Springview Holdings Ltd(SPHL) - 2024 Q4 - Annual Report

PART I Key Information This section outlines significant business risks, including market dependency and internal control weaknesses, and securities risks like dual-class shares and Nasdaq compliance Risks Related to Business and Industry The company faces significant business risks from its project-based nature, reliance on the Singapore construction market and foreign labor, and identified material weaknesses in internal financial controls - Profitability is highly variable due to its project-based nature and negotiated terms, with no guarantee of replicating past performance[29] - The business is heavily reliant on the Singapore construction industry, making it vulnerable to economic downturns, regulatory changes, and geopolitical events[34][35][36] - Approximately 82% of the workforce consists of foreign employees, exposing the company to risks from changes in Singapore's foreign labor policies[39] - Two material weaknesses in internal controls were identified: insufficient personnel with U.S. GAAP accounting knowledge and a lack of IT general controls for financial systems and cybersecurity[67] - Revenue is highly concentrated, with the top ten customers accounting for approximately 98% of revenue in FY2024, up from 94% in FY2023 and 87% in FY2022[74] - The company is involved in ongoing litigation related to a 2019 workplace accident, facing potential fines ranging from S$150,000 to S$250,000[55][175][177] Risks Related to Securities Investment in the company's securities carries significant risks, including a dual-class share structure concentrating voting power, Nasdaq minimum bid price non-compliance, and exemptions as a foreign private and controlled company - On April 25, 2025, Nasdaq notified the company of non-compliance with the $1.00 minimum bid price rule, granting a 180-day period to regain compliance[81] - The dual-class share structure grants Class B shares 20 times the voting power of Class A shares, giving Avanta (BVI) Limited, controlled by Ms. Siew Yian Lee, 97.87% of total voting power[96][97] - As a "controlled company" under Nasdaq rules, the company is exempt from certain corporate governance requirements, including the need for a majority of independent directors[99] - As a foreign private issuer, the company follows home country governance practices, potentially offering less shareholder protection and making judgment enforcement difficult[100][105] - There is a risk of classification as a Passive Foreign Investment Company (PFIC), which could lead to adverse U.S. federal income tax consequences for shareholders[92][93][94] - The company does not expect to pay dividends in the foreseeable future, requiring investors to rely on share price appreciation for returns[89] Information on the Company Springview Holdings, through its Singapore subsidiary, is a design and construction firm specializing in residential and commercial buildings, offering new construction, A&A, and general contracting services - The company's primary business, through Springview Singapore, is the design and construction of residential and commercial buildings in Singapore[120][125] - Core services include new construction, reconstruction, additions and alterations (A&A), and other general contracting services[121][126] - Business strategies include enhancing client relationships, investing in technology like BIM, expanding the in-house team, and exploring strategic alliances[159][160][161] - The company has a high concentration of customers, with the top ten accounting for 98% of revenue in FY2024[139] - The company holds a Builders License from the Singapore Building and Construction Authority, expiring July 8, 2027, and a bizSAFE Level 3 certificate valid until June 20, 2025[169][170] Operating and Financial Review and Prospects This section analyzes the company's financial performance, highlighting a significant revenue decline and net loss in FY2024, contrasting with strong growth in FY2023, and details liquidity improvements from IPO proceeds Operating Results: Comparison of FY2023 and FY2024 FY2024 saw a 34.0% revenue decrease to S$8.8 million and a shift to a S$1.0 million net loss, driven by project declines, lower margins, and increased IPO-related professional fees Consolidated Results of Operations (FY2023 vs FY2024) | | 2023 (S$) | 2024 (S$) | Variance (S$) | Variance (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | 13,353,013 | 8,811,646 | (4,541,367) | (34.0) | | Total Cost of revenue | (8,711,448) | (7,907,554) | 803,894 | (9.2) | | Gross profit | 4,641,565 | 904,092 | (3,737,473) | (80.5) | | Income (loss) from operations | 2,921,410 | (1,124,201) | (4,045,611) | (138.5) | | Net income (loss) | 2,390,166 | (1,031,138) | (3,421,304) | (143.1) | - The 34.0% revenue decline in FY2024 was mainly due to a reduction in new projects, with significant drops in Reconstruction (-88.7%) and A&A (-72.5%) categories[203] - Gross profit margin contracted sharply from 34.8% in FY2023 to 10.3% in FY2024 due to lower revenue, a more competitive market, and additional project costs[211] - General and administrative expenses increased by 17.9% in FY2024, primarily driven by an 81.3% surge in professional fees associated with the company's IPO[213] - The company shifted from a net income of S$2,390,166 in FY2023 to a net loss of S$1,031,138 in FY2024[217] Operating Results: Comparison of FY2022 and FY2023 FY2023 saw strong growth with 85.0% revenue surge to S$13.4 million, driven by new construction and A&A projects, leading to a 126.6% gross profit increase and a 286.9% net income rise Consolidated Results of Operations (FY2022 vs FY2023) | | 2022 (S$) | 2023 (S$) | Variance (S$) | Variance (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | 7,215,952 | 13,353,013 | 6,137,061 | 85.0 | | Total Cost of revenue | (5,167,588) | (8,711,448) | (3,543,860) | 68.6 | | Gross profit | 2,048,364 | 4,641,565 | 2,593,201 | 126.6 | | Net income | 617,725 | 2,390,166 | 1,772,441 | 286.9 | - The 85.0% revenue growth in FY2023 was primarily fueled by a significant increase in new construction (+95.9%) and A&A (+340.2%) projects[237] - Gross profit margin improved from 28.4% in FY2022 to 34.8% in FY2023, attributed to larger projects with better pricing power[242] - General and administrative expenses rose by 29.6% in FY2023, mainly due to a significant increase in professional fees related to IPO preparations[244] Liquidity and Capital Resources The company's liquidity improved significantly in 2024, with cash increasing to S$3.4 million primarily due to S$5.6 million in net IPO proceeds, despite a net cash outflow from operations Cash and Liquidity Overview (S$) | | As of Dec 31, 2023 | As of Dec 31, 2024 | | :--- | :--- | :--- | | Cash | 698,106 | 3,373,424 | | Current Assets | 6,048,082 | 10,731,442 | | Current Liabilities | 3,363,968 | 4,002,580 | | Outstanding Loans | 1,266,265 | 835,800 | Consolidated Cash Flow Summary (S$) | | For the Year Ended Dec 31, 2023 | For the Year Ended Dec 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | (1,369,386) | (531,270) | | Net cash provided by (used in) investing activities | 995,121 | (2,621,944) | | Net cash provided by financing activities | 723,686 | 5,577,867 | - Net cash from financing activities in 2024 was S$5.6 million, primarily due to S$5.6 million in net proceeds from the IPO[228] - Net cash used in investing activities in 2024 was S$2.6 million, which represented a loan to a third party[226] - The company's CEO, Mr. Zhuo Wang, provided a financial support letter for up to S$2,000,000, expiring May 31, 2025[253] Directors, Senior Management and Employees This section details the company's leadership, board structure, and employee base, highlighting the executive team, independent directors, and the dual-class share structure concentrating voting power - The executive team includes Mr. Zhuo Wang (Chairman & CEO), Ms. Siew Yian Lee (Executive Director), and Mr. Jordan Yi Chun Tse (CFO)[285] - The Board of Directors consists of five members, including three independent directors: Mr. Edward C Ye, Mr. Mikael Charette, and Ms. Hung Yu Wu[286][309] Share Ownership of Key Personnel | Name | Class A Shares | Class B Shares | Combined Voting Power | | :--- | :--- | :--- | :--- | | Zhuo Wang | 1,200,000 (10.43%) | — | 0.57% | | Siew Yian Lee | 7,000,000 (60.87%) | 10,000,000 (100%) | 97.87% | Employee Breakdown by Function | Function | Dec 31, 2022 | Dec 31, 2023 | Dec 31, 2024 | | :--- | :--- | :--- | :--- | | Management | 3 | 3 | 3 | | Finance and Administrative | 2 | 2 | 2 | | Quantity surveyor/Drafting | 8 | 8 | 8 | | Projects | 50 | 59 | 58 | | Total | 63 | 72 | 71 | Major Shareholders and Related Party Transactions This section details related party transactions, including construction services provided to an entity controlled by an executive director and financial support received from the CEO's controlled entity - The company engaged in transactions with Springview Contracts Pte. Ltd., an entity controlled by Executive Director Ms. Siew Yian Lee and her spouse, providing construction services[77][615] - CEO Mr. Zhuo Wang, through his controlled entity, provided financial support amounting to S$969,247 as of December 31, 2024, for IPO expenses and operating funds[616] - Mr. Heng Kong Chuan, a shareholder and spouse of the executive director, provided an interest-free working capital loan facility of up to S$1,500,000[617] Financial Information This section covers consolidated financial statements, legal proceedings with an S$275,000 provision, and the company's dividend policy, noting no current plans for distribution and Class A share entitlement - The company is subject to legal proceedings and has accrued a provision of S$275,000 as of December 31, 2024, for potential losses[232][623] - The company has no current plans to distribute dividends, with any future distributions subject to board discretion and various financial factors[327] - Under the company's articles, only holders of Class A Shares are entitled to receive dividends; Class B shareholders are not[331][344] Additional Information This section details the company's corporate structure, including its dual-class share system, dividend entitlements for Class A shares, Cayman Islands tax status, and potential U.S. PFIC classification risk - The company has a dual-class share structure: Class A shares have one vote, while Class B shares have 20 votes per share[346] - Only holders of Class A Shares are entitled to dividends and distributions upon liquidation; Class B shareholders have no such rights[344][359] - The company is incorporated in the Cayman Islands, which currently levies no taxes on profits, income, gains, or appreciation[377] - For U.S. federal income tax purposes, the company does not expect to be a Passive Foreign Investment Company (PFIC), though this is an annual factual determination with no assurance[391][392] Quantitative and Qualitative Disclosures About Market Risk The company faces significant market risks, primarily from high customer and vendor concentration, with three customers accounting for a large portion of revenue and receivables, and exposure to foreign exchange risk against the U.S. Dollar - Significant customer concentration exists, with three customers accounting for 20%, 19%, and 18% of total revenue in FY2024[271][411] - Accounts receivable concentration is high, with three customers accounting for 28%, 32%, and 40% of total accounts receivable as of December 31, 2024[272][412] - Vendor concentration is notable in accounts payable, with Subcontractor A accounting for 22% and Subcontractors B and C each for 12% as of December 31, 2024[274][414] - The company's operating activities are transacted in Singapore Dollars (S$), creating foreign exchange risk against the U.S. Dollar ($)[270][409] PART II Material Modifications to the Rights of Security Holders and Use of Proceeds This section details the allocation of approximately US$5.2 million in net proceeds from the IPO completed on October 17, 2024, for business development, hiring, and working capital - The company completed its IPO on October 17, 2024, raising approximately US$5.2 million in net proceeds[422][423] - Net IPO proceeds are allocated: US$1.5 million for business development and marketing, US$1.5 million for hiring and training, and US$2.0 million for working capital and general corporate purposes[424] Controls and Procedures Management concluded that as of December 31, 2024, disclosure controls were ineffective due to material weaknesses in U.S. GAAP accounting knowledge and IT general controls, with remediation efforts underway - Management concluded that as of December 31, 2024, the company's disclosure controls and procedures were ineffective[427] - Two material weaknesses were identified: insufficient personnel with U.S. GAAP accounting knowledge and a lack of IT general controls for financial systems and cybersecurity[429] - Remediation efforts include hiring qualified accounting and IT staff, implementing U.S. GAAP training, and preparing comprehensive accounting policies and manuals[430] - As an emerging growth company, the company is exempt from the auditor attestation requirement on internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act[431][433] Corporate Governance and Other Disclosures This section covers corporate governance, including the designated audit committee financial expert, adoption of a Code of Conduct, reliance on home country practices as a foreign private issuer, and cybersecurity risk management - The Board of Directors has designated Mr. Edward C Ye as the "audit committee financial expert"[435] Principal Accountant Fees (US$) | Services | 2023 | 2024 | | :--- | :--- | :--- | | Audit Fees (Marcum Asia CPAs LLP) | 210,000 | 325,308 | | Total | 210,000 | 325,308 | - As a foreign private issuer, the company follows home country (Cayman Islands) practices, exempting it from certain Nasdaq corporate governance requirements[444] - The company has developed a cybersecurity risk management program focused on monitoring, risk mitigation, and incident response[448][449] PART III Financial Statements This section presents the audited consolidated financial statements for FY2022, FY2023, and FY2024, prepared under U.S. GAAP, including balance sheets, statements of operations, equity, and cash flows, with accompanying notes Consolidated Balance Sheet Highlights (S$) | | As of Dec 31, 2023 | As of Dec 31, 2024 | | :--- | :--- | :--- | | Total Assets | 6,762,187 | 11,531,808 | | Total Liabilities | 4,894,403 | 5,150,884 | | Total Shareholders' Equity | 1,867,784 | 6,380,924 | Consolidated Statement of Operations Highlights (S$) | | FY 2022 | FY 2023 | FY 2024 | | :--- | :--- | :--- | :--- | | Total Revenue | 7,215,952 | 13,353,013 | 8,811,646 | | Gross Profit | 2,048,364 | 4,641,565 | 904,092 | | Net Income (Loss) | 617,725 | 2,390,166 | (1,031,138) | Consolidated Statement of Cash Flows Highlights (S$) | | FY 2022 | FY 2023 | FY 2024 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | (597,497) | (1,369,386) | (531,270) | | Net cash provided by (used in) investing activities | 694,248 | 995,121 | (2,621,944) | | Net cash (used in) provided by financing activities | (209,439) | 723,686 | 5,577,867 | - The company completed its IPO on October 17, 2024, raising net proceeds of approximately S$5.3 million[478] - Revenue is recognized over time using an input method based on actual contract costs; a change in estimate in 2024 reduced revenue by S$1,613,632[535]