20-F: Linkage Global Inc. Files 20-F Report for Fiscal Year 2024, Addressing Regulatory and Financial Landscape

Linkage Global Inc.'s 20-F filing for fiscal year 2024 highlights financial results, regulatory risks in China and Hong Kong, and ongoing efforts to maintain Nasdaq listing compliance.

Summary

• Linkage Global Inc., a Cayman Islands holding company, conducts operations through subsidiaries in Japan, Hong Kong, and mainland China.
• The company's 20-F filing covers the fiscal year ended September 30, 2024, including audited consolidated financial statements for 2024, 2023, and 2022.
• The document addresses legal and operational risks associated with business operations in mainland China and Hong Kong, including cybersecurity, data privacy, and regulatory oversight.
• The company states that it is compliant with the Personal Information Protection Law of the PRC (PIPL) and has not provided critical data and personal information outside the territory of the PRC.
• The company's PRC legal counsel has advised that the company is not required to complete filing procedures with the CSRC for continued offerings, given that the PRC subsidiaries account for under 50% of the company's operating revenue, total profit, total assets, or net assets.
• The company is addressing a Nasdaq notification regarding minimum bid price compliance and is evaluating options to regain compliance.
• The company's revenues decreased from $22.03 million in fiscal year 2022 to $10.29 million in fiscal year 2024, primarily due to a decrease in cross-border sales.
• The company has established controls and procedures for cash flows within its organization based on internal cash management policies.
• The company intends to keep any future earnings to finance the expansion of its business and does not anticipate paying any cash dividends in the foreseeable future.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While it highlights efforts to address regulatory challenges and expand into new markets, it also acknowledges declining revenues and material weaknesses in internal controls.

Positives

• The company is compliant with the Personal Information Protection Law of the PRC (PIPL).
• The company's PRC legal counsel has advised that the company is not required to complete filing procedures with the CSRC for continued offerings.
• The company is taking steps to address a Nasdaq notification regarding minimum bid price compliance.
• The company has established controls and procedures for cash flows within its organization.
• The company is implementing remedial measures to address material weaknesses in its internal control over financial reporting.

Negatives

• The company's revenues decreased from $22.03 million in fiscal year 2022 to $10.29 million in fiscal year 2024, primarily due to a decrease in cross-border sales.
• The company has identified material weaknesses in its internal control over financial reporting.
• The company is addressing a Nasdaq notification regarding minimum bid price compliance, with a compliance period until April 29, 2025.

Risks

• The company faces legal and operational risks associated with business operations in mainland China and Hong Kong, including cybersecurity, data privacy, and regulatory oversight.
• The company's PRC subsidiaries are subject to restrictions and limitations on their ability to distribute earnings.
• The company's Class A Ordinary Shares may be prohibited from trading on a national exchange under the Holding Foreign Companies Accountable Act (HFCA Act) if the PCAOB is unable to inspect the company's auditors for two consecutive years.
• The company's ability to raise capital in the future may be limited.
• The company may be classified as a PFIC, which could have adverse U.S. federal income tax consequences for U.S. taxpayers who are shareholders.

Future Outlook

The company plans to selectively launch its integrated e-commerce related services in other countries in Southeast Asia during the next two years, starting from markets such as Thailand, Malaysia, and Indonesia.

Industry Context

The cross-border e-commerce service provider industry in Japan and China is highly-competitive and rapidly evolving, with many new companies joining the competition in recent years and few leading companies.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or comparable companies.
• The document does not provide specific details about comparable projects or results.

Related Party Transactions

• The company has entered into a substantial number of transactions with certain related parties, including Ms. Xiaoyu Qi, the spouse of Zhihua Wu, our chief executive officer and director, Mr. Fuyunishiki Ryo, our director, Mr. Zhihua Wu, our chief executive officer and director, Shunyu Wu, head of our digital marketing sales department, and Ishiyama Real Estate Co. Ltd., an investee of our company.

Stakeholder Impact

• Shareholders may experience volatility in the market price of the company's Class A Ordinary Shares.
• Shareholders may be subject to adverse U.S. federal income tax consequences if the company is classified as a PFIC.
• The company's ability to pay dividends is dependent on the performance of its subsidiaries and is subject to regulatory restrictions.
• The company's employees are subject to labor laws and social welfare regulations in the PRC and Japan.

Next Steps

• The company is evaluating options to regain compliance with Nasdaq's continued listing requirement.
• The company intends to selectively launch its integrated e-commerce related services in other countries in Southeast Asia during the next two years, starting from markets such as Thailand, Malaysia, and Indonesia.
• The company plans to adopt additional measures to improve its internal control over financial reporting.

Key Dates

Keywords

Linkage Global, 20-F, financial report, regulatory risks, China, Hong Kong, PCAOB, internal controls, cybersecurity, data privacy, Nasdaq, listing compliance, financial results, cross-border sales, Overseas Listing Trial Measures, CSRC