Corporate Structure and Governance - The company adopted a dual-class share structure, with Mr. Hongliang Li and Mr. Hongqi Li each owning 50% of the Class B Ordinary Shares, granting them approximately 98.66% of the voting power[23]. - The dual-class voting structure allows directors and officers to hold approximately 98% of the voting power, potentially limiting shareholder influence[149]. - Shareholders of the company have limited rights under Cayman Islands law to inspect corporate records, which may hinder their ability to protect their interests[175]. Regulatory and Compliance Risks - The company faces significant legal and operational risks due to its majority operations in mainland China, including potential regulatory interventions that could adversely affect its business and share value[25]. - The China Securities Regulatory Commission (CSRC) has implemented new regulations for overseas listings, requiring domestic companies to complete filing procedures, which may impact the company's ability to list on U.S. exchanges[26]. - The company is subject to various risks related to compliance with PRC laws, which could materially affect its operations and financial performance[33]. - The Holding Foreign Companies Accountable Act (HFCAA) could lead to the delisting of the company's Class A Ordinary Shares if its auditor is not subject to PCAOB inspections[28]. - The company may be subject to significant legal and administrative liabilities under PRC Trademark Law, including fines and potential redesign of products, which could disrupt operations[52]. - The company must comply with the PRC Anti-unfair Competition Law, which prohibits activities that disrupt market competition and may result in civil, administrative, or criminal liabilities[82]. - The evolving PRC legal system and regulations concerning the oil equipment industries may impose new compliance requirements that could adversely affect the company's operations[98]. - The PRC regulations on loans and direct investments by offshore holding companies may limit the company's ability to fund and expand its business in China[84]. - The approval and filing requirements from the CSRC for future offshore offerings may pose uncertainties and affect the company's ability to raise capital[104]. - The newly enacted HFCAA and AHFCAA impose stricter criteria on companies operating in restrictive markets, potentially leading to delisting risks[108]. Financial Performance and Risks - The company is reliant on a small number of customers for a majority of its revenue, and the loss of any key customer could adversely affect its financial condition[31]. - The company's three largest customers accounted for 42.6% and 45.3% of total operating revenue for the fiscal years ended September 30, 2025 and 2024 respectively, indicating a high concentration of customer revenue[36]. - The company may face significant fluctuations in operating results due to the cyclical nature of the oil and natural gas industry, which is affected by the volatility of commodity prices[37]. - Financial performance is heavily reliant on economic conditions in the oil and gas industry, particularly in China, with volatility in crude oil prices impacting demand for services[59]. - The company may incur penalties if it fails to comply with PRC regulations regarding employee benefits plans and property-related laws, which could adversely affect its business and financial condition[35]. - The company has not historically declared or paid dividends on its Ordinary Shares, meaning returns for investors will primarily depend on share price appreciation[35]. - The company may face delays in using proceeds from offerings due to the need for governmental registration processes in China, potentially affecting business growth strategies[95]. - The company's ability to distribute profits to shareholders may be restricted if PRC residents do not complete necessary foreign exchange registrations[90]. - The company may face tax assessments if equity transfer prices are significantly low without justification, impacting financial performance[134]. - The company faces potential fines ranging from 50% to 500% of unpaid or underpaid taxes due to non-compliance with PRC tax regulations[138]. Operational Challenges - The ongoing military conflict between Russia and Ukraine may negatively impact the company's business operations and financial results[31]. - The ongoing military conflict in Ukraine could lead to significant market disruptions, including volatility in commodity prices and supply chain interruptions, adversely affecting the company's financial condition and results of operations[38]. - The company must continually invest in research and development to remain competitive in the technology-oriented oil and gas industry[31]. - The company faces integration challenges, design defects, and software errors that could lead to delays in product introductions and increased costs[56]. - The company is dependent on skilled personnel, and competition for talent may impact operational effectiveness and profitability[62]. - The COVID-19 pandemic significantly impacted operations and demand for services, with potential future health crises posing ongoing risks[69]. Market and Economic Factors - Fluctuations in exchange rates may have a material adverse effect on the company's results of operations and the value of investments[33]. - Rising labor costs in China may adversely affect the company's profitability if these costs cannot be passed on to customers[115]. - Stricter regulatory requirements regarding labor contracts and employee benefits could limit the company's operational flexibility and impact results[116]. - Potential violations of labor laws may lead to disputes or government investigations, adversely affecting the company's financial condition[117]. Product and Technology Development - The company operates in four segments: clean-energy equipment, new energy production and operation, digitalization and integration equipment, and oil and gas engineering technical services[182]. - The company focuses on providing integrated solutions for natural gas and other clean-energy resources, including LNG, CNG, and solar energy[186]. - The company has developed a solar powered wellhead safety control system to address power supply issues in remote areas, reducing operating and maintenance costs[206]. - The integrated pre-water separation unit reduces investment and land requirements by 50% and 30% compared to traditional processes, improving economic returns[211]. - The company specializes in the design and production of various oil and gas equipment, including metering and pressure regulating skids[219].
Leishen Energy Holding Co., Ltd.(LSE) - 2025 Q4 - Annual Report