iOThree Ltd(IOTR) - 2025 Q4 - Annual Report

PART I: Company Information and Risk Factors Risk Factors The company faces risks from its early-stage operations, customer and supplier concentration, regulatory environment, technological vulnerabilities, and founder's significant control leading to 'controlled company' status - As an early-stage entity since 2019, the company's limited operating history makes future performance difficult to predict[66] - In FY2025, 44.0% of total revenue was derived from the top five key customers, indicating significant concentration[79] - The top five suppliers accounted for 50.1% of the total cost of sales in FY2025, posing a significant concentration risk[80] - As a 'foreign private issuer' and 'controlled company' due to founder's majority ownership, the company is exempt from certain U.S. corporate governance standards[118][121] - On June 3, 2025, Nasdaq notified the company of non-compliance with the $1.00 minimum bid price requirement, with a deadline of December 1, 2025, to regain compliance[135] Information on the Company iOThree, a Cayman Islands holding company, provides maritime digital technologies through its Singapore subsidiary, ranking fifth in the market with two core segments and a flagship JARVISS platform History and Development Incorporated in Singapore in 2019, iOThree Limited became the ultimate holding company in 2023, completed its Nasdaq IPO in April 2025, and expanded into Malaysia - The company completed its IPO on April 11, 2025, listing on Nasdaq under 'IOTR' at $4.00 per share[159] - Corporate reorganizations in 2023 and 2024 established iOThree Limited (Cayman Islands) as the holding company for its BVI and Singapore operating subsidiaries[153][154][155] Business Overview The company operates in satellite connectivity and digitalization solutions, offering its JARVISS platform, ranking fifth in Singapore's maritime market, and pursuing growth through solution enhancement, geographic expansion, and M&A - The company operates in two segments: satellite connectivity solutions and digitalization and other solutions[165] - JARVISS, the flagship unified digital shipboard platform, integrates native and third-party applications for connectivity management, cybersecurity, and data acceleration[197][166] - Growth strategies include broadening solutions, expanding geographically into Asia and the Middle East, and pursuing strategic M&A and alliances[250][251][252][254] - In FY2025, the top five customers accounted for 44.0% of revenue, and the top five suppliers for 50.1% of the cost of sales, indicating significant concentration[256][259] - Key competitors include Navarino, Marlink, and Inmarsat for satellite connectivity, and Alpha Ori, Zero North, and Storm Geo for digitalization solutions[272] Regulations Singaporean operations are subject to local regulations covering workplace safety, employee compensation, foreign worker employment, data protection (PDPA), income tax, and customs for goods export - Operations are governed by Singapore's Workplace Safety and Health Act (WSHA) and Work Injury Compensation Act (WICA)[280][282] - Employment practices are regulated by the Employment Act, Employment of Foreign Manpower Act (EFMA), and Central Provident Fund (CPF) Act[285][288][293] - The company is subject to Singapore's Personal Data Protection Act (PDPA), governing personal data handling and data breach notifications[299][300][304] Operating and Financial Review and Prospects FY2025 revenue grew 22.1% to $10.5 million, but gross profit remained flat at $1.9 million, leading to a wider net loss of $230,515 due to lower margins and higher costs, with liquidity impacted by equipment investments Operating Results FY2025 total revenue increased 22.1% to $10.5 million, but gross profit remained stable at $1.9 million with a margin decline to 17.8%, resulting in a net loss of $230,515 Consolidated Results of Operations (Years ended March 31) | | 2025 (US$) | 2024 (US$) | 2023 (US$) | |:---|---:|---:|---:| | Revenues, net | 10,478,550 | 8,570,070 | 7,487,564 | | Cost of revenue | (8,614,316) | (6,724,479) | (5,231,836) | | Gross profit | 1,864,234 | 1,845,591 | 2,255,728 | | Total operating cost and expenses | (2,066,888) | (1,878,740) | (1,206,354) | | (Loss)/Income from operations | (202,654) | (33,149) | 1,049,374 | | NET (LOSS)/INCOME | (230,515) | (4,446) | 924,160 | Revenue by Segment (Years ended March 31) | Revenue Segment | 2025 (US$) | 2024 (US$) | 2023 (US$) | |:---|---:|---:|---:| | Satellite connectivity solution | 6,658,181 | 5,612,098 | 4,986,262 | | - Subscription | 4,408,157 | 3,678,354 | 3,605,177 | | - Sales and lease of equipment | 2,250,024 | 1,933,744 | 1,381,085 | | Digitalization and other solutions | 3,820,369 | 2,957,972 | 2,501,302 | | - Subscription | 503,586 | 369,179 | 84,770 | | - Equipment and engineering services | 3,316,783 | 2,588,793 | 2,416,532 | | Total Revenue | 10,478,550 | 8,570,070 | 7,487,564 | - Gross profit margin for satellite connectivity solutions decreased from 29.6% in FY2024 to 25.5% in FY2025, primarily due to lower-margin Starlink services[335] - Gross profit margin for digitalization and other solutions decreased from 6.2% in FY2024 to 4.3% in FY2025, mainly due to increased staff costs[336] Liquidity and Capital Resources As of March 31, 2025, the company had $0.5 million working capital and $0.4 million cash, with net cash from operations decreasing to $0.5 million in FY2025, primarily due to increased investing activities Consolidated Cash Flows (Years ended March 31) | | 2025 (US$) | 2024 (US$) | 2023 (US$) | |:---|---:|---:|---:| | Net cash provided by operating activities | 488,097 | 1,631,420 | 725,952 | | Net cash used in investing activities | (581,050) | (491,365) | (119,182) | | Net cash used in financing activities | (465,532) | (539,194) | (410,337) | | Net change in cash and cash equivalents | (551,975) | 593,544 | 189,799 | - As of March 31, 2025, working capital was approximately $0.5 million, with $4.1 million in current assets and $3.6 million in current liabilities[365] - Capital expenditures were approximately $0.6 million, $0.5 million, and $0.1 million for FY2025, FY2024, and FY2023 respectively, primarily for property, equipment, and intangible assets[378] Critical Accounting Estimates Key critical accounting estimates under U.S. GAAP include revenue recognition (ASC 606), lease accounting (ASC 842) for both lessor and lessee, impairment of long-lived assets, and fair value measurement of financial instruments - Revenue is recognized under ASC 606, applying judgment in identifying performance obligations and allocating transaction prices based on estimated standalone selling prices[385][386] - Lease accounting under ASC 842 involves classifying contracts as sales-type or operating leases (lessor) and finance or operating leases (lessee)[391][392][399] - Long-lived assets are assessed for impairment when carrying amounts may not be recoverable, comparing them to future undiscounted cash flows[410] - Fair value of financial instruments is measured using a three-tier hierarchy (Level 1, 2, 3) as defined by ASC 820[411][412][413] Directors, Senior Management, and Employees Led by founder Eng Chye Koh, the company's board includes three independent directors, with FY2025 executive cash compensation totaling $508,000, and a workforce of 36 employees and 12 contractors Executive Officers and Directors | Name | Age | Position | |:---|:---:|:---| | Eng Chye Koh | 49 | Chief Executive Officer, Chairman | | Fui Chu Lo | 53 | Chief Financial Officer | | Joanna Hui Cheng Soh | 45 | Chief Commercial Officer, Director | | Wei Meng See | 50 | Chief Technology Officer | | Wai Man Raymond Cheung | 48 | Independent director | | Ser Chiang Ng | 58 | Independent director | | Yuanting Zhang | 46 | Independent director | - For FY2025, aggregate cash compensation for the four executive officers was approximately $508,000[425] - As of March 31, 2025, the company had 36 full-time employees in Singapore and approximately 12 IT contractors in Malaysia[451] - The board has established an Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee, each comprising three independent directors[444] Major Shareholders and Related Party Transactions Founder Eng Chye Koh beneficially owns approximately 74.89% of shares, making the company a 'controlled company' and giving him significant influence, with $329,427 due to directors as of March 31, 2025 - Founder, Chairman, and CEO Eng Chye Koh beneficially owns 19,209,600 Ordinary Shares, representing approximately 74.89% of the company's voting power[457][459] - The company is a 'controlled company' under Nasdaq Listing Rules due to Mr. Koh's majority ownership[148] - As of March 31, 2025, $329,427 was payable to directors Eng Chye Koh and Joanna Hui Cheng Soh[460] Market Risk Disclosures The company faces significant credit risk with 23.5% concentration from two customers, exchange rate risk from S$/US$ fluctuations, minimal interest rate risk due to fixed-rate borrowings, and manages liquidity by monitoring cash flows - As of March 31, 2025, two customers accounted for 23.5% of combined accounts receivable and sale-type lease investments, indicating significant credit risk concentration[494][685] - Exchange rate risk arises from operations in Singapore, with revenues and costs denominated in US$ and S$, impacting reported financial results[500] - Interest rate risk is limited as all bank borrowings as of March 31, 2025, were at fixed interest rates[498] PART II: Corporate Governance and Controls Use of IPO Proceeds The April 11, 2025 IPO generated $8.4 million gross proceeds, with the company receiving $6.6 million and selling shareholders $1.8 million, after underwriting discounts and issuance costs - The IPO, including over-allotment, generated gross proceeds of $8.4 million, with the company receiving $6.6 million and selling shareholders $1.8 million[511] Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no management assessment or auditor attestation on internal control over financial reporting due to transition rules - Management concluded that disclosure controls and procedures were effective as of March 31, 2025[514] - The report omits a management report or auditor attestation on internal control over financial reporting due to the transition period for newly public companies[515][516] Corporate Governance and Other Matters The board identified Yuanting Zhang as the 'Audit Committee Financial Expert,' adopted a Code of Ethics, and established a cybersecurity risk management framework, with FY2025 audit fees at $143,805 - The Board of Directors determined that Yuanting Zhang qualifies as the 'Audit Committee Financial Expert'[520] Principal Accountant Fees (Audit Alliance LLP) | Fee Type | FY 2025 (USD) | FY 2024 (USD) | |:---|---:|---:| | Audit Fees | 143,805 | 329,900 | | Audit-Related Fees | - | - | | Tax Fees | - | - | | All Other Fees | - | - | | Total | 143,805 | 329,900 | - The company established a cybersecurity risk management framework and governance structure, with board oversight and CEO-led management responsibility[538][541][542] PART III: Financial Statements Consolidated Financial Statements Audited consolidated financial statements for FY2025 and FY2024, prepared under U.S. GAAP, show total assets of $5.7 million, liabilities of $3.9 million, equity of $1.7 million, revenues of $10.5 million, and a net loss of $230,515 for FY2025 Consolidated Balance Sheet (As of March 31) | | 2025 (US$) | 2024 (US$) | |:---|---:|---:| | Total current assets | 4,129,805 | 4,434,608 | | Total non-current assets | 1,536,700 | 1,418,343 | | TOTAL ASSETS | 5,666,505 | 5,852,951 | | Total current liabilities | 3,668,025 | 3,505,586 | | Total long-term liabilities | 252,999 | 371,369 | | TOTAL LIABILITIES | 3,921,024 | 3,876,955 | | Total shareholders' equity | 1,745,481 | 1,975,996 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 5,666,505 | 5,852,951 | Consolidated Statement of Operations (Years ended March 31) | | 2025 (US$) | 2024 (US$) | |:---|---:|---:| | Revenues, net | 10,478,550 | 8,570,070 | | Cost of revenue | (8,614,316) | (6,724,479) | | Gross profit | 1,864,234 | 1,845,591 | | Loss from operations | (202,654) | (33,149) | | NET LOSS | (230,515) | (4,446) | | Net loss per share (Basic and diluted) | (0.01) | - | Revenue by Geography (Years ended March 31) | Geography | 2025 (US$) | 2024 (US$) | |:---|---:|---:| | Singapore | 5,228,044 | 3,407,171 | | Israel | 1,316,832 | 869,824 | | Malaysia | 1,126,294 | 1,130,439 | | Vietnam | 675,186 | 534,472 | | Indonesia | 398,979 | 816,023 | | Thailand | 295,814 | 625,178 | | Others | 1,433,401 | 1,186,993 | | Total | 10,478,550 | 8,570,070 |