PART I Key Information This section presents key financial data and significant risks, highlighting the company's BVI holding structure, Hong Kong operations, and potential HFCA Act delisting risks despite current PCAOB auditor inspectability Selected Financial Data The company's 2024 financial performance significantly declined, with contract revenue dropping 42% to $3.95 million, gross profit decreasing 83%, and net loss widening to $2.54 million Summary Consolidated Statements of Operations and Comprehensive Income (For the years ended December 31) | | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Contract revenue | $3,951,649 | $6,825,879 | $4,169,931 | | Gross Profit | $412,171 | $2,440,600 | $785,704 | | Net Loss | $(2,543,959) | $(648,854) | $(596,881) | | Total comprehensive loss | $(2,513,926) | $(627,630) | $(597,011) | Summary Consolidated Balance Sheet (As of December 31) | | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Total Assets | $8,721,050 | $11,790,806 | | Total Liabilities | $5,226,051 | $5,781,881 | | Total Equity | $3,494,999 | $6,008,925 | Summary Consolidated Statements of Cash Flow (For the years ended December 31) | | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Net cash used in Operating activities | $(1,569,940) | $(3,814,384) | $(352,764) | | Net cash provided by Financing activities | $634,683 | $8,413,951 | $422,531 | | Net (decrease) / increase in cash and cash equivalents | $(905,679) | $4,600,577 | $71,878 | Risk Factors The company faces diverse risks across business operations, Hong Kong's evolving regulatory and political landscape, and share ownership, including potential HFCA Act delisting - Inaccurate estimation of project risks, revenues, or costs could lead to contract losses or lower-than-anticipated profits, influenced by factors like bidding errors, project delays, and supplier failures4951 - The business is susceptible to risks from the cancellation of significant contracts or disqualification from bidding, which could idle equipment and result in lost revenues52 - The company's operations are primarily in Hong Kong, making it subject to risks from the evolving legal system and potential influence from the PRC government, which could impact contractual rights and business operations363976 - The company's shares could be delisted from Nasdaq under the Holding Foreign Companies Accountable Act (HFCA Act) if the PCAOB is unable to inspect its auditors for two consecutive years. While the PCAOB vacated its previous negative determination in December 2022, the situation remains subject to future developments38110116 - As a foreign private issuer and a controlled company, the company is exempt from certain U.S. corporate governance and disclosure requirements, which may offer less protection to shareholders compared to U.S. domestic issuers133141 - The company's research and development of kinetic technology for footstep-energized panels faces risks, including potential failure to generate expected revenue, design challenges, and the need for intellectual property protection68 Information on the Company WANG & LEE GROUP, Inc. is a BVI holding company operating through its Hong Kong E&M construction subsidiary, diversifying into renewable energy and subject to extensive Hong Kong regulations History and Development of the Company WANG & LEE GROUP, Inc., a BVI holding company, operates via its Hong Kong subsidiary, completed its Nasdaq IPO in April 2023, and acquired Solar (HK) Limited in March 2025 for $1.94 million - The company is a BVI holding company, with its primary business operated through its Hong Kong subsidiary, WANG & LEE CONTRACTING LIMITED, established in 1992177178 - The company completed its IPO on the Nasdaq Capital Market on April 24, 2023, with gross proceeds of $8,000,000180 - On March 31, 2025, the company acquired Solar (HK) Limited for HK$15,000,000 (approx. $1.94 million) to expand into solar energy solutions181207 Business Overview The company, through its Hong Kong subsidiary, is an E&M prime and subcontractor diversifying into renewable energy, characterized by high customer concentration and strong supplier relationships - The company is a construction prime and subcontractor for E&M systems, including low voltage electrical, MVAC, fire services, and fitting out for public and private sectors in Hong Kong182 - The company is expanding its services to include renewable energy solutions, such as solar panel installations and developing kinetic energy harvesting technology (footstep-energized panels)183 Revenue from E&M Engineering Services | Year | Revenue (HKD) | Revenue (USD) | | :--- | :--- | :--- | | 2024 | HK$30,710,244 | $3,951,649 | | 2023 | HK$53,239,808 | $6,825,879 | | 2022 | HK$32,649,726 | $4,169,931 | - The company has a high customer concentration, with the five largest customers accounting for 88%, 98%, and 89% of total revenue in 2024, 2023, and 2022, respectively194 - The five largest suppliers accounted for approximately 54%, 51%, and 51% of total actual costs for the years 2024, 2023, and 2022, respectively197 Regulations The company's Hong Kong operations are subject to a comprehensive regulatory framework, including contractor registration, E&M licensing, labor, health, safety, and environmental laws - The company must adhere to contractor registration systems for building works as stipulated by the Buildings Ordinance in Hong Kong209 - For its E&M engineering business, the company requires specific licenses and registrations, including being a Registered Electrical Contractor with the EMSD and a Registered Fire Service Installation Contractor (Classes 1 & 2) with the Fire Services Department215222224 - Operations are subject to stringent labor, health, and safety laws, including the Factories and Industrial Undertakings Ordinance and the Occupational Safety and Health Ordinance, which mandate providing a safe work environment231232234 - The company must comply with environmental protection laws in Hong Kong, including the Air Pollution Control Ordinance, Noise Control Ordinance, and Waste Disposal Ordinance246247250 Operating and Financial Review and Prospects The company experienced a significant operational downturn in 2024 with revenue down 42% to $3.95 million, leading to a $2.55 million operating loss, prompting diversification into sustainable energy and strategic operational shifts Operating Results The company's 2024 operating results show a sharp decline, with revenue down 42% to $3.95 million and gross profit plummeting 83%, leading to a $2.55 million operating loss Comparison of Operating Results (2024 vs. 2023) | | 2024 ($) | 2023 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Contract revenue | $3,951,649 | $6,825,879 | -42% | | Contract costs | $(3,539,478) | $(4,385,279) | -19% | | Gross Profit | $412,171 | $2,440,600 | -83% | | Operating Loss | $(2,548,875) | $(771,090) | +231% | - The decrease in 2024 revenue was due to a construction industry downturn and fewer available bids. The company responded by diversifying into the sustainable energy market and adopting a site project management strategy for large projects304306 Comparison of Operating Results (2023 vs. 2022) | | 2023 ($) | 2022 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Contract revenue | $6,825,879 | $4,169,931 | +64% | | Contract costs | $(4,385,279) | $(3,384,227) | +30% | | Gross Profit | $2,440,600 | $785,704 | +211% | | Operating Loss | $(771,090) | $(641,452) | +20% | - The revenue increase in 2023 was driven by a focus on smaller scale projects and the resumption and successful claim for loss and damage on a major suspended construction project317318 Reconciliation to Adjusted EBITDA (Non-GAAP) | | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Consolidated Net Loss (GAAP) | $(2,543,959) | $(648,854) | $(596,881) | | Interest expenses | $129,803 | $61,564 | $35,377 | | Depreciation and amortization | $15,037 | $32,413 | $2,603 | | Adjusted EBITDA (Non-GAAP) | $(2,399,119) | $(554,877) | $(558,901) | | Adjusted EBITDA Margin | (60.71)% | (8.13)% | (13.40)% | Liquidity and Capital Resources As of December 31, 2024, the company held $4.3 million in cash, with net cash used in operations at $1.57 million, and plans to enhance service diversity and potentially raise additional capital Summary of Cash Flows (For the years ended December 31) | | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Net cash used in Operating activities | $(1,569,940) | $(3,814,384) | | Net cash provided by Financing activities | $634,683 | $8,413,951 | | Net (decrease) / increase in cash and cash equivalents | $(935,257) | $4,599,567 | - The decrease in cash from financing activities in 2024 was mainly due to the absence of capital injection comparable to the IPO in 2023333 - Management plans to enhance service diversity and may raise capital through an additional public offering to ensure sufficient liquidity if current resources prove insufficient329 - In March 2025, the company entered into a registered direct offering to sell shares and warrants, expecting to receive gross proceeds of approximately $12 million341 Directors, Senior Management, and Employees The company is led by CEO Pui Lung Ho, with a board including four independent directors, and in 2024 adopted an Equity Incentive Plan, employing 10 people in Hong Kong - The executive team is led by Pui Lung Ho (CEO and Chairman) and Yuk Ming, Gary MA (CFO). The board includes four independent directors: Olivia Sarah Annabel Marion SERRE, Juan RUIZ-COELLO, Chun Yip, Edmund CHAN, and Wood Shing Kei SZE347348350 Executive Compensation Summary | Name and Principal Position | Year | Total Compensation ($) | | :--- | :--- | :--- | | Mr. Pui Lung, HO (CEO) | 2024 | 56,038 | | | 2023 | 60,131 | | | 2022 | 51,342 | | Mr. Yuk Ming, Gary MA (CFO) | 2024 | 46,323 | | | 2023 | 46,156 | | | 2022 | 45,978 | - On December 2, 2024, the Board adopted the 2024 Equity Incentive Plan, authorizing up to 2,264,077 ordinary shares. All 2,264,077 shares were awarded in December 2024 to an executive director and employees373 Share Ownership of Directors and Executive Officers | Name | Position | Ordinary Shares Beneficially Owned | Percent | | :--- | :--- | :--- | :--- | | Pui Lung, Ho | CEO | 8,150,477 | 25.67% | | WANG & LEE BROTHERS, Inc. | 5% Beneficial Owner | 8,000,000 | 25.19% | - As of the report date, the company had 10 employees in Hong Kong, broken down into management, project/safety, administration, and finance395 Major Shareholders and Related Party Transactions CEO Pui Lung Ho is the major shareholder with over 25% beneficial ownership, and related party transactions primarily involve non-interest-bearing amounts due to him - CEO and Chairman Mr. Pui Lung Ho beneficially owns 25.67% of the company's Ordinary Shares through his 100% ownership of WANG & LEE BROTHERS, Inc. and direct holdings398 Amounts Due to/from Related Parties (Year-End) | Related Party | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Due to Pui Lung Ho (Director) | $(1,366,738) | $(1,347,019) | $(1,853,263) | | Due from WANG & LEE BROTHERS., Inc | $1,293 | $1,286 | $1,282 | - Amounts due to the director, Pui Lung Ho, are unsecured, interest-free, and repayable on demand407 Financial Information This section confirms appended financial statements, reports no material legal proceedings, and states the company's policy to retain earnings for business development rather than paying dividends - The company is not currently a party to any pending legal proceedings and is not aware of any threatened proceedings410 - The company does not expect to pay any cash dividends in the foreseeable future, intending to retain earnings to fund business growth412 - As a holding company, its ability to pay dividends depends on receiving funds from its operating subsidiaries, subject to various potential restrictions413 Additional Information This section details corporate governance under BVI law, potential PFIC tax implications for U.S. investors, and tax regimes in Hong Kong and the British Virgin Islands - The company is incorporated in the British Virgin Islands (BVI) and its corporate affairs are governed by its Amended Memorandum and Articles and the BVI Business Companies Act, which differs from U.S. corporate law424445 - The company may be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could result in adverse tax consequences for U.S. Holders on distributions and dispositions of shares. The company does not intend to provide the information necessary for a Qualified Electing Fund (QEF) election168510517 - Under Hong Kong's two-tiered profits tax regime, the first HK$2 million of profits are taxed at 8.25% and profits above that at 16.5%. Hong Kong does not impose tax on capital gains or withholding tax on dividends paid to foreign shareholders526527 - The British Virgin Islands does not impose any income tax, capital gains tax, withholding tax, or stamp duty on the company or its non-resident shareholders532534535 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks including credit, interest rate, and foreign currency, with credit risk from receivables at $3.37 million and a 1% interest rate change impacting post-tax loss by $23,730 - The company faces credit risk from its accounts receivables and contract assets. The maximum potential loss from these for the year ended December 31, 2024, is $3,365,746 and $109,255, respectively543 - The company is exposed to cash flow interest rate risk from its variable-rate bank loans. A 1% change in interest rates would impact the post-tax loss for 2024 by approximately $23,730544730 - Foreign currency risk is considered insignificant because the company's monetary assets and liabilities are mainly denominated in Hong Kong Dollars (HK$), which is pegged to the U.S. Dollar547733 - The company's operations are mainly in Hong Kong, exposing it to political, economic, and legal environment risks specific to the region548733 PART II Material Modifications to the Rights of Security Holders and Use of Proceeds No material modifications to security holder rights have occurred, and the company raised approximately $6.0 million in net proceeds from its April 2023 IPO - The company raised approximately $6.0 million in net proceeds from its initial public offering, which closed on April 24, 2023559 Controls and Procedures This report omits management assessment and auditor attestation on internal controls due to transition rules, with no changes reported in internal control over financial reporting - The report does not include a management assessment or auditor attestation on internal control over financial reporting due to the transition period for newly public companies560 - There were no changes in the company's internal control over financial reporting during the period562 Corporate Governance and Other Disclosures This section details corporate governance, including the audit committee financial expert, a change in independent auditors due to prior material weaknesses, and the implementation of a cybersecurity risk management program - The board of directors has determined that Mr. Edmund CHAN qualifies as an audit committee financial expert563 Principal Accountant Fees (USD) | Fee Type | Firm | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | :--- | | Audit fees | WWC P.C. | - | - | 170,000 | | | AOGB CPA Limited | 85,000 | 170,000 | - | | Audit-related fees | AOGB CPA Limited | 8,000 | - | - | - On December 15, 2023, the company dismissed WWC, P.C. and engaged AOGB CPA Limited as its new independent registered public accounting firm. A material weakness related to a lack of U.S. GAAP and SEC reporting expertise was identified during WWC's tenure570572574 - The company has implemented a cybersecurity risk management program, with oversight provided by the Audit Committee, which receives regular updates from third-party assessors and consultants580581594 PART III Financial Statements This section presents the audited consolidated financial statements with an unqualified opinion, highlighting revenue recognition for construction contracts as a critical audit matter due to significant management judgment - The independent auditor, AOGB CPA Limited, issued an unqualified opinion on the consolidated financial statements as of December 31, 2024 and 2023, and for the three years ended December 31, 2024611 - A critical audit matter was identified concerning Revenue Recognition for Engineering and Construction Contracts. This was due to the significant management judgment involved in estimating total contract revenue and costs, which are used to measure progress towards completion617618 - The company's going concern assessment concludes that there is no substantial doubt about its ability to continue, based on adequate resources and management's plans, despite incurring a net loss of $2.54 million in 2024630 Consolidated Balance Sheet Summary (as of Dec 31) | | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Total Current Assets | $6,833,774 | $11,298,237 | | Total Assets | $8,721,050 | $11,790,806 | | Total Current Liabilities | $4,754,476 | $5,104,704 | | Total Liabilities | $5,226,051 | $5,781,881 | | Total Shareholders' Equity | $3,494,999 | $6,008,925 | Consolidated Statement of Operations Summary (for year ended Dec 31) | | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Contract revenues | $3,951,649 | $6,825,879 | $4,169,931 | | Gross profit | $412,171 | $2,440,600 | $785,704 | | Operating loss | $(2,548,875) | $(771,090) | $(641,452) | | Net loss | $(2,543,959) | $(648,854) | $(596,881) | | Loss per share – Basic and diluted | $(0.17) | $(0.04) | $(0.05) |
WANG & LEE GROUP(WLGS) - 2024 Q4 - Annual Report