Global Mofy(US:GMM)2026-01-09 22:01Company Structure and Operations - Global Mofy Cayman is a holding company with no significant assets or operations, conducting business in China through its subsidiaries[32]. - Global Mofy Zhejiang WFOE, incorporated on April 3, 2023, is engaged in technology development, technical services, and software development[34]. - As of the date of the report, no dividends or distributions have been made to US investors, and the company's business is primarily conducted through its subsidiaries[54]. - The company has appointed Cogency Global Inc. as its agent to receive service of process in the United States[46]. - The company has received all requisite licenses and permissions from PRC authorities to conduct its business operations, with no denials reported[66]. - The business licenses held by subsidiaries allow for a range of technology services, including development, consulting, and advertising, across various regions in China[67][68]. Financial Operations and Dividends - Current PRC regulations permit the WFOE to pay dividends to the company only out of accumulated profits, if any, determined in accordance with Chinese accounting standards[53]. - The company relies on dividends paid by its subsidiaries for working capital and cash needs, including servicing debt obligations and paying operating expenses[54]. - No dividends, distributions, or transfers have been made between Global Mofy Cayman and its subsidiaries, and no cash dividends are expected in the foreseeable future[59]. - The company’s ability to pay dividends may be restricted by debt instruments governing its subsidiaries[56]. - The company's PRC subsidiaries generate revenue primarily in Renminbi, which is not freely convertible, potentially limiting the ability to pay dividends[88]. - A withholding tax rate of up to 10% may apply to dividends payable by Chinese companies to non-PRC-resident enterprises, affecting the company's ability to distribute dividends[89]. - The company relies on dividends from its PRC subsidiaries for funding, which are subject to PRC laws that restrict payments to only after-tax profits and require statutory reserves[150][155]. Regulatory Environment - The PRC government may impose restrictions on the ability to transfer cash or assets, affecting the company's liquidity[51]. - The company must comply with PRC foreign exchange regulations for the remittance of dividends outside of China[52]. - PRC regulations require subsidiaries to set aside a minimum of 10% of net income after taxes as statutory surplus reserves until it reaches 50% of registered capital[56]. - The Holding Foreign Companies Accountable Act may impact the company's ability to complete business combinations with certain companies, particularly those with substantial operations in China[60]. - The company does not anticipate any regulatory objections to its offering from PRC authorities[68]. - The company is not currently required to obtain any other approval from Chinese authorities to list on U.S. exchanges or issue securities to foreign investors[75]. - The company must comply with new cybersecurity review measures before any public offering at a foreign stock exchange, adding potential compliance challenges[99]. - The company is subject to extensive regulation in the financial and taxation solution services industry, creating uncertainties regarding the legality of its operations[95]. Market and Competition - The company faces intense competition in the metaverse and digital entertainment industry, which could negatively impact its market share and financial performance[90]. - The company faces intense competition in the metaverse and digital entertainment industry, with significant competitors like BaseFX and SVHQ Media, which may affect market share[226]. Financial Performance - For the fiscal year ended September 30, 2025, the revenue from digital asset development reached $22.83 million, up from $20.5 million in 2024 and $11.5 million in 2023, indicating significant growth in this business line[209]. - The company incurred a net loss of $19.30 million for the fiscal year ended September 30, 2025, following a profit of $12.1 million in 2024 and $6.6 million in 2023, highlighting ongoing financial challenges[211]. - The company anticipates an increase in operating costs and expenses as it continues to grow, which may impact future profitability[212]. - The company has a limited operating history, making it difficult to predict future performance and increasing the risk of fluctuating financial results[210]. Customer and Supplier Dependency - As of September 30, 2025, one customer accounted for approximately 16% of total revenues, indicating a reliance on major customers for revenue generation[214]. - Four major suppliers accounted for approximately 19%, 14%, 11%, and 11% of total purchases for the year ended September 30, 2025, reflecting dependency on key suppliers[217]. - As of September 30, 2025, the balance due from four customers accounted for approximately 22%, 20%, 18%, and 13% of total accounts receivable, indicating potential risks in cash flow[215]. Legal and Compliance Risks - The company may face significant legal and regulatory obstacles in obtaining information for shareholder investigations or litigation outside of China[84]. - The PRC legal system's unpredictability may impede the company's ability to enforce contracts and could adversely affect operations[126]. - Enforcement of foreign judgments in China is uncertain, particularly for judgments from U.S. courts, due to the lack of reciprocal agreements[183]. - The company may face significant scrutiny and negative publicity similar to other U.S.-listed Chinese companies, which could adversely affect its operations and stock value[181]. Economic and Political Factors - The company’s operations are significantly influenced by political, economic, and social conditions in China, which could impact financial performance[128]. - Adverse changes in PRC government policies could materially affect the overall economic growth of China, reducing demand for the company's products and services[84]. - The financial and operating performance of the company may be adversely affected by general economic conditions, natural disasters, and public health crises impacting the metaverse industry[186]. - The rapid spread of COVID-19 has resulted in increased travel restrictions and business disruptions, potentially leading to financial distress for buyers and impacting revenues[187].