Operations and Risks - Highway Holdings Limited operates through subsidiaries in Hong Kong, PRC, and Myanmar, with significant legal and operational risks associated with its operations in these regions[21] - The ongoing civil war in Myanmar has indirectly affected the Company's operations, including a reduction in the potential pool of employees due to military drafts[35] - The Company operates under significant risks in Myanmar, including strikes, lack of infrastructure, and unpredictable access to utilities[46] - The political and trade tensions between the U.S. and China could adversely affect the Company's operations and stock price[40] - The Company faces significant risks related to political, economic, and legal uncertainties in its international operations, which may affect profitability[70] Financial Performance - For the fiscal years ended March 31, 2023, 2024, and 2025, the Hong Kong Subsidiaries distributed profits to Highway Holdings amounting to approximately $1,019,000, $616,000, and $492,000 respectively[29] - The company reported a net income of approximately $106,000 in fiscal 2025, compared to a net loss of approximately $959,000 in fiscal 2024[174] - For the fiscal year ended March 31, 2025, net sales increased by approximately $1,091,000, or 17.3%, compared to the fiscal year ended March 31, 2024, driven by increased demand in Europe[163] - Gross profit as a percentage of net sales increased to 33.3% in fiscal 2025 from 27.0% in fiscal 2024, resulting in a gross profit increase of approximately $762,000 to $2,470,000[168] - The Company had an operating loss of approximately $535,000 in fiscal 2025, an improvement from an operating loss of approximately $1,631,000 in fiscal 2024[172] Dividends and Shareholder Returns - Highway Holdings declared dividends of $0.05 per share on May 3, 2024, $0.02 per share on October 11, 2024, and $0.05 per share on December 24, 2024[29] - The company declared three dividend payments totaling $0.12 per share for the fiscal year ended March 31, 2025[80] - The Company paid dividends of approximately $492,000 in fiscal 2025, down from $616,000 in 2024 and $1,019,000 in 2023[189] - The company may cease dividend payments if retaining funds is deemed necessary for corporate goals[80] Cash Flow and Working Capital - As of March 31, 2025, the Company had cash and cash equivalents of approximately $5,972,000, a decrease from $6,601,000 in 2024 and $6,952,000 in 2023[185] - The Company generated approximately $415,000 in net cash from operating activities in fiscal 2024, but used approximately $360,000 in fiscal 2025, marking a significant decline[187] - The working capital of the Company as of March 31, 2025, was approximately $5,493,000, a decrease from $5,809,000 in 2024 and $6,599,000 in 2023[185] - The Company believes its current working capital and operational funds are adequate to support operations for at least the next 12 months[191] Customer Concentration and Sales - The company's sales to its three largest customers accounted for approximately 88.5% of net sales in the year ended March 31, 2025, highlighting financial dependence on a few major customers[57] - Accounts receivable from the three largest customers represented 79.8% of total outstanding receivables as of March 31, 2025, indicating a high concentration of credit risk[58] - Net sales to European customers rose to 85.3% in fiscal 2025 from 66.7% in fiscal 2024, while net sales to North American customers decreased to 3.9% from 19.0%[166] Manufacturing and Operations Strategy - The Company has transferred a substantial portion of its non-automated manufacturing equipment from Shenzhen to Kayser Myanmar to enhance local production capabilities[46] - The Company has stopped most labor-intensive manufacturing in China due to labor shortages and increased wage expectations, shifting operations primarily to Myanmar[50] - The Company has reduced its manufacturing labor force in Shenzhen, China, to approximately 40 workers by increasing automation[90] - The Company is transitioning from being an OEM to an ODM by developing its own proprietary electric motors[143] Regulatory and Compliance Issues - The Holding Foreign Companies Accountable Act may lead to delisting from Nasdaq if the company retains a foreign accounting firm that cannot be inspected by the PCAOB for two consecutive years[27] - The New Overseas Listing Rules may impact the company's ability to offer and list securities in overseas markets, creating uncertainty for future operations[24] - The company does not believe it is subject to the new cybersecurity laws as it does not control more than one million users' personal information[25] - The Chinese government exerts substantial control over business operations, which may result in increased compliance costs and operational changes[53] Internal Controls and Governance - The company identified material weaknesses in its internal control over financial reporting, particularly related to operations in Myanmar, as of March 31, 2025[66] - The Company has faced challenges in maintaining effective internal controls due to insufficient skilled accounting personnel[67] - The Company appointed Marcum Asia CPAs LLP as its independent registered public accounting firm on March 7, 2025, replacing ARK, which was based in Hong Kong[84] Economic Conditions and Inflation - Inflation in Myanmar was estimated to exceed 14% per annum in 2023 and more than 26% per annum in 2024, significantly impacting employee compensation and operating expenses[52] - Increased labor costs in China and Myanmar have significantly impacted the Company's operating costs and gross margins[43] - The Company has faced increased operational costs in China due to regulatory changes, prompting a strategic shift in manufacturing locations[99] Research and Development - The Company has engaged in some research and development activities related to automated machines and proprietary products, although historically it has not conducted significant R&D[142] - The Company has developed a proprietary line of energy-saving brushless direct current motors, with the first motor now being manufactured and sold[131] - The Company has filed for and obtained a utility patent for its new motors, enhancing its competitive position in the market[131] Revenue Recognition and Accounting Policies - The Company records all product revenue on a gross basis, indicating it is primarily responsible for fulfilling the promise to provide specified goods or services[213] - The Company disaggregates its revenue from different types of contracts by principal product categories to best depict the nature and timing of its revenue[214] - The Company adopted ASU No. 2016-13, which amends guidance regarding the impairment of financial instruments, focusing on expected losses rather than incurred losses[217]
Highway Holdings(HIHO) - 2025 Q4 - Annual Report