Regulatory Environment - The operating entities' amusement parks are subject to approval from the National Development and Reform Commission (NDRC) for two parks, which have not yet received the necessary approvals[27]. - The Chinese government has significant control over the economy, which may adversely affect the operating entities' business and operating results due to potential changes in laws and regulations[25]. - The PRC legal system presents uncertainties that may impact the protection of the operating entities' business and shareholders[23]. - Recent regulations may require the operating entities to complete filing procedures with the China Securities Regulatory Commission (CSRC) for future offerings, which could impact their ability to raise capital[32]. - The Chinese government has indicated an intent to strengthen oversight of overseas listings, which could limit the operating entities' ability to offer securities[26]. - The evolving nature of PRC regulations on data security and personal information protection may require adjustments in business practices for compliance[42]. - The Cybersecurity Review Measures require online platform operators with significant user data to undergo reviews, which could impact future operations[35]. - The operating entities are not currently subject to cybersecurity review as they do not possess personal information of over one million users[40]. Financial Performance - For the fiscal years ended September 30, 2024, 2023, and 2022, the company's revenue was US$22,333,251, US$31,786,802, and US$41,788,196, respectively, indicating a decline in revenue over the three years[84]. - The net income (loss) for the same fiscal years was US$(1,796,552), US$6,549,584, and US$14,328,374, showing a significant drop in profitability in 2024 compared to previous years[84]. - The total number of guest visits at the parks for the fiscal year ended September 30, 2024, was approximately 1.32 million, down from 1.87 million in 2023 and 2.41 million in 2022, representing a decline of 29.4% year-over-year[180]. - For the fiscal years ended September 30, 2024, 2023, and 2022, in-park recreation sales amounted to US$19,263,768, US$30,115,995, and US$39,377,906, respectively, accounting for approximately 82.26%, 94.74%, and 94.23% of total revenue[200]. Operational Challenges - The operating entities' financial condition may be adversely affected by government control over capital investments and changes in tax regulations[22]. - The high fixed cost structure of park operations may lead to significantly lower margins if revenues decline[80]. - The inability to contract with third-party suppliers for rides and attractions could adversely affect park attendance and revenues[77]. - Declines in discretionary guest spending and changes in guest preferences could negatively affect the profitability of the operating entities' business[76]. - Increased labor costs and difficulties in retaining suitable employees may adversely affect the company's financial condition and results of operations[86]. - Financial distress among business partners could adversely impact the operating entities' business and financial condition[79]. Tax and Dividend Considerations - The operating entities' ability to distribute dividends is contingent upon their accumulated profits, which must comply with PRC accounting standards[49]. - Current PRC regulations require operating entities to set aside at least 10% of their after-tax profits each year for statutory reserves until it reaches 50% of their registered capital[49]. - Dividends paid by foreign-invested enterprises to foreign non-resident investors are subject to a 10% withholding tax, with no tax treaty between the Cayman Islands and China[50]. - The PRC government imposes restrictions on the remittance of Renminbi, which may limit the company's ability to pay dividends and other obligations[55]. - The classification as a PRC resident enterprise could subject the company to a 25% tax rate on global income, potentially reducing net income significantly[63]. Legal and Compliance Issues - The company is facing significant uncertainties due to the ongoing impacts of the COVID-19 pandemic, which may lead to future park closures and reduced guest spending[106]. - The company is actively conducting a legal internal investigation related to three putative class action lawsuits filed against it, with a hearing scheduled for January 30, 2025[172]. - The company may face increased scrutiny and potential litigation as a result of its public company status, which could divert management resources[149]. - The company may not be able to enforce certain judgments obtained against it by shareholders due to its assets being located outside the U.S.[136]. Strategic Initiatives - The company is investing an estimated total of RMB326.4 million in the construction of three new amusement parks[200]. - The estimated investment for Yangming Lake Glacier Tribe Amusement Park is RMB180 million, with approximately RMB90 million already invested as of the report date[211]. - The company is actively pursuing strategic acquisitions and business development in the Southeast Asian market through consulting agreements[162]. - The company has entered into long-term lease agreements with Fuzhou Yibang, generating initial annual rental income of RMB30 million and RMB20 million for two amusement parks, with increases of 2% annually[92]. Market and External Factors - A significant portion of the company's revenue is generated in Hunan Province, China, making it vulnerable to risks such as natural disasters and travel-related disruptions in that area[100]. - The company experienced negative impacts from Typhoon Doksuri in July 2023, highlighting the vulnerability of park attendance to extreme weather conditions[99]. - Various external factors, including natural disasters and geopolitical events, could adversely affect park attendance and revenue[107]. - The parks' operations are impacted by Chinese national holidays, which can increase attendance and revenue by approximately 15%[214]. Corporate Governance - The company has a dual-class share structure, with Class B shareholders holding 200 votes per share, concentrating voting power with Mr. Cuizhang Gong, who owns 100% of Class B shares[121]. - The company may rely on exemptions under Nasdaq listing rules as a "controlled company," potentially affecting corporate governance practices[124]. - The company has no general rights under Cayman Islands law for shareholders to inspect corporate records, which may hinder transparency[134]. - The company may face difficulties in protecting shareholder interests due to its incorporation under Cayman Islands law, which has less developed securities laws compared to the U.S.[133]. Insurance and Risk Management - The company maintains public liability insurance coverage ranging from RMB1 million to RMB5 million for each park, totaling RMB16 million in aggregate[215]. - The primary risk associated with park operations is guest injuries, which is covered by public liability insurance policies[216]. - Current public liability insurance coverage is consistent with industry standards[216]. - The operating entities do not maintain property insurance policies, as facilities are maintained according to national and industrial standards[216].
Golden Heaven(GDHG) - 2024 Q4 - Annual Report