell our shares.

Our management is generally not familiar with the United States securities laws and the customs and practices of businesses outside of China.

Our management is generally unfamiliar with the requirements of the United States securities laws and may not appreciate the need to devote the resources necessary to comply with such laws. A failure to adequately respond to the requirements of the applicable securities laws could lead to investigations by the Securities and Exchange Commission and other regulatory authorities that could be costly, divert management's attention and disrupt our business. Moreover, our management is not familiar with the customs and business practices utilized outside of China to manage businesses. Such lack of familiarity may result in decisions being made that are contrary to the expectations of investors in the United States or Europe.

We will significant costs as a result of operating as a public company, and our management is required to devote substantial time to new compliance requirements.

As a public company we incur significant legal, accounting and other expenses under the Sarbanes-Oxley Act of 2002, together with rules implemented by the Securities and Exchange Commission and applicable market regulators. These rules impose various requirements on public companies, including requiring certain corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and make some activities more time-consuming and costly.

Ability to opt out of NASDAQ Marketplace Rules

NASDAQ Marketplace Rule 5615(a)(3) permits a foreign private issuer to follow its home country practice in lieu of most of the requirements of the 5600 Series of the NASDAQ Marketplace Rules. In order to claim such an exemption, we must disclose the significant differences between our corporate governance practices and those required to be followed by U.S. domestic issuers under NASDAQ’s corporate governance requirements.  We previously determined to follow our home country rule which allowed us to sell more than 20% or more of our shares outstanding prior to the transaction for less than the greater of book or market value of the stock..

We also have opted out of NASDAQ Marketplace Rule 5635(a)(2) which requires each issuer to obtain shareholder approval prior to the issuance of its shares in connection with the acquisition of the stock or assets of another company if any director, officer or Substantial Shareholder (as defined by NASDAQ Marketplace Rule 5635(e)(3)) of the issuer has a 5% or greater interest (or such persons collectively have a 10% or greater interest) directly or indirectly, in the company or assets to be acquired or in the consideration to be paid in the transaction or series of related transactions and the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, could result in an increase in common shares or voting power of 5% or more. The presence of this rule would preclude us from issuing shares of our common stock, or securities convertible into or exercisable for common stock, in connection with an acquisition if the issuance would result in an increase in common shares or voting power of 5% or more, and any of our directors or officers, or any shareholder owning 5% or more or group of shareholders owning 10% or more of our outstanding shares, had a 5% or greater interest in the company or assets to be acquired or the consideration to be paid.

In the British Virgin Islands, our jurisdiction of organization or home country, shareholder approval is not required for a transaction which would require shareholder approval pursuant to Rule 5635(a)(2), unless the transaction is with an “Interested Shareholder” as that term is defined in Article 23 of our Articles of Association. We have determined that neither Ms. Li nor any of our other current directors or officers is an Interested Shareholder. Therefore, under the laws of the British Virgin Islands and our constituent documents, we would not be required to obtain shareholder approval if we engaged in a transaction in which one or more of such individuals had an interest in the company or assets to be acquired, or consideration to be paid, even if shareholder approval would be required by Rule 5635(a)(2) and, should we intend to engage in any such transaction, we intend to rely upon the exemption provided by NASDAQ Marketplace Rule 5615 from the requirements of NASDAQ Marketplace Rule 5635(a)(2) rather than put the matter to a shareholder vote.

In the future we could determine to opt out of other requirements of the 5600 Series of the NASDAQ Marketplace Rules.

Shares eligible for future sale may adversely affect the market price of our common shares, as the future sale of a substantial amount of outstanding common shares in the public marketplace could reduce the price of our common shares.

The market price of our shares could decline as a result of sales of substantial amounts of our shares in the public market, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds if required through future offerings of our common shares. As of March 27, 2018, we had outstanding an aggregate of 7,983,745 common shares, of those shares, 1,840,000 are restricted shares owned by non-affiliates that can be freely transferable or are tradable subject to the satisfaction of certain conditions without registration under the Securities Act, 3,638,750 are owned by our affiliates that may be sold in the future without registration under the Securities Act to the extent permitted by Rule 144 or other exemptions under the Securities Act. The shares held by our affiliates could also be sold in private transactions or transactions outside of the United States without the being reported in the United States.

Our former chief executive officer owns a significant percentage of our common shares, decreasing your influence on shareholder decisions.

Mr. Ping Wang, our former Chairman and Chief Executive Officer, beneficially owns approximately 30.53% of our outstanding common shares. In addition, our current Chief Financial Officer, Ms. Hanying Li, as well as one of our directors, owns approximately 10.01% of our outstanding common shares. As a result, Mr. Wang and Ms. Li possess substantial ability to impact our management and affairs and the outcome of matters submitted to shareholders for approval. These shareholders, acting individually or as a group, could exert control and substantial influence over matters such as electing directors and approving mergers or other business combination transactions. This concentration of ownership and voting power may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our common shares.

We may suffer a change in control and our business could be significantly harmed if an owner of a significant number of our shares including our Chief Executive Officer or other significant employees pledge their common shares to secure loans and default in the payment of those loans.

If our former Chief Executive Officer, Mr. Ping Wang, who owns approximately 30.53% of our outstanding common shares, or Ms. Li, our current Chief Financial Officer and director, who owns approximately 10.01% of our outstanding common shares, was to pledge his or her shares to secure the payment of a loan, and then default in the payment of that loan, the default could result in a sale of a substantial number of our common shares resulting in a decrease in the price of our shares and a change in control of our company.

As the rights of shareholders under British Virgin Islands law differ from those under U.S. law, you may have fewer protections as a shareholder.

Our corporate affairs will be governed by our amended and restated memorandum and articles of association, the British Virgin Islands Business Companies Act, 2004 (the “BVI Act”), and the common law of the British Virgin Islands. The rights of shareholders to take legal action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors under British Virgin Islands law are to a large extent governed by the common law of the British Virgin Islands and by the BVI Act. The rights of our shareholders and the fiduciary responsibilities of our directors under British Virgin Islands law are not as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United States. In particular, the British Virgin Islands has a less developed body of securities laws as compared to the United States.

As a result of all of the above, holders of our shares may have more difficulty in protecting their interests through actions against our management, directors or major shareholders than they would as shareholders of a U.S. company.

British Virgin Islands companies may not be able to initiate shareholder derivative actions, thereby depriving shareholders of the ability to protect their interests.

British Virgin Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. The circumstances in which any such action may be brought, and the procedures and defenses that may be available in respect to any such action, may result in the rights of shareholders of a British Virgin Islands company being more limited than those of shareholders of a company organized in the United States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate wrongdoing has occurred. The British Virgin Islands courts are also unlikely to recognize or enforce against us judgments of courts in the United States based on certain liability provisions of U.S. securities law; and to impose liabilities against us, in original actions brought in the British Virgin Islands, based on certain liability provisions of U.S. securities laws that are penal in nature. There is no statutory recognition in the British Virgin Islands of judgments obtained in the United States, although the courts of the British Virgin Islands will generally recognize and enforce the non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. This means that even if shareholders were to sue us successfully, they may not be able to recover anything to make up for the losses suffered.

The laws of the British Virgin Islands provide little protection for minority shareholders, so minority shareholders will have little or no recourse if the shareholders are dissatisfied with the conduct of our affairs.

Under the law of the British Virgin Islands, there is little statutory law for the protection of minority shareholders other than the provisions of the BVI Act dealing with shareholder remedies. The principal protection under statutory law is that shareholders may bring an action to enforce the constituent documents of the corporation, our amended and restated memorandum and articles of association. Shareholders are entitled to have the affairs of the company conducted in accordance with the general law and the articles and memorandum.