Regulatory Environment - The Chinese government has significant control over the economy, which may adversely affect the operating entities' business and competitive position [28]. - The approval from the National Development and Reform Commission (NDRC) is required for small and medium-sized theme parks, with two parks currently lacking necessary approvals [34]. - Recent regulations require companies with over one million users' personal information to undergo cybersecurity reviews, but the operating entities do not currently meet this threshold [46]. - The PRC legal system presents uncertainties that may affect the enforcement of contractual rights and the protection of shareholders [29]. - The operating entities may face increased costs due to compliance with new laws and regulations imposed by the Chinese government [32]. - The operating entities' ability to conduct business may be hindered by new regulations or interpretations from the Chinese government [32]. - The recent Cybersecurity Review Measures require scrutiny of data processing activities that may affect national security, impacting future operations [41]. - The company is subject to uncertainties regarding the interpretation and implementation of the Cybersecurity Review Measures and Data Security Regulations, which may require adjustments to business practices [48]. - PRC regulations may limit the company's ability to inject capital into operating entities and could impose penalties on PRC resident shareholders for non-compliance with SAFE Circular 37 [49]. - Acquisitions by foreign investors in China are subject to complex procedures and may require approval from the Ministry of Commerce (MOFCOM), potentially delaying growth through acquisitions [51]. - Future business growth may be hindered by the time-consuming nature of regulatory compliance for acquisitions, affecting the company's ability to expand market share [52]. Financial Performance - For the fiscal years ended September 30, 2025, 2024, and 2023, the company's revenue was US$15,288,195, US$22,333,251, and US$31,786,802, respectively, with net (loss) income of US$(8,285,806), US$(1,796,552), and US$6,549,584 [92]. - For the fiscal year ended September 30, 2025, the Company's revenue was US$15,288,195, a decrease of 31.5% from US$22,333,251 in 2024, and net loss was US$(8,593,406) compared to a net income of US$(1,796,552) in 2024 [189]. - Rental income for the fiscal years ended September 30, 2025, 2024, and 2023 was US$12,302,168, US$3,069,483, and US$1,514,697, accounting for approximately 80.47%, 13.74%, and 4.77% of total revenue, respectively [211]. - In-park recreation sales amounted to US$2,986,027, US$19,263,768, and US$30,115,995, representing approximately 19.53%, 86.26%, and 94.74% of total revenue, respectively [210]. Operational Challenges - The operating entities may face challenges in maintaining cost-effectiveness of entertainment offerings due to external factors such as economic conditions and supplier pricing [75]. - Declines in discretionary guest spending and changes in guest preferences could negatively impact the profitability of the operating entities' business [76]. - The operating entities may struggle to contract with third-party suppliers for rides and attractions, which could lead to construction delays and affect park attendance [77]. - The high fixed cost structure of park operations can result in significantly lower margins if revenues decline, affecting profitability [89]. - Bad or extreme weather conditions can adversely impact park attendance and revenue, as seen with Typhoon Yángliǔ affecting operations [104]. Legal and Compliance Issues - The enforcement of the PRC Labor Contract Law may adversely affect the operating entities' business and results of operations due to its specific provisions on employment contracts and severance [61]. - The operating entities have not fully paid social insurance contributions and housing provident fund contributions for all employees in 2023, 2024, and 2025, which may lead to penalties of 0.05% per day for late payments [62]. - The operating entities are subject to periodic examinations by PRC tax authorities, and failure to fulfill tax obligations may result in fines or penalties [70]. - The company is subject to legal proceedings that could result in substantial monetary damages or settlements, adversely affecting financial condition [103]. - The company may face significant additional costs if it loses its foreign private issuer status, which could require compliance with more extensive U.S. reporting requirements [146]. Shareholder and Governance Issues - The dual-class structure of ordinary shares concentrates voting control with Class B shareholders, potentially misaligning interests with other shareholders [119]. - Cuizhang Gong owns 100% of Class B ordinary shares, giving him majority voting power, classifying the company as a "controlled company" under Nasdaq rules [121]. - The company may experience difficulties in protecting shareholder interests due to its incorporation under Cayman Islands law, which has less developed securities laws compared to the U.S. [130]. - The company has identified material weaknesses in its internal controls over financial reporting, leading to ineffective disclosure controls as of September 30, 2025 [142]. Investment and Growth Strategies - The company aims to secure a total investment of no less than US$100 million through a financial advisor over a two-year term [180]. - The operating entities are planning to open additional virtual reality experience halls in all parks following the refurbishment of the existing facility in Tongling West Lake Amusement World [208]. - The company plans to develop wedding photography and light show projects in collaboration with local partners, sharing project profits during the cooperation period [167]. - An estimated total of RMB326.4 million will be invested in the development of three new amusement parks [209]. Market and Economic Factors - The Chinese economy has experienced uneven growth, and any adverse changes in economic conditions could materially impact the operating entities' business [28]. - The company is sensitive to macroeconomic fluctuations and cultural tourism demand, which could lead to declines in rental income and collections [85]. - The trading price of Class A Ordinary Shares is expected to be volatile, influenced by market factors and company-specific operations [122]. - The company does not expect to pay dividends in the foreseeable future, relying on price appreciation for returns [128]. Tenant and Lease Management - The company faces risks related to tenant performance, which could materially affect revenues and cash flows if tenants default or terminate leases early [80]. - Asset impairment may occur if tenants do not maintain leased amusement assets, potentially leading to significant charges and reduced returns [81]. - The ability to renew leases on favorable terms is uncertain, and failure to do so may lead to significant relocation costs and operational disruptions [98]. - The company has entered into long-term lease agreements with Fuzhou Yibang for amusement parks, generating initial annual rental income of RMB30 million and RMB20 million for Tongling West Lake and Yueyang Amusement Worlds, respectively, with a 2% annual increase [78].
Golden Heaven(GDHG) - 2025 Q4 - Annual Report