Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.
The
information set forth in this section contains certain “forward-looking statements”, including, among others (i) expected
changes in our revenue and profitability, (ii) prospective business opportunities and (iii) our strategy for financing our business.
Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking
statements may be identified by use of terms such as “believes”, “anticipates”, “intends” or “expects”.
These forward-looking statements relate to our plans, liquidity, ability to complete financing and purchase capital expenditures, growth
of our business including entering into future agreements with companies, and plans to successfully expand our business. We have based
these forward-looking statements largely on our current expectations and projections about future events and financial trends that we
believe may affect our financial condition, results of operations, business strategy and financial needs.
Although
we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds
of our knowledge of our business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion
of forward-looking statements in this Annual Report should not be regarded as a representation by us or any other person that our objectives
or plans will be achieved.
We
assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting
forward-looking statements.
Our
revenues and results of operations could differ materially from those projected in the forward-looking statements as a result of numerous
factors, including, but not limited to, the following: the risk of significant natural disaster, the inability of our company to insure
against certain risks, inflationary and deflationary conditions and cycles, currency exchange rates, and changing government regulations
affecting our operations.
You
should read the following discussion and analysis in conjunction with the Financial Statements and Notes attached hereto, and the other
financial data appearing elsewhere in this Annual Report.
US
Dollars are denoted herein by “USD”, “$” and “dollars”.
General
Overview of Operations
We
own and operate two public golf country clubs in Florida that we acquired in 2014. Our golf country clubs include two golf-courses with
over 13,000 yards of combined fairways, clubhouses boasting food and beverage options, aquatic golf ranges, and pro shops to assist any
level of golfers. Our two golf country clubs are situated on over 289 acres of multi-service recreational property.
37
Each
of our golf country clubs is organized into four revenue streams: (i) golf operations, (ii) sales of food and beverage; (iii) sales of
merchandise; and (iv) ancillary income.
On
February 13, 2025, the Company announced the closing of its initial public offering (“IPO”) of 3,000,000 shares of common
stock, US$0.001 par value per stock share at an offering price of US$4.00 per share for a total of US$12,000,000 in gross proceeds. The
Company raised total net proceeds of approximately US$10.6 million after deducting underwriting discounts and commissions and offering
expenses.
Management’s
Plans
Over
the next twelve months, we plan to continue to promote, market, manage and operate our golf country clubs with the intent to (i) attract
and retain customers across a number of demographic groups to further develop customer loyalty and capture a greater share of customers
in the greater Orlando Florida region and (ii) increase revenue from managing and operating our golf country clubs.
We
believe attracting and retaining customers while increasing customer engagement and loyalty by providing what we believe to be a high
quality golfing experience will drive our revenue. Drivers of our revenue growth will require further steps to maintain and build on
quality experiences at our golf country clubs. To achieve the foregoing, we intend to focus on:
●
Renovating
and modernizing our golf country clubs to promote more enjoyable use of our facilities;
●
Retaining
new regional customers from the growth of the surrounding greater Orlando Florida region through marketing efforts; and
●
Expanding
our portfolio through regional country club acquisitions.
Key
Factors Affecting our Results of Operations
a.
Seasonality
and weather
Our
businesses are subject to seasonality and typically the first quarter of each year is our busiest season of the year. Then, even during
our busy season, our business activities are affected by weather conditions. In 2023, we believe that we experienced very few rainy days
during the first quarter making almost every day of the busiest season a suitable day for playing golf.
b.
Cost
of maintenance due to inflation
Our
maintenance contract with our major vendor, SSS Down to Earth, LLC (“DTE”) an independently contracted country club consultancy
and golf maintenance company, was only renewed in 2022 and the renewed contractual price did not fully reflect the inflationary environment
that subsequently impacted the labor, fertilizer and chemical markets. In order to maintain our golf courses at a quality level that
is consistent with our price points, after thorough discussions with the management of DTE, we had agreed to increase our contract price
with DTE by a total of $200,000 starting in October 2023. This increase did not fully impact our cost basis in 2023 but will be in 2024.
The maintenance cost and contract with DTE may be subject to further increases in 2024 if the inflationary environment continues to impact
our maintenance needs.
Basis
of Presentation
The
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”). The financial statements include the accounts of the Company and its wholly-owned subsidiaries.
A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. The financial statements
of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. All significant
inter-company transactions and balances between members of the Group are eliminated upon consolidation.
38
Critical
Accounting Policies, Judgments and Estimates
We
have identified certain accounting policies that are significant to the preparation of our Group’s financial information. Some
of our accounting policies involve subjective assumptions and estimates, as well as complex judgements relating to accounting items.
In each case, the determination of these items requires management judgements based on information and financial data that may change
in future periods. When reviewing our financial statements, you should consider: (i) our selection of accounting policies; and (ii) the
results to changes in conditions and assumptions. We set forth below those accounting policies that we believe are of critical importance
to us or involve the most significant estimates and judgements used in the preparation of our Group’s financial statements.
Results
of Operations
For the Years Ended December 31,
2024
2023
2022
Revenue
Golf operations
2,443,178
2,643,856
2,310,615
Sales of food and beverage
648,738
682,281
517,694
Sales of merchandise
115,262
138,450
99,366
Ancillary revenue
91,183
90,125
80,979
Total revenue
3,298,361
3,554,712
3,008,654
Operating costs:
Golf operating costs (exclusive of depreciation and salaries and benefits shown separately below)
1,367,958
1,189,889
1,015,852
Cost of food and beverage sales (exclusive of depreciation and salaries and benefits shown separately below)
186,602
209,226
167,614
Cost of merchandise sales (exclusive of depreciation and salaries and benefits shown separately below)
54,876
92,675
56,228
Salaries and benefits
724,157
683,941
556,880
Depreciation
201,113
174,207
163,371
Other general and administration expenses
945,687
951,616
580,463
Total operating costs
3,480,393
3,301,554
2,540,408
(Loss) income from operations
(182,032 )
253,158
468,246
Other income (expense)
Interest expense
(25,550 )
(30,393 )
(36,196 )
Other income
44,818
28,098
8,900
Total other income (expense), net
19,268
(2,295 )
(27,296 )
(Loss) income before income tax
(162,764 )
250,863
440,950
Income tax (benefits) expenses
20,936
(135,265 )
117,757
Net (Loss) Income
(183,700 )
386,128
323,193
39
Revenue
Revenues
disaggregated by major revenue streams for years ended December 31, 2024, 2023 and 2022 are disclosed in the table below:
For the Years
Ended
2024 vs 2023
2023 vs 2022
December
31,
Changes
Changes
2024
2023
2022
$
%
$
%
Golf operations
– annual
membership dues
$ 303,542
$ 168,723
$ 230,874
$ 134,819
80 %
$ (62,151 )
(27 )%
– one-time green fees
2,139,636
2,475,133
2,079,741
(335,497 )
(14 )%
395,392
19 %
Sales of food and beverage
648,738
682,281
517,694
(33,543 )
(5 )%
164,587
32 %
Sales of merchandise
115,262
138,450
99,366
(23,188 )
(17 )%
39,084
39 %
Ancillary
revenue
91,183
90,125
80,979
1,058
1 %
9,146
11 %
$ 3,298,361
$ 3,554,712
$ 3,008,654
$ (256,351 )
(7 )%
$ 546,058
18 %
Comparison
for the years ended December 31, 2024 and 2023
Our
revenue is mainly comprised of golf operations, sales of food and beverage and sales of merchandise. Overall decrease in revenue period
over period by $256,351 or 7% was mainly due to the decrease in one-time green fees from golf operations and the associated sales of
food and beverage and merchandise, and partially offset by the increase in annual membership dues.
Revenue
from golf operations decreased by $200,678 or 8% from $2,643,856 for the year ended December 31, 2023 to $2,443,178 for the year ended
December 31, 2024, which was mainly driven by the decrease in one-time green fees from golf operations by $335,497 or 14%, partially
offset by the increase in annual membership dues by $134,819 or 80%.
Revenue
from annual membership dues accounted for 9% and 5% of total revenue for the years ended December 31, 2024 and 2023. It increased by
$134,819 or 80% mainly due to more receipts in advance closed to the year ended December 31, 2023 and deferred to be recognized as revenue
during the year ended December 31, 2024.
One-time
green fees from golf operations accounted for 65% and 70% of total revenue for the years ended December 31, 2024 and 2023 respectively.
Decrease in one-time greens fees by 14% resulted from the decrease in total number of rounds by approximately 15% from approximately
66,000 rounds during the year ended December 31, 2023 to approximately 56,000 rounds during the year ended December 31, 2024 despite
the increase in average price per round by approximately 3% from $37 per round for the year ended December 31, 2023 to $38 per round
for the year ended December 31, 2024. Decrease in number of rounds was mainly due to more rainy days during the year ended December 31,
2024.
Decrease
in revenue from sales of food and beverage by $33,543 or 5% from $682,281 for the year ended December 31, 2023 to $648,738 for the year
ended December 31, 2024 was contributed by a decrease in quantities sold by 11% from approximately 116,000 pieces of food and beverage
for the year ended December 31, 2023 to approximately 103,000 pieces of food and beverage for the year ended December 31, 2024 while
the average unit price remained stable at $6 per unit for both periods. The decrease in quantities sold was in line with decrease in
golf operations.
40
Decrease
in revenue from sales of merchandise by $23,188 or 17% from $138,450 for the year ended December 31, 2023 to $115,262 for the year ended
December 31, 2024 was contributed by a decrease in sales of golf balls, men’s wear and headwear by 17% as a result of the decrease
in customers playing golf during the year ended December 31, 2024 which was mainly due to the decrease in revenue from golf operations
as a result of decrease in customers visiting our pro shops.
Ancillary
revenue mainly represented the equipment and facilities rental, including the lease of our clubhouse and lease of golf club to our customers.
The increase slightly by $1,058 or 1% was mainly due to an increase in demand for rental services for activities and events during the
year ended December 31, 2024.
Comparison
for the years ended December 31, 2023 and 2022
Our
revenue is comprised of golf operations, sales of food and beverage and sales of merchandise. Overall increase in revenue year over year
by $546,058 or 18% was mainly due to the increase in one-time green fees from golf operations, sales of food and beverage and sales of
merchandise which was partially offset by decrease in annual membership dues from golf operations.
Revenue
from golf operations increased by $333,241 or 14% from $2,310,615 for the year ended December 31, 2022 to $2,643,856 for the year ended
December 31, 2023, which was driven by the increase in one-time green fees from golf operations by $395,392 or 19% which partially offset
the decrease in annual membership dues from golf operations by $62,151 or 27%.
One-time
green fees from golf operations accounted for 70% and 69% of total revenue for the years ended December 31, 2023 and 2022 respectively.
Increase in one-time greens fees by 19% resulted from the increase in total number of rounds by 10% from approximately 50,000 rounds
during fiscal year ended 2022 to approximately 55,000 rounds during fiscal year ended 2023 as well as the increase in average price per
round by 8% from $39 per round December 31, 2022 to $42 per round for the year ended December 31, 2023.
Annual
memberships decreased by 27% was mainly due to most of the annual membership dues being received during the third quarter during the
year ended December 31, 2023 and the remaining unused monthly services were deferred to the year of 2024.
Increase
in revenue from sales of food and beverage by $164,587 or 32% from $517,694 for the year ended December 31, 2022 to $682,281 for the
year ended December 31, 2023, which was contributed by the increase in quantities sold by 16% from approximately 100,000 for the year
ended December 31, 2022 to approximately 116,000 for the year ended December 31, 2023 and the average unit price remained stable at $6
per unit for the year ended December 31, 2022 and $6 for the year ended December 31, 2023. The increase in quantity sold was in line
with increase in golf operations.
Increase
in revenue from sales of merchandise by $39,084 or 39% from $99,366 for the year ended December 31, 2022 to $138,450 for the year ended
December 31, 2023, which was contributed by the increase in sales of golf balls, men’s and ladies’ wear and gloves by 44%
as a result of the increase in sales to customers playing golf during the year ended December 31, 2023.
Ancillary
revenue mainly represented the equipment and facilities rental, including the lease of our clubhouse and lease of golf club to our customers.
The increase by $9,146 or 11% was mainly due to increase in demand for rental services for activities and events during the year ended
December 31, 2023.
41
Operating
expenses
Operating
expenses consisted of the following:
For the Years Ended
2024 vs 2023
2023 vs 2022
December 31,
Changes
Changes
2024
2023
2022
$
%
$
%
Golf operating costs(1)
$ 1,367,958
$ 1,189,889
$ 1,015,852
$ 178,069
15 %
$ 174,037
17 %
Cost of food and beverage sales(1)
186,602
209,226
167,614
(22,624 )
(11 )%
41,612
25 %
Cost of merchandise sales(1)
54,876
92,675
56,228
(37,799 )
(41 )%
36,447
65 %
Salaries and benefits
724,157
683,941
556,880
40,216
6 %
127,061
23 %
Depreciation
201,113
174,207
163,371
26,906
15 %
10,836
7 %
Other general and administrative expenses
945,687
951,616
580,463
(5,929 )
(1 )%
371,153
64 %
$ 3,480,393
$ 3,301,554
$ 2,540,408
$ 178,839
5 %
$ 761,146
30 %
(1)
Exclusive
of depreciation and salaries and benefits shown separately above.
Comparison
for the years ended December 31, 2024 and 2023
The
operating expenses of the Company mainly consist of costs related to golf operations, costs related to sales of food and beverage and
merchandise, salaries and benefits, depreciation and other miscellaneous administrative expenses. The overall operating expenses increased
by $178,839 or 5% from $3,301,554 for the year ended December 31, 2023 to $3,480,393 for the year ended December 31, 2024, which was
primarily due to increases in golf operating costs, salaries and benefits and depreciation and partially offset by the decrease in cost
of food and beverages sales and cost of merchandise sales during the current year with details discussed below.
Golf
operating expenses consisted of course upkeep expenses including the regular repair and maintenance of the golf courses and landscaping.
Golf operating expenses increased by $178,069 or 15% from $1,189,889 for the year ended December 31, 2023 to $1,367,958 for the year
ended December 31, 2024, which was attributable to the increase in contractual landscaping and repair and maintenance by $115,715 with
our largest vendor, Down to Earth, during the year ended December 31, 2024 as a result of inflation.
The
decrease in cost of food and beverage sales by $22,624 or 11% from $209,226 for the year ended December 31, 2023 to $186,602 for the
year ended December 31, 2024 was in line with the decrease in sales of food and beverage.
Our
cost of merchandise sales consisted of mainly the purchase cost of golf balls, men’s and ladies’ wear, gloves and headwear.
Decrease in cost of merchandise sales by $37,799 was in line with the decrease in revenue from golf operations.
Our
salaries and benefits mainly consisted of the director’s remuneration, the staff costs and welfare of management, operating team,
cashier and administrative personnel. The increase in salaries and benefits by $40,216 or 6% was primarily due to the increase in mandatory
minimum wage by $1 per hour and the salaries paid to the Chief Financial Officer who had joined the Company since November 2023.
42
Our
depreciation is mainly derived from depreciation of the recreational building, golf carts, pump stations and other operating equipment.
The increase in depreciation was mainly due to the replacement of a pump station having 15 years useful life and air-conditioning system
having 5 years of useful life with total acquisition costs of $181,471, of which $103,436 was paid and recognized as prepayment for acquisition
of property and equipment in the prior year.
Other
general and administrative expenses mainly consisted of professional fees, repair and maintenance of restaurant machinery and equipment,
utilities, liability insurance, personal property tax and real estate tax, credit card charges and other miscellaneous administrative
expenses. Other general and administrative expenses remained stable at $951,616 for the year ended December 31, 2023 and $945,687 for
the year ended December 31, 2024.
Comparison
for the years ended December 31, 2023 and 2022
The
operating expenses of the Company mainly consists of costs related to golf operations, costs related to sales of food and beverage and
merchandise, salaries and benefits, depreciation and other miscellaneous administrative expenses. The overall operating expenses increased
by $761,146 or 30% from $2,540,408 for the year ended December 31, 2022 to $3,301,554 for the year ended December 31, 2023 which was
primarily due to increases across all operating cost categories during the current year discussed below.
Golf
operating expenses consisted of course upkeep expenses including the regular repair and maintenance of the golf courses and landscaping.
Increase in golf operating expenses increased by $174,037 or 17% from $1,015,852 for the year ended December 31, 2022 to $1,189,889 for
the year ended December 31, 2023 which was attributable to the increase in number of rounds by golf players as discussed in revenue above
which was resulted in increase in the frequency of landscaping and repair and maintenance of equipment required by 16%.
The
increase in cost of food and beverage by $41,612 or 25% from $167,614 for the year ended December 31, 2022 to $209,226 for the year ended
December 31, 2023 was in line with the increase in sales of food and beverage.
Our
cost of merchandise sales consisted of mainly the purchase cost of golf balls, men’s and ladies’ wears and gloves. Increase
in cost of merchandise sales was mainly due to the combined effect of (i) increase in revenue from sales of merchandise; and (ii) average
purchase costs for golf balls, men’s and ladies’ wear and gloves increased by 43%.
Our
salaries and benefits mainly consisted of the director’s remuneration, the staff costs and welfare of management, operating team,
cashier and administrative personnel. The increase in salaries and benefits by 23% was primarily due to increased mandatory minimum wage
and inflation driven cost of living adjustments to key management members and staff by 23% as compared to prior year.
Our
depreciation is mainly derived from the recreational building, golf carts, pump stations and other operating equipment. The increase
in depreciation was mainly due to the acquisition of a pump station, cooler and freezer and air-conditioning system resulting in an aggregate
depreciation of approximately $148,000 during the year ended December 31, 2023.
Other
general and administrative expenses mainly consisted of professional fees, repair and maintenance of restaurant machineries and equipment,
utilities, liability insurance, personal property tax and real estate tax, credit card charges and other miscellaneous administrative
expenses. Increase in other general and administrative expenses by $371,153 or 64% from $580,463 for the year ended December 31, 2022
to $951,616 for the year ended December 31, 2023 was attributable to the increase in insurance expenses by approximately $35,000 resulted
in obtaining coverage in the State of Florida; (ii) increase in repair and maintenance of restaurant machineries and equipment by $30,000;
and (iii) increase in audit fee of $268,000 for listing purpose.
Other
income (expenses)
Other
income (expenses) mainly includes interest expenses regarding the bank other borrowings incurred, bank interest income and
additional service charges from customers who paid by credit cards. The increase in other income by $21,563 for the year ended
December 31, 2024 and the decrease in other expenses by
$25,001 for the year ended December 31, 2023 was mainly due to the increase in service charges from customers due to more
usage of credit cards by the customers and increase in bank interest income.
43
Income
tax expenses (benefits)
The
Company provides for income tax under ASC 740, “Income Taxes” under the asset and liability method of ASC 740, deferred tax
assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities
and the tax rates in effect when these differences are expected to reverse. A valuation allowance is provided for certain deferred tax
assets if it is more likely than not that the Company will not realize tax assets through future operations.
The
Company is incorporated in the State of Nevada and is not subject to tax on income or capital gains under current Nevada law. In addition,
upon payments of dividends by these entities to their shareholders, no Nevada withholding tax will be imposed.
The
Company’s deferred tax asset and income tax expenses are computed at the federal statutory rate of 21% and state of Florida tax
rate of 5.5% to the income tax amount recorded for the years ended December 31, 2024 and 2023.
The
Group evaluated the recoverable amounts of deferred tax assets to the extent that future taxable profits will be available against which
the net operating losses and temporary difference can be utilized.
As
of December 31, 2024, the Company had $857,177 of net operating losses (“NOLs”) which can be carried forward indefinitely.
The
NOLs carry forwards are subject to certain limitations due to the change in control of the Company pursuant to Internal Revenue Code
Section 382.
The
Company recorded income tax expenses of $20,936 for the year ended December 31, 2024 while income tax benefits of $135,265 for the year
ended December 31, 2023 and income tax expenses of $117,757 for the year ended December 31, 2022. Please refer to Note 12 – Income
Tax to the Consolidated Financial Statements for more details.
Net
(loss) income
Our
net loss for the year ended December 31, 2024 was $183,700 as compared to a net income of $386,128 for the year ended December 31, 2023.
The decrease in net income by $569,828 or 148% was mainly due to the decrease in our revenue by $256,351 and increase in our operating
costs by $178,839 mainly due to the increase in golf operating costs as mentioned above and increase in income tax expense due to utilization
of NOLs for the year ended December 31, 2024.
Our
income for the years ended December 31, 2023 and 2022, was $386,128 and $323,193, respectively. The increase of net income by $62,935
or 19% was mainly due to the increase in our revenue during the year ended December 31, 2023 and recognition of deferred tax assets on
NOLs as discussed above.
Working
Capital
The
following table summarizes our cash and working capital as of December 31, 2024 and 2023:
December 31,
December 31,
2024
2023
Changes
%
Cash and cash
equivalents
$ 457,142
$ 646,294
$ (189,152 )
(29 )%
Accounts receivable –
net
20,778
36,299
(15,521 )
(43 )%
Short-term investment
6,778
-
6,778
100 %
Inventories, net
55,817
55,704
113
0 %
Deferred offering costs
582,679
252,964
329,715
130 %
Other
current assets
2,078
125
1,953
1,562 %
Total
currents assets
$ 1,125,272
$ 991,386
$ 133,886
14 %
Accounts payable and accrued
liabilities
$ 420,005
$ 495,930
$ (75,925 )
(15 )%
Contract liabilities –
deferred revenue
162,226
158,429
3,797
2 %
Bank and other borrowings
– current
94,007
135,970
(41,963 )
(31 )%
Operating lease liabilities
– current
195,115
222,275
(27,160 )
(12 )%
Due to
related parties
2,532,160
1,651,407
880,753
53 %
Total
current liabilities
$ 3,403,513
$ 2,664,011
$ 739,502
28 %
Working
Capital Deficiency
$ (2,278,241 )
$ (1,672,625 )
$ (605,616 )
36 %
44
Accounts
receivables
Accounts
receivable mainly represent amounts due from customers paid by credit cards from provision of golf operations services and sales of merchandise
and food and beverages which are recorded net of allowance for expected credit losses. The decrease in accounts receivables from $36,299
as of December 31, 2023 to $20,778 as of December 31, 2024 was mainly due to the less customers who paid by credit cards near the year
end.
Inventories
Our
inventories consist of merchandise goods such as golf balls, gloves, men’s wear and women’s wears, food and beverages. The
Company keeps low inventories since the turnaround time is short.
Deferred
offering costs
Deferred
offering costs consist of underwriting, legal and other expenses incurred through the balance sheet date that are directly related to
the intended initial public offering (“IPO”). Deferred offering costs will be charged to shareholders’ equity netted
against the proceeds upon the completion of our proposed initial public offering (“IPO”). Should the IPO prove to be unsuccessful,
these deferred offering costs, as well as additional expenses to be incurred, will be charged to statements of operations. Such costs
will be deferred until the closing of the IPO, at which time the deferred costs will be offset against the offering proceeds and recognized
in equity of the Company. The increase of $329,715 was due to additional payment for expenses for listing purpose during the year ended
December 31, 2024.
Accounts
payable and accrued liabilities
Accounts
payable and accrued liabilities represented the payable to the vendors for the course upkeep costs, credit cards charge payables, sales
tax payables and property tax payable. Decrease in accounts payable and accrued liabilities balance by $75,925 or 15% from $495,930 as
of December 31, 2023 to $420,005 as of December 31, 2024 was mainly due to the decrease in accounts payable by $121,708 as a result of
settlement of payables to vendors outweighed the costs incurred to vendors during the year ended December 31, 2024 and offset by the
increase in accrued expenses of $65,042 in relation to the audit fee.
Contract
liabilities – deferred revenue
Contract
liabilities – deferred revenue represented the annual membership dues received in advance before the usage of golf course by customers.
The increase in this balance by $3,797 or 2% was mainly due to annual membership dues being received in advance outweighed the revenue
recognized during the year ended December 31, 2024.
Bank
and Other Borrowings
The
Company borrowed loans from various financial institutions for working capital purposes. Our borrowings are as follows as of December
31, 2024 and 2023:
Initiation
date
Loan No.
Principal
Amount
Maturity
date
Fixed Interest
Rate
December 31,
2024
December 31,
2023
May 13, 2020
#1
$ 500,000
April 13,2050
3.75 %
$ -
$ 488,961
May 17, 2022
#2
$ 25,050
August 1,2025
5.50 %
5,022
13,975
September 9, 2022
#3
$ 150,000
September 9, 2025
6.75 %
40,438
91,202
August 1, 2023
#4
$ 87,199
July 1, 2031
6.50 %
66,413
74,089
November 13, 2023
#5
$ 120,000
November 13, 2026
9.25 %
80,505
117,088
Total loans payable
192,378
785,315
Current portion
(94,007 )
(135,970 )
Long-term portion
$ 98,371
$ 649,345
The
overall decrease in bank and other borrowings was mainly due to the repayment of loans of $592,937 during the year ended December 31,
2024.
45
Operating
lease liabilities
The
operating leases liabilities represented the leases for golf carts and golf equipment for terms of four to five years. The decrease in
the operating leases – current was mainly due to the amortization for the year ended December 31, 2024.
Amounts
due to related parties
Amounts
due to related parties consists of the following:
Name
Relationship
Nature
December 31, 2024
December 31, 2023
Mr. Cheung Ching Ping
Shareholder of the Company
Interest-free listing expense loans (1)
$ 1,021,617
$ 520,964
Mr. Cheung Ching Ping
Shareholder of the Company
Interest-free shareholder’s loans (2)
607,272
472,272
Mr. Cheung Chi Ping
Shareholder and Director of the Company
Interest-free shareholder’s loans (2)
485,917
377,817
Mr. Cheung Chi Ping
Shareholder and Director of the Company
Director’s remunerations (3)
295,900
185,900
Mr. Cheung Yick Chung
Shareholder of the Company
Interest-free shareholder’s loans (2)
121,454
94,454
$ 2,532,160
$ 1,651,407
Notes:
(1)
On
September 7, 2023, Mr. Cheung Ching Ping, a shareholder of the Company, entered into a loan facility agreement with the Company that
Mr. Cheung Ching Ping agreed to pay the listing expenses incurred for the initial public offering in Nasdaq on behalf of the Company
before listing with a maximum principal amount of $1,000,000. Pursuant to the facility agreement, the loan is interest-free, unsecured
and repayable on the earlier of the listing of our common stock on Nasdaq, or December 31, 2025. As of December 31, 2024 and 2023,
amount of listing expenses paid by Mr. Cheung Ching Ping on behalf of the Company was $1,021,617 and $520,964.
(2)
On
April 24, 2014, Mr. Cheung Ching Ping, Mr. Cheung Chi Ping and Mr. Cheung Yick Chung entered into two shareholders’ loan agreements
with Chrome Field I, Inc. and Chrome Field II, Inc., wholly-owned subsidiaries of the Company, respectively. Pursuant to the shareholders’
loan agreements, Mr. Cheung Ching Ping, Mr. Cheung Chi Ping and Mr. Cheung Yick Chung agreed to grant shareholders’ loans at
principal amounts of $1,307,619.69 and $1,447,739.16 to Chrome Field I, Inc. and Chrome Field II, Inc., respectively, in a proportion
of 50%, 40% and 10%, respectively, in connection with the acquisition of Kissimmee Bay and Remington in 2014. Pursuant to the shareholders’
loan agreements, the loans are interest-free, unsecured and to repayable on demand. As of December 31, 2024, amount of outstanding
shareholders’ loans owned by the Company to Mr. Cheung Ching Ping, Mr. Cheung Chi Ping and Mr. Cheung Yick Chung was $607,272,
$485,917 and $121,454, respectively. As of December 31, 2023, amount of outstanding shareholders’ loans owned by the Company
to Mr. Cheung Ching Ping, Mr. Cheung Chi Ping and Mr. Cheung Yick Chung was $472,272, $377,817 and $94,454, respectively.
(3)
For
the sake of compensating Mr. Cheung Chi Ping’s involvement in the daily operations and management of golf operations of the
Company, director’s remuneration was granted by the Company every year based on the performance of the Company. For the years
ended December 31, 2024 and 2023, the Company charged $110,000 and $110,000, respectively, as director’s remuneration to Mr.
Cheung Chi Ping and recognized under salaries and benefits on the statements of operations. The balance is interest-free, unsecured
and repayable on demand. As of December 31, 2024 and 2023, outstanding director’s remuneration was $295,900 and $185,900, respectively.
46
Mr.
Cheung Ching Ping, Mr. Cheung Chi Ping and Mr. Cheung Yick Chung signed an undertaking that no demand on repayment from the Company since
December 31, 2022 and all the outstanding balances, other than the director’s remuneration of $295,900 to Mr. Cheung Chi Ping and
expected to be settled within one year, were fully settled in subsequent between February and March 2025.
Cash
Flows
The
following table summarizes our cash flows from operating, investing and financing activities for the years ended December 31, 2024, 2023
and 2022:
For the Years Ended
2024 vs 2023
2023 vs 2022
December 31,
Changes
Changes
2024
2023
2022
$
$
Cash provided by Operating Activities
$
89,676
$
848,032
$
576,256
$
(758,356
)
$
271,776
Cash used in Investing Activities
(133,457
)
(251,389
)
(207,582
)
117,932
(43,807
)
Cash used in Financing Activities
(145,371
)
(643,500
)
(364,781
)
498,129
(278,719
)
Net change in cash and cash equivalents
$
(189,152
)
$
(46,857
)
$
3,893
$
(142,295
)
$
(50,750
)
Cash
Flow from Operating Activities
During
the fiscal year ended December 31, 2024, our net cash provided by operating activities was approximately $89,676, primarily arising from
net loss of $183,700, as adjusted for non-cash items and changes in operating assets and liabilities. Adjustment for non-cash items mainly
consisted of depreciation of $201,113 and unpaid director’s remuneration of $110,000. Changes in operating assets and liabilities
mainly include (i) a decrease in accounts receivables of $15,521 due to decrease in customers who paid by credit cards near the year
end; (ii) a decrease in accounts payable and accrued liabilities of $75,925 due to decrease in accounts payable by $121,708 as a result
of settlement of payables to vendors outweighed the costs incurred to vendors and offset by the increase in accrued expenses of $65,042
in relation to the audit fee; and (iii) increase in deferred tax liabilities of $11,958 due to increase in the temporary difference derived
from the accelerated depreciation of property and equipment.
During
the fiscal year ended December 31, 2023, our net cash provided by operating activities was approximately $848,032, primarily arising
from net income of $386,128, and adjusted for non-cash items and changes in operating assets and liabilities. Adjustment for non-cash
item mainly consisted of depreciation of $174,207 and unpaid director’s remuneration of $100,000. Changes in operating assets and
liabilities mainly include (i) an increase in deferred tax assets of $162,557 due to $274,075 being recognized during the year for the
NOLs and partially offset by the utilization of NOLs for the current year ended December 31, 2023 as mentioned above; (ii) an increase
in accounts payable and accrued liabilities of $187,536 due to increase in accounts payable to vendors for the course upkeep costs; and
(iii) an increase in contract liabilities of $138,973 due to a large portion of annual membership dues being received in the third quarter
of 2023 for services to be used by customers partly in fiscal year 2024.
47
During
the fiscal year ended December 31, 2022, our net cash provided by operating activities was approximately $576,256, which was driven by
net income of $323,193, and adjusted for non-cash items and changes in operating assets and liabilities. Adjustment for non-cash item
mainly consisted of depreciation of $163,371 and unpaid director’s remuneration of $30,000. Changes in operating assets and liabilities
mainly include (i) a decrease in deferred tax assets of $99,765 due to the prior year tax credits; (ii) an increase in inventory of $33,742
due to an increase in unsold merchandise goods; and (iii) a decrease in accounts payable and accrued liabilities of $39,424 due to a
decrease in accounts payable.
Cash
Flows from Investing Activities
During
the fiscal year ended December 31, 2024, cash flows used in investing activities were mainly for the purchase of property and
equipment of $126,679 including pump station and the installation of new air-conditioner system and our investment in money market
funds which comprises of United States short-term treasury bills of $6,778.
During
the fiscal year ended December 31, 2023, cash flows used in investing activities were for the purchase of property and equipment and
prepayment for acquisition of property and equipment of $147,953 and $103,436, respectively. The purchase and the prepayment for acquisition
of property and equipment was due to payments for clubhouse renovations such as roof replacement, clubhouse exterior wall painting, down
payment for a new pump station to replace the old one and down payment for a new air-conditioner system to be installed to replace the
old one.
During
the fiscal year ended December 31, 2022, cash flows used in investing activities were for the purchase of property and equipment of $207,582,
it is mainly due to payments for the course renovations, roof replacement and bridge improvement.
Cash
Flows from Financing Activities
During
the fiscal year ended December 31, 2024, cash used in financing activities was the result of deferred offering costs of $329,715 and
repayments of bank and other borrowings of $592,937 and partially offset by net proceeds from related party loans of $770,753.
During
the fiscal year ended December 31, 2023, cash used in financing activities was the result of net repayments of related party loans of
$514,136 and deferred offering costs of $252,964 offset by net proceeds from bank and other borrowings of $123,600.
During
the fiscal year ended December 31, 2022, cash used in financing activities was the result of net repayments of related party loans of
$466,000 offset by net proceeds from bank and other borrowings of $101,219.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that
is material to stockholders.
Capital
Expenditures
We
incurred capital expenditures of $126,679, $251,389 and $207,582 for the years ended December 31, 2024, 2023 and 2022, respectively,
which mainly related to the purchase of pump station, cooler and freezer, air-conditioning system, restaurant equipment and clubhouse
improvements.
48
Contractual
Obligations
Lease
Agreements
Future
minimum lease payments under operating leases as of December 31, 2024 were as follows:
Year ending December 31,
2025
$ 228,430
2026
200,125
2027
161,880
2028
161,880
2029
107,920
Thereafter
-
$ 860,235
Less imputed interest
(84,689 )
Operating lease liabilities
$ 775,546
Cash
Flow Sufficiency
In
order to meet the debt obligations and operating needs of our business, our management expects to satisfy the cash flow needs and through
(i) maintaining stable relationships with banks in order to renew the bank borrowings upon maturity or to arrange for additional banking
facilities for use when necessary; (ii) closely monitoring the collection status of accounts receivable and actively following up with
our customers for settlements; (iii) diversifying and broadening our customer base to avoid reliance on particular customers and to expand
our sources of revenue and cash flow; (iv) effectively managing accounts payable and negotiating for longer credit periods from suppliers,
when necessary; (v) obtaining financial support from our Controlling Shareholder and investors to meet short-term operating expenses;
and (vi) continuing to focusing on improving operational efficiency and cost reductions and enhancing efficiency.
The
Company successfully raised a total gross proceed of $12,000,000, before deducting underwriting discounts and other offering expenses,
from its initial public offering on February 13, 2025.
The
Company believes that, taking into consideration the present available banking facilities and internal financial resources we have, including
the current levels of cash and cash flows from operations, and the measures mentioned above, will be sufficient to meet its anticipated
cash needs for at least the next twelve months from the date of this report.
Quantitative
and Qualitative Disclosure About Market Risk
Credit
Risk
The
Company’s principal financial assets are cash and cash equivalents and accounts receivables. The Company’s credit risk is
primarily concentrated in its cash which is held with institutions with a high credit worthiness. The Company has not experienced losses
on their accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to
these deposits is not significant.
Management
believes that the Company is not exposed to any significant credit risk with respect to its cash.
The
Company mitigates its credit risk on receivables by actively managing and monitoring its receivables. The Company mitigates credit risk
by evaluating the creditworthiness of customers prior to conducting business with them and monitoring its exposure for credit losses
with existing customers. Since all accounts receivable as at years ended December 31, 2024 and 2023 are aged within one year and collected
all receivables subsequent to year end, minimum credit risk was noted for accounts receivable.
49
Vendor
concentration risk
As
of December 31, 2024 and 2023, the Company owed 84% and 85% of accounts payable to a key supplier, respectively.
For
the years ended December 31, 2024, 2023 and 2022, one vendor accounted for 31%, 29% and 32% of our total operating costs, respectively.
No other vendor accounts for more than 10% of our total operating costs for the years ended December 31, 2024, 2023 and 2022, respectively.
Interest
rate risk
Interest
rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Company is not exposed to interest rate risk as its financial liabilities carry interest at fixed rates.
Liquidity
risk
Liquidity
risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that
are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as
possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Company’s reputation.
Typically,
the Company ensures that it has sufficient cash on demand to meet expected operational expenses for a period of twelve months, including
through operations and financial support from our stockholders and financial institutions. We are continuing to focus on improving operational
efficiency and cost reductions and enhancing efficiency, as well as servicing of financial obligations: this excludes the potential impact
of extreme circumstances that cannot reasonably be predicted, such as natural disasters. Our ability to continue as a going concern is
dependent upon obtaining the necessary financing or negotiating the terms of the existing short-term liabilities to meet our current
and future liquidity needs.
Market
Risk
Market
risk is the risk of loss arising from adverse changes in market rates and prices. Our market risk exposure is generally limited to those
risks that arise in the normal course of business, as we do not engage in speculative, non-operating transactions, nor do we utilize
financial instruments or derivative instruments for trading purposes.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
As
a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, and pursuant to Item 305 of Regulation S-K we
are not required to provide quantitative and qualitative disclosures about market risk