Financial Performance - Revenue from the top five key customers accounted for approximately 90.2%, 87.0%, and 85.9% of total revenue for the financial years ended December 31, 2024, 2023, and 2022, respectively [24]. - The top key customer represented approximately 42.9%, 26.9%, and 24.5% of total revenue for the same periods [24]. - Material costs, subcontracting costs, and project-related employee benefits totaled approximately $6.2 million for the financial year ended December 31, 2024, and $5.0 million for 2022 [30]. - As of December 31, 2024, the sales backlog was approximately $20.0 million, representing the total estimated contract value of works remaining to be completed [48]. - Delays in project completion can significantly impact revenue, operational cash flows, and financial performance due to fixed-price contracts [39]. - The company may incur additional costs if customers hire additional subcontractors to avoid delays, affecting financial performance [40]. - Revenue recognition is based on the percentage of completion method, which may not align with the value of works eventually certified by customers [38]. Compliance and Regulatory Risks - The company is subject to a compliance period until October 13, 2025, to regain compliance with Nasdaq's minimum bid price requirement of $1 per share [19]. - Changes in laws and regulations may lead to increased compliance costs, adversely affecting business operations and financial condition [31]. - The company has received a notice from Nasdaq indicating it has failed to maintain the minimum listing price of $1 per share [67]. - The company has until October 13, 2025, to regain compliance with Nasdaq's continued listing requirements [69]. - If the company does not regain compliance, it may be eligible for an additional 180 days, provided it meets other listing standards [69]. - The company is currently evaluating options to regain compliance but cannot assure that it will succeed [70]. - If delisted from Nasdaq, the company's shares may be quoted on an over-the-counter market, leading to reduced liquidity and increased trading restrictions [71]. - The company is permitted to adopt certain corporate governance practices under Cayman Islands law, which may provide less protection to shareholders compared to Nasdaq standards [89]. - The company is exempt from certain Nasdaq regulations, including having a majority of independent directors on its Board [90]. - The company is incorporated under Cayman Islands law, which may limit shareholders' rights and protections compared to U.S. companies [92]. - Shareholders have no general rights to inspect corporate records, making it difficult to obtain necessary information for shareholder resolutions [93]. - The company plans to rely on home country corporate governance practices, potentially affording shareholders less protection than U.S. domestic issuers [94]. - The Cayman Islands' recent economic substance legislation may impact the company, but it is currently anticipated to have little material effect [96]. - The company may lose its foreign private issuer status if more than 50% of voting securities are owned by U.S. residents, leading to increased compliance costs [102]. Market and Operational Risks - The company operates in a sector where economic growth, urbanization, and infrastructure investments significantly influence demand for civil engineering services [28]. - The company faces risks related to cost overruns due to inaccurate estimations of project costs and time, which could adversely affect profitability [23]. - Changes in government policies and economic conditions in Singapore could materially impact the company's business operations and financial performance [27]. - Over 85.0% of the workforce is comprised of foreign labor, and any restrictions on foreign labor supply could adversely affect operations and financial performance [32]. - The foreign worker levy (FWL) for basic skilled workers in the construction sector is set at S$700 per head, and any increase in FWL will raise operating expenses [33]. - The number of construction employees in Singapore declined at a compounded annual rate of approximately 1.6% from 2014 to 2019, and is expected to decline further at a rate of approximately 1.1% from 2020 to 2024 [52]. - As of December 31, 2024, the company employed 147 foreign employees, representing over 85.0% of the total workforce [52]. - The company relies on competitive tendering for all revenue, with no assurance of contract renewal or similar terms for future projects [54]. - Progress payments are typically received within 30 to 45 days after invoice presentation, with no guarantee of timely or full payment from customers [55]. - The occurrence of natural disasters or geopolitical events could adversely affect operations and financial performance [65]. Internal Control and Financial Management - The company has employed a full-time head of finance to enhance internal control over financial reporting in accordance with US GAAP [63]. - The company faces risks related to the maintenance of effective internal controls, which could impact financial reporting and investor confidence [62]. - The company may need additional capital in the future, with no assurance that financing will be available on acceptable terms [57]. - The company is exposed to interest rate risk from short-term bank loans, which are typically fixed for twelve months but subject to change upon renewal [351]. - Credit risk is managed through approvals, limits, and monitoring, with a focus on the probability of default by customers [352]. Currency and Translation Risks - The reporting currency is the U.S. dollar, while the local currency for operations is Singapore dollars [354]. - Almost all consolidated revenues and costs are denominated in Singapore dollars [354]. - Assets and liabilities in Singapore dollars are translated into U.S. dollars using the exchange rate on the balance sheet date [354]. - Revenues and expenses are translated at average rates prevailing during the financial year [354]. - Gains and losses from translation are recorded as a component of accumulated other comprehensive income [354]. - The company does not currently hedge against currency fluctuations with foreign subsidiaries [354]. Shareholder and Governance Issues - Ms. Liao controls 41.73% of the voting power of the company's Ordinary Shares, significantly influencing corporate decisions [88]. - The company is classified as an emerging growth company, allowing it to take advantage of reduced reporting requirements, including auditor attestation exemptions [98]. - As a foreign private issuer, the company is exempt from certain U.S. securities regulations, resulting in less extensive and timely information for investors [100]. - An active trading market for the company's Ordinary Shares may not be established, affecting liquidity and market price [66]. - The trading price of the company's shares may be highly volatile, potentially resulting in substantial losses for investors [74]. - The company may face significant adverse consequences if it is classified as a passive foreign investment company (PFIC), affecting U.S. taxpayers holding its securities [83].
SKK Holdings Limited(SKK) - 2024 Q4 - Annual Report