Linkage Global Inc(US:LGCB)2026-01-30 21:39Deregistration and Compliance - Linkage Cayman is in the process of deregistration of HQT NETWORK, which ceased operations in April 2025[29]. - The PRC subsidiaries have not provided critical data and personal information outside the territory of the PRC, ensuring compliance with the Personal Information Protection Law[32]. - The Company is not required to complete filing procedures with the CSRC for continued offerings, as the PRC subsidiaries' contributions are under 50% of total financial metrics[33]. - The Company has not received any inquiries or sanctions from the CSRC regarding its planned overseas listing as of the report date[33]. - No permission is required from PRC authorities for the overseas listing of Class A Ordinary Shares, but cybersecurity review may be necessary[46][51]. - The Cybersecurity Review Measures require data processing operators with over one million users to undergo a cybersecurity review before foreign listings[48]. - The Overseas Listing Trial Measures require domestic companies to complete filing procedures with the CSRC within three working days of submitting an application for overseas listing[50]. - The company is not classified as a domestic company under PRC law, thus not subject to certain filing requirements for overseas offerings[51]. - The PRC subsidiaries have not provided personal information outside of China and are believed to be compliant with existing data protection laws[177]. Financial Performance and Dividends - As of the date of the report, no dividends or distributions have been made to shareholders, with future earnings intended to finance business expansion[38]. - Cash dividends on Class A Ordinary Shares may be subject to a withholding tax rate of up to 10% from PRC subsidiaries[41]. - The withholding tax rate may be reduced to 5% if a Hong Kong resident enterprise owns at least 25% of a PRC project, subject to specific requirements[42]. - The value of Class A Ordinary Shares may significantly decline if the company fails to obtain necessary permissions or approvals in the future[51]. - The company does not intend to pay dividends for the foreseeable future, opting to retain earnings for business operation and expansion[126]. - The company relies on dividends from its PRC subsidiaries for cash and financing, which are subject to PRC laws that restrict dividend payments to retained earnings[194]. - Current PRC regulations allow dividends to be paid only from accumulated profits, with at least 10% of profits required to be set aside for reserve funds until reaching 50% of registered capital[218]. Market and Competition - Revenues decreased from $12.73 million in the fiscal year ended September 30, 2023, to $10.29 million in the fiscal year ended September 30, 2024, and further decreased to $5.10 million for the year ended September 30, 2025, primarily due to a decrease in cross-border sales[59]. - The Operating Entities operate in a highly competitive market, facing competition from both offline and online supply chain providers, retailers, and wholesalers, which could adversely affect their results of operations[58]. - The market price of the Class A Ordinary Shares may be volatile or decline regardless of the company's operating performance, making it difficult for prospective investors to assess the rapidly changing value[55]. - The company has no long-term supply agreements with major suppliers, making it reliant on maintaining good relationships to ensure a sufficient selection and volume of products[66]. Regulatory Environment - Recent regulatory changes in China may impose additional compliance requirements for companies seeking to list overseas, impacting future operations[33]. - The enactment of the Hong Kong National Security Law could impact the company's subsidiaries in Hong Kong, introducing legal and operational uncertainties[57]. - The U.S. government has removed Hong Kong's preferential trade status, which could lead to similar tariffs and trade restrictions as those imposed on mainland China[155]. - The Competition Ordinance in Hong Kong prohibits anti-competitive conduct, and the Hong Kong subsidiaries have complied with these regulations[158]. - Changes in China's economic, political, or social conditions could materially affect the PRC subsidiaries' business and operations[160]. - The PRC legal system's rapid evolution and uncertainties in law enforcement may limit legal protections for the company and its subsidiaries[163]. - The interpretation and enforcement of PRC laws may change quickly, leading to uncertainties that could materially affect business operations[164]. - Recent policies from the Chinese government have impacted various industries, including the internet sector, and future regulations could adversely affect the business and financial condition of PRC subsidiaries[169]. Operational Risks - System interruptions or performance failures in technology infrastructure could damage the company's reputation and results of operations, particularly affecting customer data and order fulfillment[61]. - The Operating Entities may face difficulties in attracting and retaining key personnel, which could adversely affect their business plan implementation[77]. - The Operating Entities are materially dependent on third-party manufacturers, and any disruptions could adversely affect their financial performance[71]. - The Operating Entities' international expansion may encounter various risks, including compliance with different legal and regulatory standards in Southeast Asia[75]. - The Operating Entities face potential disruptions and significant relocation expenses due to increases in rental expenses or lease terminations for their warehouse and offices[88]. - Cybersecurity risks pose a significant threat to the Operating Entities, potentially leading to operational disruptions and financial data misstatements[99][100]. - The Operating Entities have established measures to address cybersecurity threats, but there is no assurance that these measures will be fully effective[102]. Corporate Governance and Compliance - The audit committee is responsible for reviewing and approving all material related party transactions, which may present potential conflicts of interest[105]. - The Operating Entities have engaged in substantial transactions with related parties, with amounts due to related parties being $426,043, $314,544, and $1,413,604 for the fiscal years ended September 30, 2025, 2024, and 2023 respectively[103]. - The company may face challenges in maintaining compliance with SEC regulations, which could strain its management and financial resources[123]. - The company is classified as an "emerging growth company" and may take advantage of reduced reporting requirements until it no longer meets the criteria[122]. Currency and Taxation - Fluctuations in exchange rates could materially affect the company's results of operations and the value of investments, with the RMB having appreciated over 20% against the USD since 2005[207]. - The company's financial statements are presented in U.S. dollars, and changes in RMB/USD exchange rates affect asset values and operational results[208]. - The PRC government imposes controls on the convertibility of RMB into foreign currencies, which may restrict the company's ability to pay dividends in foreign currencies[195]. - The PRC tax authority may challenge the company's qualification for preferential tax treatment, potentially subjecting it to a higher withholding tax rate[221]. - If classified as a PRC "resident enterprise," the company could face a 25% enterprise income tax on worldwide income, adversely affecting net income and shareholder returns[210]. Future Outlook and Strategic Plans - The company plans to venture into the Southeast Asian market, indicating a strategy for international expansion[63]. - The Operating Entities plan to expand integrated e-commerce services into Southeast Asia, starting with Thailand, Malaysia, and Indonesia over the next two years[74]. - The company's historical performance may not be sustainable, and it cannot guarantee future growth, with potential negative impacts from inflation and changing economic conditions[59]. - The company is currently evaluating options to regain compliance with Nasdaq's continued listing requirements[138].