Corporate Structure and Incorporation - Global Mofy Cayman was incorporated on September 29, 2021, as a holding company with no significant assets or operations, conducting business in China through Global Mofy China and its subsidiaries[280] - Global Mofy WFOE was incorporated on December 9, 2021, focusing on technology development, technical services, and software development[280] - Global Mofy China was incorporated on November 22, 2017, with principal activities including technology development, technical services, design, advertisement production, and film screening[281] - On January 5, 2022, Global Mofy WFOE entered into VIE agreements with Global Mofy China, establishing a VIE structure for accounting purposes under U.S. GAAP[283] - The VIE structure was dissolved on July 8, 2022, after Global Mofy WFOE acquired 100% equity interest in Global Mofy China, making it a wholly owned subsidiary[285] - The company's corporate structure includes subsidiaries such as Global Mofy HK Limited, Mofy Metaverse (Beijing) Technology Co., Ltd., and Global Mofy (Beijing) Technology Co., Ltd.[416] Business Operations and Revenue - The company's revenue for the year ended September 30, 2023 was 26.89 million, with 57% from virtual technology services and 43% from digital assets development and others[448] - Revenues increased by 17.19 million in 2022 to 2.8 million (22.7%) from 15.4 million in 2023[463] - Digital assets development and others revenues increased by 4.02 million in 2022 to 10.42 million (253.1%) from 14.53 million in 2023[462] - Net income was 265,241 in 2022[462] - The company adjusted its business strategies for digital marketing, reducing its input and expecting further reduction in revenue proportion[447] - Digital marketing revenues accounted for 0.0% and 3.7% of total revenues for the years ended September 30, 2023 and 2022, respectively, with a decrease due to strategic adjustments and focus on higher margin business lines[465] - Revenues from digital asset development and others increased by 4.0 million in 2022 to 0.7 million (5.5%), from 12.4 million in 2023, with virtual technology service costs increasing by 0.4 million (14.1%)[467][469][471] - Gross profit increased by 4.1 million in 2022 to 2.5 million (56.4%), from 6.9 million in 2023, driven by higher general and administrative expenses and research and development costs[475][477][478] - Selling expenses increased by 0.2 million in 2022 to 2.0 million (192.5%), from 3.0 million in 2023, primarily due to professional service fees and provision for doubtful accounts[477] - Research and development expenses increased by 3.2 million in 2022 to 1,718 (4.0%), from 41,230 in 2023[479] Regulatory and Compliance - PRC subsidiaries are required to set aside 10% of net income after taxes as statutory surplus reserves until the cumulative amount reaches 50% of registered capital, which cannot be distributed as cash dividends[292] - The company relies on dividends from its PRC subsidiaries for working capital and cash needs, but PRC regulations restrict the ability to transfer net assets as dividends[290] - No dividends, distributions, or transfers have been made between Global Mofy Cayman and its subsidiaries as of the report date[294] - The Holding Foreign Companies Accountable Act (HFCAA) may restrict the company's ability to complete business combinations with certain companies, particularly those with substantial operations in China[295] - The SEC adopted interim final rules on March 24, 2021, requiring identified issuers to comply with disclosure and documentation requirements under the HFCAA, with the trading prohibition period reduced from three to two consecutive years[296] - The PCAOB announced on December 15, 2022, that it secured complete access to inspect and investigate PCAOB-registered public accounting firms in mainland China and Hong Kong, vacating its 2021 determinations[298] - The company's auditor, Marcum Asia CPAs LLP, is headquartered in New York and has been regularly inspected by the PCAOB, with the last inspection in 2020[299] - The company's PRC subsidiaries hold business licenses allowing operations in Beijing, Shanghai, and Xinjiang, with terms ranging from 2021 to 2051[303][304] - The company's Xi'an subsidiary holds a business license allowing 3D scanning technology research, software development, and import/export operations in Shanxi Province[306] - The company's Beijing subsidiary holds a business license allowing technology services, transfer, and development until 2038[307] - The Draft Overseas Listing Regulations require the company to complete filing procedures with the CSRC for its Nasdaq listing[310] - The company is not required to apply for a cybersecurity review under the Measures for Cybersecurity Review (2021) as it does not control over one million users' personal information[311] - The company is not currently subject to cybersecurity review or merger control review in China due to its revenue levels and data processing scope[319] - The company faces regulatory risks in China, including potential fines, operational restrictions, and delays in repatriating offering proceeds[318] - The company must file with the CSRC within three business days after completing its overseas offering, as per the Trial Measures effective March 31, 2023[315] - The Advertising Law of the People's Republic of China was revised on April 24, 2015, and implemented on September 1, 2015, to regulate advertising activities and protect consumer rights[370] - Virtual currencies like Bitcoin are defined as "special virtual commodities" in China and are protected under Article 127 of the Civil Code[371][374] - The Data Security Law of China, effective from September 1, 2021, establishes comprehensive regulations for data security and governance[376] - The Foreign Investment Law, effective from January 1, 2020, replaces previous laws and introduces a negative list system for foreign investment management[377][379] - The Negative List (Edition 2021) classifies industries into "encouraged," "restricted," and "prohibited" categories for foreign investment[385] - The PRC Company Law governs the establishment and operation of corporate entities, including foreign-invested companies[388] - The metaverse industry, including virtual content production and digital marketing, falls under the "encouraged" or "permitted" category in China[387] - The Civil Code of China distinguishes personal information as a separate personality right and provides legal protection for data and virtual properties[376] - The Foreign Investment Law prohibits foreign investment in industries listed on the negative list and requires compliance with specific requirements for restricted industries[379][381] - The M&A Rules require PRC companies or individuals to obtain MOFCOM approval for acquiring equity interests or assets of PRC domestic companies[389] - The Draft Overseas Listing Regulations mandate PRC domestic enterprises to complete CSRC filing procedures for overseas securities issuance and listing[390] - The Trial Measures, effective March 31, 2023, require PRC domestic companies to file with CSRC for both direct and indirect overseas securities offerings[393] - Existing enterprises listed overseas before March 31, 2023, are exempt from immediate CSRC filing but must comply for refinancings and other matters[394] - Overseas-listed companies must file with CSRC within three business days after completing follow-on offerings or equivalent activities[395] - Non-compliance with CSRC filing requirements may result in fines ranging from RMB 1.0 million to RMB 10.0 million[393] - PRC patents are protected for 10 years (utility models and designs) or 20 years (inventions) from the application date[398] - Copyrighted software in PRC is protected for 50 years from the date of first publishing[398] - Registered trademarks in PRC are valid for 10 years and can be renewed for another 10 years[399] - Non-resident enterprises may be subject to a 10% withholding tax on PRC-sourced income, reduced to 5% for Hong Kong enterprises under specific conditions[400] - One of the company's beneficial owners, Zhenquan Ren, a PRC resident, has not completed the Circular 37 Registration, which may result in restrictions on foreign exchange activities and potential penalties[407] Intellectual Property and Assets - Global Mofy China has 3 registered trademarks, 1 registered domain name, and 44 registered copyrights, while Xi'an Mofy has 5 registered copyrights[419] - The company plans to register its 3D digital assets using part of the IPO proceeds, as these assets are currently not registered under any PRC or international intellectual property laws[420] - The company's registered trademarks include "Mo Fei Shi Xiao" (Class 40), "Mo Fei Ying Ye" (Class 41), and "Huan Qiu Mo Fei" (Class 41)[422] - The company's copyrights include works such as "Wu Gen Zhi Guo," "Ba Luo Tu," and "Cai Hong Shou," registered under Global Mofy (Beijing) Technology Co., Limited[423] - Global Mofy owns 30 software copyrights, including AI visual effect platforms and 3D rendering tools, registered between 2019 and 2022[425][426] - The company's digital asset bank contains over 30,000 high-precision 3D assets with 4K (4096*2160) resolution[441] - The company's software portfolio includes tools for batch rendering, polygon conversion, and AI-driven cloud platforms[425][426] Financial Transactions and Offerings - The company issued 1,379,313 ordinary shares and warrants for 5.00 per share, raising 9.4 million[453] Research and Development - Research and development expenses were 3.21 million for the fiscal years ended September 30, 2023, and 2022, respectively[361] - The company has 17 full-time R&D personnel, with 8 focused on the core technology platform, Mofy Lab[361] Operational Risks and Challenges - Global Mofy China excluded radio and television program production and film projection services from its business scope in June 2022, leading to the cancellation of the related business license[286] - In 2020, 3,813 data leakage incidents occurred globally, involving 4.1 billion data entries, a 54% increase compared to the previous year[376] - The company's principal executive office is located in Beijing, China, with a registered office in the Cayman Islands[321] - The company's operating office in Beijing covers an area of 1962.14 square meters, leased for RMB 266,360 per month (approximately US$36,675)[418]
Global Mofy(GMM) - 2023 Q4 - Annual Report