Financial Performance - Revenues decreased from $22.03 million in the fiscal year ended September 30, 2022, to $12.73 million in the fiscal year ended September 30, 2023, and further decreased to $10.29 million for the year ended September 30, 2024, primarily due to a decrease in cross-border sales[58]. - All revenue in digital marketing services for the fiscal years ended September 30, 2024, 2023, and 2022 came from Google commissions, amounting to $0.31 million, $1.53 million, and $3.95 million, respectively, representing approximately 3.03%, 11.99%, and 17.91% of total revenue for those years[67]. - The company has incurred related party expenses of $446,469, $1,728,398, and $1,424,460 for the fiscal years ended September 30, 2024, 2023, and 2022, respectively[105]. - The amounts due to related parties as of September 30, 2024, 2023, and 2022 were $314,544, $1,413,604, and $1,273,832, respectively[105]. - The company may face limitations in raising capital in the future, which could hinder growth and expansion of its e-commerce platform and logistics services[88]. Regulatory Environment - The PRC government has implemented new regulations affecting business operations, which may impact the Company's future offerings and operations[30]. - The Overseas Listing Trial Measures require PRC domestic companies seeking to list overseas to fulfill filing procedures with the CSRC, but Linkage Cayman is not classified as a domestic company[30]. - The Cybersecurity Review Measures require data processing operators with personal data of at least one million users to undergo a cybersecurity review before foreign listings[47]. - The PRC legal system's uncertainties may limit legal protections and affect the enforcement of rights for the PRC subsidiaries[160]. - The evolving nature of data security and antimonopoly laws in Hong Kong may negatively impact the business operations and financial condition of the company[155]. Corporate Governance - The CEO and Chairman owns 84.02% of the voting power, which may lead to governance issues and influence decisions that may not align with other shareholders' interests[112]. - The company is classified as an "emerging growth company" and will remain so until it meets certain revenue or market capitalization thresholds[119]. - The company’s articles of association allow shareholders holding at least 10% of voting shares to requisition a general meeting[141]. - The company may face increased costs due to compliance with the Sarbanes-Oxley Act and other regulations, impacting its financial resources[117]. Operational Risks - The Operating Entities operate in a highly competitive market, facing competition from various supply chain providers, retailers, and wholesalers, which could adversely affect their results of operations[57]. - System interruptions or performance failures in technology infrastructure could damage the company's reputation and results of operations[59]. - The company faces risks related to doing business in mainland China, including changing regulations and potential government intervention, which could materially affect operations[56]. - The company has not maintained business interruption insurance, which could expose it to significant liabilities[96]. International Expansion - The company plans to venture into the Southeast Asian market, indicating a strategy for international expansion[61]. - The company plans to expand its integrated e-commerce services into Southeast Asia, starting with Thailand, Malaysia, and Indonesia over the next two years[76]. - The company faces risks related to international operations, including compliance with varied legal and regulatory standards in Southeast Asia[77]. Compliance and Legal Issues - The company is subject to legal and regulatory proceedings, which could divert management's attention and resources, potentially harming its brand equity[94]. - The company may face sanctions from the CSRC or other PRC regulatory agencies if it fails to seek necessary approvals for offerings in the U.S., which could include fines and operational limitations[225]. - The company must navigate potential restrictions on the transfer of cash or assets due to PRC government interventions, which could impact its operational funding[191]. - The company may face penalties if it fails to complete required filing procedures or provides false information in filings[223]. Data Security and Privacy - As of the date of the annual report, the PRC subsidiaries have not provided personal information outside of China and are believed to be compliant with existing data protection laws[175]. - The PRC subsidiaries may face penalties for inadequate social insurance and housing provident fund contributions, with potential fines of one to three times the outstanding amount[97]. - Cybersecurity risks could disrupt operations and negatively impact financial results, despite measures taken to mitigate these risks[100]. Shareholder Considerations - Linkage Cayman has not made any dividends or distributions to its shareholders and does not anticipate paying cash dividends in the foreseeable future[36]. - The company does not intend to pay dividends for the foreseeable future, opting to retain earnings for business operation and expansion[123]. - If classified as a Passive Foreign Investment Company (PFIC), U.S. taxpayers holding Class A Ordinary Shares may face adverse tax consequences[142]. Market and Economic Conditions - The Hong Kong subsidiaries' revenue is susceptible to ongoing social, economic, and political instability, which could adversely affect business operations[152]. - Changes in China's economic, political, or social conditions could materially adversely affect the PRC subsidiaries' business and operations[157]. - Increased labor costs in the PRC may adversely affect the profitability of the company's subsidiaries, as average wages are expected to continue rising[196]. Future Outlook - Historical performance may not be sustainable, and the company cannot guarantee future growth, with potential declines in revenue due to various external factors[58]. - The company is currently evaluating options to regain compliance with Nasdaq's continued listing requirements[134]. - The company may face significant consequences if delisted from Nasdaq, including anti-takeover provisions that could discourage changes in control[135].
Linkage Global Inc(LGCB) - 2024 Q4 - Annual Report