Skyline Builders (Nasdaq: KAZR) adds critical minerals to Hong Kong roads focus
Rhea-AI Filing Summary
Skyline Builders Group Holding Limited (KAZR) is a Cayman Islands holding company whose operating subsidiaries in Hong Kong undertake public civil engineering works, mainly roads and drainage, as an Approved Public Works Contractor. Operations are currently a single segment focused on Hong Kong projects, often as subcontractor, with revenue concentrated in a small number of customers.
The company is pursuing a new strategic direction in the critical materials sector. It agreed to subscribe for an approximate 20% membership interest in a critical minerals LLC for $20,000,000, and on April 30, 2026 entered a Transaction Agreement for a multi-step Business Combination with Cove Kaz and Kaz Resources involving Kaz Critical Minerals LLP in Kazakhstan and a new Delaware public company, Kaz Resources Inc. Class A Ordinary Shares now trade on Nasdaq as “KAZR”, replacing “SKBL”.
The report highlights extensive regulatory and geopolitical risks related to PRC and Hong Kong oversight, potential future cybersecurity and CSRC filing requirements, constraints on cash transfers and dividends, customer and subcontractor concentration, project cost overruns, safety and environmental liabilities, labor shortages, credit risk on receivables, and the controlling influence of Dablam LLP, which holds high-vote Class B Ordinary Shares. Management reports remediation of prior material weaknesses in internal control as of March 31, 2026.
Positive
- None.
Negative
- None.
Filing Explained
Dablam LLP controls 71.4% of ordinary-share voting power, while the newly acquired Nevada properties are described as immaterial.
As a foreign private issuer’s annual report, this 20-F covers the fiscal year ended
The ordinary shares have unequal voting rights: Class A has one vote each, while Class B has 20, and the preferred shares generally have no voting rights except for specified matters. Dablam LLP’s 1,995,000 Class B shares represent
The company also reports that it acquired two early-stage Nevada gold and silver properties on
Key Figures
Key Terms
Business Combination financial
PIPE Financing financial
M&A Rules regulatory
Trial Measures regulatory
Measures for Cybersecurity Review regulatory
foreign private issuer regulatory
FAQ
What is Skyline Builders Group Holding Limited’s (KAZR) core business as of March 31, 2026?
How is KAZR expanding into the critical materials sector?
How concentrated is Skyline Builders’ (KAZR) customer base?
Who controls voting power at Skyline Builders (KAZR)?
What is the significance of KAZR’s Nevada mineral property acquisitions?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2026
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report _________________________
For the transition period from __________________ to_____________________________
Commission file number 001-42461
| Skyline Builders Group Holding Limited |
| (Exact name of Registrant as specified in its charter) |
| N/A |
| (Translation of Registrant’s name into English) |
| Cayman Islands |
| (Jurisdiction of incorporation or organization) |
Office A, 15/F, Tower A, Capital Tower, No. 38 Wai Yip Street, Kowloon Bay, Hong Kong |
| (Address of principal executive offices) |
Ngo Chiu Lam, Chief Executive Officer +852-2811-9688 kin-chiu88@kinchiu.com.hk Office A, 15/F, Tower A, Capital Tower, No. 38 Wai Yip Street, Kowloon Bay, Hong Kong |
| (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) |
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class to be so registered | Name of each exchange on which each class is to be registered | |
| Class A Ordinary Shares, par value US$0.00001 per share | Nasdaq Stock Market LLC |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
| None |
| (Title of Class) |
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
| None |
| (Title of Class) |
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 17,481,491 Ordinary Shares, consisting of 15,486,491 Class A Ordinary Shares and 1,995,000 Class B Ordinary Shares; and 47,332,468 Preferred Shares, consisting of 47,326,026 Series A Preferred Shares and 6,442 Series B Preferred Shares, as of March 31, 2026.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes ☒ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐ Yes ☒ No
Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer, “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Non-accelerated filer ☒ | |
| Accelerated filer ☐ | Emerging growth company ☒ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
| † | The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| U.S. GAAP ☒ | International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ | Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐ Yes ☐ No
TABLE OF CONTENTS
| CONVENTIONS WHICH APPLY TO THIS ANNUAL REPORT | ii |
| INTRODUCTION | iv |
| SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS | v |
| PART I. | 1 |
| ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | 1 |
| ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE | 1 |
| ITEM 3. KEY INFORMATION | 1 |
| ITEM 4. INFORMATION ON THE COMPANY | 33 |
| ITEM 4A. UNRESOLVED STAFF COMMENTS | 44 |
| ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS | 45 |
| ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES | 72 |
| ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS | 80 |
| ITEM 8. FINANCIAL INFORMATION | 82 |
| ITEM 9. THE OFFER AND LISTING | 83 |
| ITEM 10. ADDITIONAL INFORMATION | 84 |
| ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 96 |
| ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | 98 |
| PART II. | 99 |
| ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES | 99 |
| ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 99 |
| ITEM 15. CONTROLS AND PROCEDURES | 99 |
| ITEM 16. [RESERVED] | 100 |
| ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT | 100 |
| ITEM 16B. CODE OF ETHICS8 | 100 |
| ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES | 100 |
| ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES | 100 |
| ITEM 16E. PURCHASER OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS | 100 |
| ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT | 100 |
| ITEM 16G. CORPORATE GOVERNANCE | 101 |
| ITEM 16H. MINE SAFETY DISCLOSURE | 101 |
| ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | 101 |
| ITEM 16J. INSIDER TRADING POLICIES | 101 |
| ITEM 16K. CYBERSECURITY | 101 |
| PART III. | 102 |
| ITEM 17. FINANCIAL STATEMENTS | 102 |
| ITEM 18. FINANCIAL STATEMENTS | 102 |
| ITEM 19. EXHIBITS | 102 |
i
Conventions Which Apply to this Annual Report
Throughout this annual report, we use a number of key terms and provide a number of key performance indicators used by management. Unless the context otherwise requires, the following definitions apply throughout where the context so admits:
| ● | “Amended Memorandum and Articles” refers to our fourth amended and restated memorandum and articles of association adopted by special resolution passed on February 6, 2026; |
| ● | “Audit Committee” refers to the audit committee of our Board of Directors; |
| ● | “Board” or “Board of Directors” refer to the board of Directors of our Company; | |
| ● | “Business Combination” refers to the transactions contemplated under the Transaction Agreement; |
| ● | “Class A Ordinary Shares” refers to Skyline Builders Group Holding Limited’s Class A Ordinary Shares of par value US$0.00001 each; |
| ● | “Class B Ordinary Shares” refers to Skyline Builders Group Holding Limited’s Class B Ordinary Shares of par value US$0.00001 each; |
| ● | “China” or the “PRC” refers to the People’s Republic of China, including Hong Kong and Macau. For reference to specific laws and regulations adopted by the PRC, the definition of “China” or the “PRC” refers to the People’s Republic of China, excluding Hong Kong and Macau; |
| ● | “Companies Act” refers to the Companies Act (Revised) of the Cayman Islands, including any statutory modification or re-enactment thereof for the time being in force; |
| ● | “Directors” refers to the directors of our Company; |
| ● | “Executive Officers” refers to the executive officers of our Company; |
| ● | “Government” refers to the government of Hong Kong; |
| ● | “Hong Kong” refers to Hong Kong Special Administrative Region, People’s Republic of China; |
| ● | “Kaz Companies” means Cove Kaz, KCMLLP, and each of their respective Subsidiaries prior to the Business Combination; |
| ● | “Nominating and Corporate Governance Committee” refers to the nominating corporate governance committee of our Board of Directors |
| ● | “Operating Subsidiaries” refers to Kin Chiu Engineering Limited and Kin Chiu Development Company Limited; |
| ● | “Ordinary Shares” refers to Class A Ordinary Shares and Class B Ordinary Shares; |
| ● | “our Group” or “the Group” refers to Skyline Builders Group Holding Limited and its subsidiaries; | |
| ● | “PIPE Financing” means the subscription by certain investors for, and issuance by SKBL of, (a) SKBL Class A Ordinary Shares, (b) SKBL Preferred B Shares, (c) SKBL Unsecured Convertible Notes and/or (d) SKBL Warrants, pursuant to subscription agreements entered into between August 2025 and March 2026. |
ii
| ● | “SEC” refers to the U.S. Securities and Exchange Commission; |
| ● | “Series A Preferred Shares” refers to Skyline Builders Group Holding Limited’s Series A Preferred Shares of par value US$0.00001 each; |
| ● | “Series B Preferred Shares” refers to Skyline Builders Group Holding Limited’s Series B Preferred Shares of par value US$0.00001 each; | |
| ● | “Shares” refers to the Class A Ordinary Shares, Class B Ordinary Shares, Series A Preferred Shares and Series B Preferred Shares collectively; | |
| ● | “Transaction Agreement” refers to the transaction agreement, dated as of April 30, 2026, by and among SKBL, SKBL Merger Sub Inc., a Cayman Islands exempted company with limited liability (“SKBL Merger Sub”), Cove Kaz Capital Group LLC, a Delaware limited liability company (“Cove Kaz”), and Kaz Resources LLC, a Delaware limited liability company (“KRLLC”); |
| ● | “we”, “us”, “our Company”, “our” or “the Company” refers to Skyline Builders Group Holding Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands, and in the context of describing its operation and business, its subsidiaries; |
| ● | “H.K. dollar”, “H.K. dollars”, or “HK$” refers to the legal currency of Hong Kong; |
| ● | “U.S. dollar”, “U.S. dollars”, “dollars”, “USD”, “US$” or “$” refers to the legal currency of the United States. |
The expressions “associated company,” “related corporation” and “subsidiary” shall have the respective meanings ascribed to them in the Companies Act, as the case may be.
Any discrepancies in tables included herein between the total sum of amounts listed and the totals thereof are due to rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.
Unless the context otherwise requires, a reference to “we,” “our,” “us,” “our Group” or the “Company” or their other grammatical variations is a reference to Skyline Builders Group Holding Limited and its subsidiaries taken as a whole.
Certain of our customers and suppliers are referred to in this prospectus by their trade names. Our contracts with these customers and suppliers are typically with an entity or entities in the relevant customer or supplier’s group of companies.
Internet site addresses in this prospectus are included for reference only and the information contained in any website, including our website, is not incorporated by reference into, and does not form part of, this Annual Report.
iii
Introduction
We (the “Company” or “SKBL”), are an exempted company with limited liability incorporated under the laws of the Cayman Islands on June 25, 2024, as a holding company. We operate our business primarily through our indirectly wholly owned Operating Subsidiaries, Kin Chiu Engineering Limited and Kin Chiu Development Company Limited. For the fiscal years ended March 31, 2026, 2025 and 2024, we operate in a single segment that represents the Company’s core business as an Approved Public Works Contractor undertaking roads and drainage for customers in Hong Kong. Our construction activities mainly include public civil engineering works, such as road and drainage works, in Hong Kong. We mostly undertake civil engineering works in the role of subcontractor, while we are also fully qualified to undertake such work in the capacity of main contractor.
On November 6, 2025, we furnished a report on Form 6-K announcing a new strategic direction focused on the critical materials sector. Under this strategy, we seek to become a strategic supplier of critical minerals and nuclear fuels and have identified several potential acquisitions and strategic partnerships. We intend to prioritize supplying customers in the United States over customers in other regions to help ensure that U.S. customers have access to the critical materials they require. As of March 31, 2026, this strategy had not resulted in a new reportable segment.
On October 31, 2025, we entered into a subscription and unit purchase agreement (the “Subscription Agreement”) with a limited liability company engaged in the critical minerals space (the “LLC”), pursuant to which we subscribed for an approximate 20% membership interest in the LLC, subject to regulatory approval, for a subscription price of $20,000,000. This represents the start of a new strategic direction by us into the critical materials space. We seek to become a highly strategic supplier of critical minerals and nuclear fuels with several potential acquisitions and strategic partnerships identified. We will focus on supplying customers in the United States preferentially over customers in other regions to ensure that US customers have access to the critical materials they require.
On April 30, 2026, we entered into a transaction agreement (the “Transaction Agreement”) with SKBL Merger Sub Inc., a Cayman Islands exempted company with limited liability (“SKBL Merger Sub”), Cove Kaz Capital Group LLC, a Delaware limited liability company (“Cove Kaz”), and Kaz Resources LLC, a Delaware limited liability company (“KRLLC”), with respect to a proposed business combination involving the parties thereto (the “Business Combination”). Unless otherwise defined in this annual report, capitalized terms used in the following description of the Business Combination have the meanings ascribed to them in the Transaction Agreement.
For purposes of engaging in the Business Combination, (i) Cove Kaz incorporated SKBL Merger Sub as a newly incorporated Cayman Islands exempted company with limited liability wholly owned by Cove Kaz and (ii) KRLLC will form a newly incorporated private company in the Astana International Financial Centre (“AIFC NewCo”). KRLLC owns 100% of the issued and outstanding participatory interests (the “KCMLLP Interests”) in Kaz Critical Minerals LLP, a limited liability partnership incorporated and existing under the laws of the Republic of Kazakhstan (“KCMLLP”). Prior to the Closing Date, and subject to the terms and conditions set forth in the Transaction Agreement, KCMLLP will merge with and into AIFC NewCo, with AIFC NewCo being the surviving entity.
Upon the terms and subject to the conditions of the Transaction Agreement, including receipt of requisite regulatory approvals: (a) KRLLC will distribute a percentage of the Equity Interest in AIFC NewCo equal to the fair market value of the KRLLC Redeemed Interests to SKBL in exchange for the redemption of all of the KRLLC Redeemed Interests, (b) Cove Kaz will convert its legal form from a Delaware limited liability company to a Delaware corporation, and change its corporate name to “Kaz Resources Inc”. (the “PubCo”), or such other name as may be agreed by the parties, (c) KRLLC will (i) sell its entire Equity Interest in AIFC NewCo to Cove Kaz, and (ii) contribute all of its rights and interests in and to the KRLLC Receivable to Cove Kaz, in each case, in exchange for newly issued shares of PubCo Class B Common Stock and the right to receive Earnout Shares, if and to the extent earned, in accordance with the Transaction Agreement and (d) at the SKBL Merger Effective Time, in accordance with the Companies Act, SKBL Merger Sub will merge with and into SKBL, as a result of which the separate corporate existence of SKBL Merger Sub will cease and SKBL will continue as the surviving company in such merger (the “SKBL Merger”) the SKBL Merger, and each of the issued and outstanding SKBL Securities immediately prior to the SKBL Merger Effective Time shall no longer be outstanding and shall automatically be cancelled in exchange for the right to receive securities in PubCo as described in the Transaction Agreement. Defined terms used herein that are not otherwise defined shall have the meaning ascribed to them in the Transaction Agreement.
On August 17, 2026, we announced that we have acquired two highly prospective gold and silver mineral properties in Nevada for an aggregate purchase price of US$136,000. The two properties acquired are (i) Mill Creek, an early-stage gold exploration project acquired from Paramount Gold (NYSE: PZG), and (ii) Irwin Mine, a past-producing property with historic high-grade intrusive-related gold and silver. Both mineral properties are at an early stage of exploration. We do not view these transactions as material to our business or operations at this time.
Our Class A Ordinary Shares began trading on Nasdaq under the trading symbol “KAZR,” replacing “SKBL,” since June 17, 2026.
We are a “foreign private issuer” as defined in Rule 3b-4 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Our financial statements appearing in this Annual Report are prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP.
Statements made in this Annual Report concerning the contents of any contract, agreement or other document are summaries of such contracts, agreements or documents and are not complete descriptions of all of their terms. If we file any of these documents as an exhibit to this Annual Report, you may read the document itself for a complete description of its terms.
iv
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “goal,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. The forward-looking statements and opinions contained in this annual report are based upon information available to us as of the date of this annual report and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Forward-looking statements include statements about:
| ● | the consummation of, and anticipated benefits from, the Business Combination; | |
| ● | the successful execution of our new business strategies following the Business Combination; | |
| ● | changes in political, social and economic conditions, the regulatory environment, laws and regulations and interpretation thereof in the jurisdictions where we conduct business or expect to conduct business; | |
| ● | timing of the development of future business; |
| ● | capabilities of our business operations; |
| ● | expected future economic performance; |
| ● | competition in our market; |
| ● | continued market acceptance of our services and products; |
| ● | protection of our intellectual property rights; |
| ● | changes in the laws that affect our operations; |
| ● | inflation and fluctuations in foreign currency exchange rates; |
| ● | our ability to obtain and maintain all necessary government certifications, approvals, and/or licenses to conduct our business; |
| ● | continued development of a public trading market for our securities; |
| ● | the cost of complying with current and future government regulations and the impact of any changes in the regulations on our operations; |
| ● | managing our growth effectively; |
| ● | projections of revenue, earnings, capital structure and other financial items; |
| ● | fluctuations in operating results; |
| ● | dependence on our senior management and key employees; and |
| ● | other factors set forth under “Risk Factors.” |
You should refer to the section titled “Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this annual report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
You should read this annual report and the documents that we reference in this annual report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
v
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
3.A. [Reserved]
3.B. Capitalization and Indebtedness
Not applicable.
3.C. Reasons for the Offer and Use of Proceeds
Not applicable.
3.D. Risk Factors
Risks Related to Our Corporate Structure
We will in the future rely on dividends and other distributions on equity paid by the Operating Subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of the Operating Subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business. In the future, funds or assets may not be available to fund operations or for other use outside of Hong Kong, due to the imposition of restrictions and limitations on, our ability or our subsidiary by the PRC government to transfer cash.
Skyline Builders Group Holding Limited is a holding company, and we will in the future rely on dividends and other distributions on equity paid by the Operating Subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. We do not expect to pay cash dividends in the foreseeable future. We anticipate we will retain any earnings to support operations and to finance the growth and development of our business. If the Operating Subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us.
According to the BVI Business Companies Act 2004 (as amended), a British Virgin Islands company may make dividends distribution to the extent that immediately after the distribution, such company’s liabilities do not exceed its assets and that such company is able to pay its debts as they fall due. According to the Companies Ordinance of Hong Kong, a Hong Kong company may only make a distribution out of profits available for distribution. Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us. Any limitation on the ability of our Hong Kong subsidiary to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.
1
Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us. The PRC laws and regulations do not currently have any material impact on transfers of cash from Skyline Builders Group Holding Limited to our Operating Subsidiaries or our Operating Subsidiaries to Skyline Builders Group Holding Limited, our shareholders and U.S. investors. However, the Chinese government may, in the future, impose restrictions or limitations on our ability to transfer money out of Hong Kong, to distribute earnings and pay dividends to and from the other entities within our organization, or to reinvest in our business outside of Hong Kong. Such restrictions and limitations, if imposed in the future, may delay or hinder the expansion of our business to outside of Hong Kong and may affect our ability to receive funds from our Operating Subsidiaries in Hong Kong. The promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case, that restrict or otherwise unfavorably impact the ability or way we conduct our business, could require us to change certain aspects of our business to ensure compliance, which could decrease demand for our services, reduce revenues, increase costs, require us to obtain more licenses, permits, approvals or certificates, or subject us to additional liabilities. To the extent any new or more stringent measures are required to be implemented, our business, financial condition and results of operations could be adversely affected and such measures could materially decrease the value of our Class A Ordinary Shares, potentially rendering them worthless.
Recently in 2023, the PRC government initiated a series of regulatory actions and statements to regulate business operations in certain areas in mainland China, including cracking down on illegal activities in the securities market, enhancing supervision over mainland China-based companies listed overseas using the variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. In the future, we may be subject to PRC laws and regulations related to the current business operations of our Operating Subsidiaries and any changes in such laws and regulations and interpretations may impair its ability to operate profitably, which could result in a material negative impact on its operations and/or the value of our Class A Ordinary Shares.
Although we have direct ownership of our operating entities in Hong Kong and currently do not have or intend to have any subsidiary or any contractual arrangement to establish a VIE structure with any entity in mainland China, we are still subject to certain legal and operational risks associated with our Operating Subsidiaries, being based in Hong Kong and having all of its operations to date in Hong Kong. Additionally, the legal and operational risks associated in mainland China may also apply to operations in Hong Kong, and we face the risks and uncertainties associated with the complex and evolving PRC laws and regulations and as to whether and how the recent PRC government statements and regulatory developments, such as those relating to data and cyberspace security and anti-monopoly concerns, would be applicable to a company such as our Operating Subsidiaries and Skyline Builders Group Holding Limited, given the substantial operations of our Operating Subsidiaries in Hong Kong and the Chinese government may exercise significant oversight over the conduct of business in Hong Kong. In the event we or our Operating Subsidiaries were to become subject to PRC laws and regulations, we could incur material costs to ensure compliance, and we or our Operating Subsidiaries might be subject to fines, experienced evaluation of securities or delisting, no longer be permitted to conduct offerings to foreign investors, and/or no longer be permitted to continue business operations as presently conducted. Our organizational structure involves risks to the investors, and Chinese regulatory authorities could disallow this structure, which would likely result in a material change in our Operating Subsidiaries’ operations and/or a material change in the value of our Class A Ordinary Shares, including the risk that such event could cause the value of such securities to significantly decline or become worthless. Moreover, there are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations related to our business and the enforcement and performance of our arrangements with customers in certain circumstances. The laws and regulations may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness and interpretation of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and our business may be affected if we rely on laws and regulations which are subsequently adopted or interpreted in a manner different from our understanding of these laws and regulations. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business.
We may become subject to a variety of PRC laws and other obligations regarding M&A Rules, the Trial Measures and data security, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, financial condition and results of operations.
The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies on August 8, 2006, and amended on June 22, 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of domestic companies in mainland China and controlled by companies or individuals of mainland China to obtain the approval of the CSRC, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. In addition, on December 24, 2021, the CSRC released the Administrative Regulations of the State Council Concerning the Oversea Issuance of Security and Listing by Domestic Enterprise (Draft for Comments) (the “Draft Administrative Regulations”) and the Measures for the Overseas Issuance of Securities and Listing Record-Filings by Domestic Enterprises (Draft for Comments) (the “Draft Filing Measures”), collectively the “Draft Rules on Overseas Listing”, for public opinion.
2
Skyline Builders Group Holding Limited is a holding company incorporated in the Cayman Islands with our Operating Subsidiaries based in Hong Kong, as of the date of this report, we have no subsidiary, VIE structure or any direct operations in mainland China, nor do we intend to have any subsidiary or VIE structure or to acquire any equity interests in any domestic companies in mainland China, and we are not controlled by any companies or individuals of mainland China. Further, we are headquartered in Hong Kong and our chief executive officer, chief financial officer and all members of the board of directors of Skyline Builders Group Holding Limited are based in Hong Kong are not mainland China citizens and all of our revenues and profits are generated by our subsidiary in Hong Kong and we have not generated any revenues or profits in mainland China. Additionally, we do not intend to operate in mainland China in the foreseeable future. As such, we do not believe we would be subject to the M&A Rules or would be required to file with the CSRC under the Trial Measures. Moreover, pursuant to the Basic Law of the Hong Kong Special Administrative Region, or the Basic Law, PRC laws and regulations shall not be applied in Hong Kong except for those listed in Annex III of the Basic Law (which is confined to laws relating to national defense, foreign affairs and other matters that are not within the scope of autonomy).Therefore, we believe, as of the date of this report, the CSRC’s approval or review is not required for the listing and trading of our Class A Ordinary Shares in the U.S. exchange as provided under the M&A Rules and the Trial Measures.
Most of our Operating Subsidiaries’ operations are conducted in Hong Kong, which is a part of the PRC. We are aware that recently, in 2023, the PRC government initiated a series of regulatory actions and statements to regulate business operations in certain areas in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using a VIE structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding its efforts in anti-monopoly enforcement. Since these statements and regulatory actions are new, it is highly uncertain how soon the legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any. It is also highly uncertain what the potential impact such modified or new laws and regulations will have on our Hong Kong subsidiary’s daily business operations, their ability to accept foreign investments and the listing of our Class A Ordinary Shares on a U.S. or other foreign exchange. These actions could result in a material change in our operations and/or to the value of our Class A Ordinary Shares and could significantly limit or completely hinder our ability to offer or continue to offer our Class A Ordinary Shares to investors.
In addition, on December 28, 2021, the Measures were published and became effective February 15, 2022, and require that, among other things, and in addition to any “operator of critical information infrastructure”, any “data processor” controlling personal information of no less than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review, and which further elaborate on the factors to be considered when assessing the national security risks of the relevant activities. The publication of the Measures indicates greater oversight by the CAC over data security, which may impact our business in the future. As of the date of this report, our Operating Subsidiaries do not have any mainland China individuals as clients. However, our Operating Subsidiaries may collect and store certain data (including certain personal information) from its customers for “Know Your Customers” purposes, which may include mainland China individuals in the future. As of the date of this report, we do not expect the Measures to have an impact on our business, operations to subject us or our Operating Subsidiaries to permission requirements from the CAC or any other government agency that is required to approve our subsidiary’s operations, as we do not believe we will be deemed to be an “operator of critical information infrastructure” or a “data processor” controlling personal information of no less than one million users, that are required to file for cybersecurity review before listing in the U.S. However, there remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations. If we were deemed to be an “operator of critical information infrastructure” or a “data processor” controlling personal information of no less than one million users, or if other regulations promulgated in relation to the Measures are deemed to apply to us, our subsidiary’s business operations and the listing of our Class A Ordinary Shares in the U.S. could be subject to CAC’s cybersecurity review or we and our subsidiary might be covered by permission from the CAC or any other government agency that is required to approve our subsidiary’s operations in the future. Nevertheless, since these statements and regulatory actions are new, it is highly uncertain how soon the legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any. It also remains uncertain what the potential impact such modified or new laws and regulations will have on our subsidiary’s daily business operations, its ability to accept foreign investments and the listing of our Class A Ordinary Shares on a U.S. or other foreign exchanges. If any or all of the foregoing were to occur, it may significantly limit or cause the value of our Class A Ordinary Shares to significantly decline or become worthless. As of the date of this report, there are no commensurate laws or regulations in Hong Kong which result in similar significant oversight over data security for companies seeking to offer securities on a foreign exchange. However, we cannot guarantee that, if, in the future, such laws or regulations were issued in Hong Kong, we would be compliant with such laws or regulations in a timely manner or at all. In addition, we may have to spend significant time and costs to become compliant. If we are unable to do so, on commercially reasonable terms, in a timely manner or otherwise, we may become subject to sanctions imposed by the relevant regulatory authorities, and our ability to conduct our business, or offer securities on a U.S. or other international securities exchange may be restricted. As a result of the foregoing, our business, reputation, financial condition, and results of operations may be materially and adversely affected.
3
Recent statements by the PRC government have indicated an intent to exert more exert oversight and control over offerings that are conducted overseas and/or foreign investments in China based issuers. On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued a document to crack down on illegal activities in the securities markets and promote the high-quality development of the capital markets, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws.
On December 24, 2021, the China Securities Regulatory Commission (the “CSRC”) released the Draft Administrative Provisions and the Draft Filing Measures, both of which had a comment period that expired on January 23, 2022. The Draft Administrative Provisions and Draft Filing Measures regulate the administrative system, record-filing management, and other related rules in respect of the direct or indirect overseas issuance of listed and traded securities by “domestic enterprises”. The Draft Administrative Provisions specify that the CSRC has regulatory authority over the “overseas securities offering and listing by domestic enterprises” and requires “domestic enterprises” to complete filing procedures with the CSRC if they wish to list overseas. On February 17, 2023, the CSRC released the Trial Measures and five supporting guidelines, which came into effect on March 31, 2023. According to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedures and report relevant information to the CSRC; any failure to comply with such filling procedures may result in administrative penalties, such as an order to rectify, warnings, and fines. On April 2, 2022, the CSRC published the Draft Archives Rules, for public comment. These rules state that in the overseas listing activities of domestic companies, domestic companies, as well as securities companies and securities service institutions providing relevant securities services thereof, should establish a sound system of confidentiality and archival work, shall not disclose state secrets, or harm the state and public interests.
Under the Trial Measures and the Guidance Rules and Notice, Chinese domestic companies conducting overseas securities offering and listing activities, either in direct or indirect form, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following their submission of initial public offerings or listing application. The companies that have already been listed on overseas stock exchanges or have obtained the approval from overseas supervision administrations or stock exchanges for its offering and listing and will complete their overseas offering and listing prior to September 30, 2023 are not required to make immediate filings for its listing, yet need to make filings for subsequent offerings in accordance with the Trial Measures. Companies that have already submitted an application for an initial public offering to overseas supervision administrations prior to the effective date of the Trial Measures but have not yet obtained the approval from overseas supervision administrations or stock exchanges for the offering and listing, shall arrange for the filing within a reasonable time period and shall complete the filing procedure before such companies’ overseas issuance and listing.
The Management understands that as of the date of this report, the Group has no operations in China and is not required to complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures. While the Group has no current operations in China, should we have any future operations in China and should we (i) fail to receive or maintain such permissions or approvals, (ii) inadvertently conclude that such permissions or approvals are not required, or (iii) applicable laws, regulations, or interpretations change and require us to obtain such permissions or approvals in the future, we may face sanctions by the CSRC, the CAC or other PRC regulatory agencies. These regulatory agencies may also impose fines and penalties on our potential operations in China, as well as limit our ability to pay dividends outside of China, limit our operations in China, delay or restrict the repatriation of the proceeds into China or take other actions that could have a material adverse effect on our business as well as the trading price of our Class A Ordinary Shares. We may be required to restructure our operations to comply with such regulations or potentially cease operations in the PRC entirely. The CSRC, the CAC or other PRC regulatory agencies also may take actions requiring us, or making it advisable for us, to halt offering securities before settlement and delivery of our Class A Ordinary Shares. In addition, if the CSRC, the CAC or other regulatory PRC agencies later promulgate new rules requiring that we obtain their approvals for offering securities, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any action taken by the PRC government could significantly limit or completely hinder our operations in the PRC and our ability to offer or continue to offer securities to investors and could cause the value of such securities to significantly decline or be worthless.
4
Furthermore, on July 10, 2021, the Cyberspace Administration of China (the “CAC”) issued a revised draft of the Measures for Cybersecurity Review for public comment, which required that, among others, in addition to any “operator of critical information infrastructure”, any “data processor” controlling personal information of no less than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review, and further elaborated the factors to be considered when assessing the national security risks of the relevant activities. On December 28, 2021, the CAC, the National Development and Reform Commission (“NDRC”), and several other administrations jointly issued the revised Measures for Cybersecurity Review, which became effective and replaced the existing Measures for Cybersecurity Review on February 15, 2022. According to the Revised Review Measures, if an “online platform operator” that is in possession of personal data of more than one million users intends to list in a foreign country, it must apply for a cybersecurity review. Based on a set of Q&A published on the official website of the State Cipher Code Administration in connection with the issuance of the Revised Review Measures, an official of the said administration indicated that an online platform operator should apply for a cybersecurity review prior to the submission of its listing application with non-PRC securities regulators. Moreover, the CAC released the draft of the Regulations on Network Data Security Management in November 2021 for public consultation, which among other things, stipulates that a data processor listed overseas must conduct an annual data security review by itself or by engaging a data security service provider and submit the annual data security review report for a given year to the municipal cybersecurity department before January 31 of the following year. Given the recency of the issuance of the Revised Review Measures and their pending effectiveness, there is a general lack of guidance and substantial uncertainties exist with respect to their interpretation and implementation. It remains unclear whether a Hong Kong company which collects personal information from PRC individuals shall be subject to the Revised Review Measures. We do not currently expect the Revised Review Measures to have an impact on our business or our operations as we do not believe that our Operating Subsidiaries would be deemed to be an “operator of critical information infrastructure” or a “data processor” controlling personal information of no less than one million users, that would be required to file for cybersecurity review before listing in the U.S. However, there remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations. If the Revised Review Measures are adopted into law in the future and if our Operating Subsidiaries are deemed to be an “operator of critical information infrastructure” or a “data processor” controlling personal information of no less than one million users, our operation and the listing of our Class A Ordinary Shares in the U.S. could be subject to CAC’s cybersecurity review.
We have been advised by David Fong & Co., our Hong Kong counsel, that based on their understanding of the current Hong Kong laws, as of the date of this report, our Company and its subsidiary, including our Operating Subsidiaries, are not required to obtain any permissions or approvals from Hong Kong authorities for the continued listing of our Class A Ordinary Shares in the U.S. and issuing our Class A Ordinary Shares to foreign investors. No such permissions or approvals have been applied for by the Company and/or its subsidiary or denied by any relevant authorities. Most of our Operating Subsidiaries’ operations are conducted in Hong Kong, which is a part of the PRC. As of the date of this report, our Operating Subsidiaries have received all requisite permissions or approvals from the Hong Kong authorities to operate their businesses in Hong Kong, including but not limited to their business registration certificates. However, we have been advised by David Fong & Co. that uncertainties still exist, due to the possibility that laws, regulations, or policies in Hong Kong could change rapidly in the future.
Based on management’s internal assessment that the Company and its subsidiary currently have no material operations in the PRC, management understands that as of the date of this report, the Company is not required to obtain any permissions or approvals from PRC authorities for the continued listing of our Class A Ordinary Shares in the U.S. and to issue our Class A Ordinary Shares to foreign investors, including the CAC or the CSRC. We also understand that our Operating Subsidiaries are not required to obtain any permissions or approvals from any Chinese authorities to operate their businesses as of the date of this report. No permissions or approvals have been applied for by the Company or denied by any relevant authority. However, uncertainties still exist, due to the possibility that laws, regulations, or policies in the PRC could change rapidly in the future.
5
As of the date of this report, Hong Kong does not have similar regulations as of the PRC to extend oversight and control over offerings that are conducted overseas. Hong Kong does not have similar regulation as of the Trial Measures and the Guidance Rules and Notice, and Measures for Cybersecurity Review of the PRC. In the event that (i) the PRC government expands the categories of industries and companies whose foreign securities offerings are subject to review by the CSRC or the CAC or if applicable laws, regulations or interpretations change and we are required to obtain such permissions or approvals, (ii) we inadvertently conclude that relevant permissions or approvals were not required or (iii) we did not receive or maintain relevant permissions or approvals required, any action taken by the PRC government could significantly limit or completely hinder our operations in Hong Kong and our ability to offer or continue to offer securities to investors and could cause the value of our securities to significantly decline or be worthless.
Most of our Operating Subsidiaries’ operations are conducted in Hong Kong. However, due to the long arm provisions under the current PRC laws and regulations, the Chinese government may exercise significant oversight and discretion over the conduct of such business and may influence such operations at any time, which could result in a material change in the operations of the Operating Subsidiaries and/or the value of our Class A Ordinary Shares. The PRC government may also impose restrictions on our ability to transfer money out of Hong Kong to distribute earnings and pay dividends or to reinvest in our business outside of Hong Kong. Changes in the policies, regulations, rules, and the enforcement of laws of the Chinese government may also occur quickly and our assertions and beliefs of the risk imposed by the PRC legal and regulatory system cannot be certain. There are uncertainties regarding the enforcement of PRC laws, and rules and regulations in China can change quickly with little advance notice. The Chinese government may intervene or influence our operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operations and/or the value of the securities we are registering for sale.
Recently in 2023, the PRC government initiated a series of regulatory actions and statements to regulate business operations in certain areas in mainland China, including a cracking down on illegal activities in the securities market, enhancing supervision over mainland China-based companies listed overseas using the VIE structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Given the recent statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in mainland China-based issuers, any such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause such securities to significantly decline or be worthless. Additionally, any further control over offerings conducted overseas and/or foreign investment impacting our subsidiary in Hong Kong by the Hong Kong government could result in a material change in our Operating Subsidiaries’ operations, financial performance and/or the value of our Class A Ordinary Shares or impair our ability to raise money.
There are uncertainties regarding the enforcement of PRC laws, and rules and regulations in China can change with little advance notice. For example, the Chinese cybersecurity regulator announced on July 2, 2021 that it began an investigation of Didi Global Inc. (NYSE: DIDI) and two days later ordered that company’s app be removed from smartphone app stores. The Chinese government has exercised, and continues to exercise, substantial control over virtually every sector of the Chinese economy through regulation and state ownership. The Chinese government may intervene or influence our operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operations and/or the value of the securities we are registering for sale. Furthermore, given the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted overseas, although we are currently not required to obtain permission from any of the PRC federal or local government and has not received any denial to list on the U.S. exchange, it is uncertain whether or when we might be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even if such permission is obtained, whether it will be later denied or rescinded, which could significantly limit or completely hinder our ability to offer or continue to offer our securities to investors and cause the value of our shares to significantly decline or be worthless.
6
If the Chinese government chooses to extend oversight and control over offerings that are conducted overseas and/or foreign investment in mainland China-based issuers to Hong Kong-based issuers, such action may significantly limit or completely hinder our ability to offer or continue to offer Class A Ordinary Shares to investors and cause the value of our Class A Ordinary Shares to significantly decline or be worthless.
Recent statements, laws and regulations by the Chinese government in 2022 and 2023, including the Measures, the PRC Personal Information Protection Law and the Trial Measures have already indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investments in mainland China-based issuers. We could be subject to approval or review by Chinese regulatory authorities to pursue offering securities. We do not have any operations in mainland China and currently do not have or intend to have any operating subsidiary established in mainland China or any contractual arrangement to establish a VIE structure with any entity in mainland China, but because all of our operations are conducted in Hong Kong through our wholly-owned subsidiary, and Hong Kong is a Special Administrative Region of China, the Chinese government may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of our Class A Ordinary Shares.
In the event that the PRC regulatory authorities disallow our business structure, any action taken by the PRC government could significantly limit or completely hinder our operations in Hong Kong and our ability and to offer or continue to offer securities to investors and could cause the value of such securities to significantly decline or be worthless.
Risks Related to Our Business and Industry
Our performance depends on market conditions and trends in the civil engineering industry and if there is any slowdown in the development of infrastructure in Hong Kong, the availability of civil engineering projects in Hong Kong may decrease significantly.
For the fiscal year ended March 31, 2026, 2025 and 2024, the majority of our revenue was derived from civil engineering projects in Hong Kong. The future development of the civil engineering industry and the availability of civil engineering projects in Hong Kong largely depend on the continued development of infrastructure by the Government of Hong Kong. The nature, extent and timing of available civil engineering projects will be determined by an interplay of a variety of factors, including the Government’s policies on the infrastructure development in Hong Kong, its land supply and public housing policy, the investment and budget of the Government of Hong Kong and the general conditions and prospects of Hong Kong’s economy. These factors may affect the availability of civil engineering projects in Hong Kong.
If there is any slowdown in the development of infrastructure by the Government in Hong Kong, there is no assurance that the availability of civil engineering projects in Hong Kong would not decrease significantly and our business and financial position and prospect may be adversely and materially affected.
Our revenue is mainly derived from projects which are non-recurrent in nature and there is no guarantee that our customers will provide us with new businesses.
Our revenue is typically derived from projects which are non-recurrent in nature and our customers are under no obligation to award projects to us. For the fiscal year ended March 31, 2026, 2025 and 2024, we secured new businesses mainly through invitation for tender by customers or through submitting tenders directly to the Government of Hong Kong responsible for the projects. There is no assurance that we will be able to secure new contracts in the future. Accordingly, the number and scale of projects and the amount of revenue we are able to derive therefrom may vary significantly from period to period, and it may be difficult to forecast the volume of future business. In the event that we fail to secure new contracts or there is a significant decrease in the number of tender invitations or contracts available for bidding in the future, our business, financial position and prospects could be materially and adversely affected.
7
Our cost of revenue has historically fluctuated. If we experience any significant increase in cost of revenue, our gross profit margin might decrease and our business operations and financial position might be materially and adversely affected.
Our revenue is typically derived from projects, with each contract sum being determined with reference to tender price that are formulated based on a certain mark-up over our estimated costs. Pricing of our services is determined on a case-by-case basis and is dependent on various factors, which generally include (i) the scope of services; (ii) the price trend for the types of subcontracting services as well as the materials required; (iii) the complexity and the location of the project; (iv) the estimated quantity and type of equipment required; (v) the completion time requested by our customers; and (vi) the availability of human and financial resources. We will review the cost budget from time to time. If the actual cost is higher than originally budgeted, it may reduce our profit margin and affect our financial performance. If we fail to keep the costs within the initial budget, our business operation and financial results may be adversely affected.
The total actual value of work done may differ from the original estimated contract sum stated in our contracts with customers.
Our customers may request additional, reduction or alteration of works beyond the scope of the contract during project implementation by placing variation orders with us. The aggregate amount of revenue that we are able to derive from a project may be different from the original estimated contract sum specified in the relevant contract due to variation orders placed by our customers. As such, there is no assurance that the amount of fees and charges as finally agreed with our customers would be sufficient to recover our costs incurred or provide us with a reasonable profit margin or the amount of revenue derived from our projects will not be substantially different from the original estimated contract sum as specified in the relevant contracts and our financial condition may be adversely affected by any decrease in our revenue as a result of variation orders. As a result, there is no assurance that our revenue and profit margin in the future will remain at a level comparable to those recorded during the fiscal year ended March 31, 2026.
Any material inaccurate cost estimation or cost overruns may adversely affect our financial results.
When determining our tender price, our management would estimate the time and costs involved in a project taking into account (i) the scope of services; (ii) the price trend for the types of subcontracting services as well as the materials required; (iii) the complexity and the location of the project; (iv) the estimated quantity and type of equipment required; (v) the completion time requested by our customers; and (vi) the availability of human and financial resources.
There is no assurance that the actual amount of time and costs incurred during the performance of our projects would not exceed our estimation. The actual amount of time and costs incurred in completing a project may be adversely affected by many factors, including unforeseen site conditions, adverse weather conditions, accidents, non-performance by our subcontractors, unexpected significant increase in costs of materials agreed to be borne by us, unexpected increase in the amount of rectification works requested by our customers and other unforeseen problems and circumstances. Any material inaccurate estimation in the time and costs involved in a project may give rise to delays in completion of works and/or cost overruns, which in turn may materially and adversely affect our financial condition, profitability and liquidity. We typically bear the risk of delays and cost overruns in our projects, and we are generally unable to pass these costs to our customers.
If we do not comply with certain laws, we could be suspended or debarred contracting, which could have a material adverse effect on our business.
Various statutes to which our operations are subject, such as Factories and Industrial Undertakings Ordinance (Cap. 59 of the Laws of Hong Kong), Construction Site (Safety) Regulations (Cap. 59I of the Laws of Hong Kong), Factory and Industrial Undertakings (Safety Officers and Safety Supervisors) Regulations (Cap. 59Z of the Laws of Hong Kong), Factories and Industrial Undertakings (Safety Management) Regulations (Cap. 59AF of the Laws of Hong Kong) and Occupational Safety and Health Ordinance (Cap. 509 of the Laws of Hong Kong), which deal with the health and safety during the construction process and various other statutes provide for discretionary suspension and/or debarment in certain circumstances.
The scope and duration of any suspension or debarment may vary depending upon the facts of a particular case and the statutory or regulatory grounds for debarment. Any suspension or debarment from contracting will have a material adverse effect on our financial condition, results of operations or liquidity.
8
Unsatisfactory performance by our subcontractors or unavailability of subcontractors may adversely affect our operation and profitability.
We engage subcontractors from time to time to perform a part of the site work under our supervision. In order to control and ensure the quality and progress of the works of our subcontractors, we select subcontractors based on quality of their service, their qualifications and experience relevant to the project, skills and technique required for the project, the prevailing market price, the delivery time, their availability and fee quotations. There is no assurance that the work quality of our subcontractors can always meet our requirements. We may be affected by the non-performance, inappropriate or poor quality of works rendered by our subcontractors. Such events could impact upon our profitability, financial performance and reputation. In addition, there is no assurance that we will always be able to secure services from suitable subcontractors when required or be able to negotiate acceptable fees and terms of service with subcontractors. In such event, our operation and financial position may be adversely affected.
In the event that our subcontractors fail to follow the safety guidelines and other requirements imposed by our customers, we may be liable to pay our customers the expenses and penalties incurred by them. Although we are entitled to be compensated by our subcontractors in relation to such penalties under the subcontracting agreement, we may not be able to claim from such subcontractors in order to maintain a stable relationship with our major subcontractors. In such event, we may be subject to additional costs and penalties incurred by our subcontractors in relation to their failure to comply with the safety procedures and other requirements imposed by our customers.
We depend on third parties for supply of materials to operate our business.
We purchase materials from our suppliers for the provision of our services. The major types of materials sourced from our suppliers included concrete, steel and consumables. We cannot assure you that our favorable working relationships with our suppliers will continue in the future. In addition, there have historically been periods of supply shortages in our industry.
The inability to purchase materials could severely impact our business. If our suppliers experience price increases or disruptions to their business, such as labor disputes, supply shortages or distribution problems, our business, financial condition, results of operations, liquidity and cash flows could be materially and adversely affected.
We may not be able to compete favorably in our highly competitive industry.
Some of our competitors may have certain advantages, including but not limited to having long operating history, better financing capabilities and well-developed technical expertise. New participants may wish to enter the industry provided that they have the appropriate skills, local experience, necessary equipment, capital and they are granted the requisite licenses or approvals by the relevant regulatory bodies. Any significant increase in competition may result in lower operating margins and loss of market share, which may adversely affect our profitability and operating results.
During the fiscal years ended March 31, 2026, 2025 and 2024, our five largest customers accounted for a significant portion of our total revenue.
A significant portion of our revenue was derived from a limited number of customers. Our five largest customers for the fiscal year ended March 31, 2026, 2025 and 2024 accounted for approximately 87.3%, 82.7%, and 84.9% of our revenue in the corresponding periods, respectively. In particular, one of our top customers contributed approximately 36.8%, 31.1%, and 33.4% of our total revenue for the fiscal years ended March 31, 2026, 2025 and 2024. For the year ended March 31, 2026, three customers accounted for approximately 36.8%, 18.9% and 16.3% of the Company’s total revenue. For the year ended March 31, 2025, five customers accounted for approximately 31.1%, 18.6%, 12.0%, 10.8% and 10.2% of the Company’s total revenue. For the year ended March 31, 2024, four customers accounted for approximately 33.4%, 14.7%, 14.1% and 13.9% of the Company’s total revenue. We were engaged by our customers on a project-by-project basis. There is no assurance that we will continue to obtain contracts from our major customers in the future. If there is a significant decrease in the number of projects awarded by our major customers, and we are unable to secure suitable projects of a comparable size and quantity as replacements from other customers, our financial condition and operating results would be materially and adversely affected.
9
Environmental, health and safety laws and regulations and any changes to, or liabilities arising under, such laws and regulations could have a material adverse effect on our financial condition, results of operations and liquidity.
Our operations are subject to stringent and complex laws and regulations governing the discharge of materials into the environment, health and safety aspects of our operations or otherwise relating to environmental protection. These laws and regulations may impose numerous obligations applicable to our operations, including: the acquisition of a permit or other approval before conducting regulated activities; the restriction of the types, quantities and concentration of materials that can be released into the environment; the limitation or prohibition of activities on certain lands lying within wilderness, wetlands, and other protected areas; the application of specific health and safety criteria addressing worker protection; and the imposition of substantial liabilities for pollution resulting from our operations.
A number of government authorities have the power to enforce compliance with these laws and regulations and the permits issued under them. Such enforcement actions often involve difficult and costly compliance measures or corrective actions. Failure to comply with these laws and regulations may result in the assessment of sanctions, including administrative, civil, or criminal penalties, natural resource damages, the imposition of investigatory or remedial obligations, and the issuance of orders limiting or prohibiting some or all of our operations. In addition, we may experience delays in obtaining, or be unable to obtain, required permits, which may delay or interrupt our operations and limit our growth and revenue.
Certain environmental laws impose strict liability (i.e., no showing of “fault” is required) or joint and several liability for costs required to remediate and restore sites where hazardous substances, hydrocarbons or solid wastes have been stored or released. We may be required to remediate contaminated properties currently or formerly owned or operated by us or third-party facilities that received waste generated by our operations regardless of whether such contamination resulted from the conduct of others or from the consequences of our own actions that were in compliance with all applicable laws at the time those actions were taken. Furthermore, the existence of contamination at properties we own, lease or operate could result in increased operational costs or restrictions on our ability to use those properties as intended.
In certain instances, citizen groups also have the ability to bring legal proceedings against us if we do not comply with environmental laws or challenge our ability to receive environmental permits that we need to operate. In addition, claims for damages to persons or property, including natural resources, may result from our operations’ environmental, health, and safety impacts. Our insurance may not cover all environmental risks and costs or may not provide sufficient coverage if an environmental claim is made against us. Moreover, public interest in protecting the environment has increased dramatically in recent years. The trend of more expansive and stringent environmental legislation and regulations applied to our industry could continue, resulting in increased costs of doing business and consequently affecting profitability.
We may not be able to implement our business plans effectively to achieve future growth.
Our expansion plan is based upon a forward-looking assessment of market prospects of the civil engineering industry in Hong Kong and there is no assurance that such assessment will always turn out to be correct or that it will be able to grow our business as planned. Expansion plans may be affected by a number of factors beyond our control. Such factors include, but are not limited to, changes in economic conditions in Hong Kong, changes in supply and demand for our civil engineering services and government regulations in relation to the civil engineering industry. Our future growth depends on our ability to improve our administrative, technical and operational infrastructure. As the business expands, we may encounter a range of difficulties in managing our business, such as difficulties (i) generating sufficient liquidity internally or obtaining external financing for capital needs, and (ii) allocating its resources and managing its relationships with a growing number of customers, suppliers and other business partners. There can be no assurance that future growth will materialize or that we will be able to manage future growth effectively, and failure to do so would have a material adverse effect on our business, financial position and results of operations.
Our continued success requires us to hire, train and retain qualified personnel and subcontractors in a competitive industry.
The success of our business depends upon our ability to attract, train and retain qualified, reliable personnel, including, but not limited to, our executive officers and key management personnel, such as Mr. Ngo Chiu Lam and Ms. Sze Man Chan. Additionally, the successful operation of our business depends upon project management personnel, other employees and qualified subcontractors who possess the necessary and required experience and expertise and who will perform their respective services at a reasonable and competitive rate. Competition for these and other experienced personnel is intense. As a result, it may be difficult to attract and retain qualified individuals with the requisite expertise and in the timeframe demanded by our clients.
10
In addition, the cost of providing our services, including the extent to which we utilize our workforce, affects our profitability. For example, the uncertainty of contract award timing can present difficulties matching our workforce size with our contracts. If an expected contract award is delayed or not received, we could incur costs resulting from excess staff or redundancy of facilities that could have a material adverse impact on our business, financial conditions and results of operations.
Failure to complete our projects on a reliable and timely basis could materially affect our reputation, our financial performance or may subject us to claim.
The contracts with our customers generally contain a liquidated damages clause under which we are liable to pay liquidated damages to our customers if we are unable to deliver or perform the contractual works within the time specified in the contract. Liquidated damages are generally determined on the basis of a fixed sum per day.
Delay in a project may occur from time to time due to various unforeseen factors such as shortage of manpower, delays by subcontractors, industrial accidents, and delay in delivery of materials. If there is any delay on our part in completion of a project, we may be liable to pay liquidated damages under the contract. There is no assurance that there will not be any delay in our existing and future projects resulting in claims in relation to liquidated damages, which in turn will have adverse impact on our reputation, business, financial condition and results of operations.
Our operations are subject to special hazards that may cause personal injury or property damage, subjecting us to liabilities and possible losses which may not be covered by insurance.
Operating hazards inherent in our business, some of which may be outside our control, can cause personal injury and loss of life, damage to or destruction of property, plant and equipment and environmental damage. We maintain insurance coverage in amounts and against the risks we believe are consistent with industry practice, but this insurance may be inadequate or unavailable to cover all losses or liabilities we may incur in our operations.
Our insurance policies are subject to varying levels of deductibles. Losses up to our deductible amounts are accrued based upon our estimates of the ultimate liability for claims incurred and an estimate of claims incurred but not reported. However, liabilities subject to insurance are difficult to estimate due to unknown factors, including the severity of an injury, the determination of our liability in proportion to other parties, the number of unreported incidents, and our safety programs’ effectiveness. If we were to experience insurance claims or costs above our estimates, we may be required to use working capital to satisfy these claims rather than using working capital to maintain or expand our operations.
Certain data and information in this report were obtained from third-party sources and were not independently verified by us.
Statistical data include projections based on a number of assumptions. The construction industry may not grow at the rate projected by market data, or at all. Any failure of the Hong Kong construction industry to grow at the projected rate may have a material adverse effect on our business and the market price of our Class A Ordinary Shares. Furthermore, if any one or more of the assumptions underlying the market data is later found to be incorrect, actual results may differ from the projections based on these assumptions.
We have not independently verified the data and information contained in any third-party publications. Data and information contained in such third-party publications and reports may be collected using third-party methodologies, which may differ from the data collection methods used by us. In addition, these industry publications and reports generally indicate that the information contained therein is believed to be reliable, but do not guarantee the accuracy and completeness of such information.
11
We may need to raise additional capital in the future for working capital, capital expenditures and/or acquisitions, and we may not be able to do so on favorable terms or at all, which would impair our ability to operate our business or achieve our growth objectives.
Our ongoing ability to generate cash is important for funding our continuing operations, making acquisitions and servicing our indebtedness. To the extent that existing cash balances and cash flow from operations, together with borrowing capacity are insufficient to make investments or acquisitions or provide needed working capital, we may require additional financing from other sources. Our ability to obtain such additional financing in the future will depend in part upon prevailing capital market conditions and conditions in our business and our operating results. Those factors may affect our efforts to arrange additional financing on terms acceptable to us.
Furthermore, if global economic, political or other market conditions adversely affect the financial institutions that provide credit to us, it is possible that our ability to draw upon credit facilities may be impacted. If adequate funds are not available, or are not available on acceptable terms, we may not be able to make future investments, take advantage of acquisitions or other opportunities, or respond to competitive challenges, resulting in loss of market share, each of which could have a material adverse impact on our financial position, results of operations, cash flows and liquidity.
Our lack of effective internal controls over financial reporting may affect our ability to accurately report our financial results or prevent fraud which may affect the market for and price of our Class A Ordinary Shares.
To implement Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on the company’s internal control over financial reporting. Prior to filing the registration statement of which this report is a part, we were a private company with limited accounting personnel and other resources for addressing our internal control over financial reporting. Our management has not completed an assessment of the effectiveness of our internal control over financial reporting and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. Our independent registered public accounting firm did not conduct an audit of our internal control over financial reporting. In connection with the audits of our consolidated financial statements as of March 31, 2024, we and our independent registered public accounting firm identified a few material weaknesses in our internal control over financial reporting PCAOB of the United States, a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified related to (1) our lack of sufficient full-time personnel with appropriate levels of accounting knowledge and experience to monitor the daily recording of transactions, address complex U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP; and (2) our lack of a functional internal audit department or personnel that monitors the consistencies of the preventive internal control procedures as well as adequate policies and procedures in internal audit function to ensure that our policies and procedures have been carried out as planned.
We have implemented measures designed to improve our internal control over financial reporting to address the underlying causes of these material weaknesses, including i) hired more qualified staff to fill up the key roles in the operations; and ii) appointed independent directors, established an audit committee and strengthening corporate governance. Our management considers our internal controls over financial reporting is effective as of March 31, 2026.
We will be subject to the requirement that we maintain internal controls and that management perform periodic evaluation of the effectiveness of the internal controls. Effective internal control over financial reporting is important to prevent fraud. As a result, our business, financial condition, results of operations and prospects, as well as the market for and trading price of our Class A Ordinary Shares, may be materially and adversely affected if we do not have effective internal controls. We may not discover any problems in a timely manner and current and potential shareholders could lose confidence in our financial reporting, which would harm our business and the trading price of our Class A Ordinary Shares. The absence of internal controls over financial reporting may inhibit investors from purchasing our Class A Ordinary Shares and may make it more difficult for us to raise funds in a debt or equity financing.
Additional material weaknesses or significant deficiencies may be identified in the future. If we identify such issues or if we are unable to produce accurate and timely financial statements, our Class A Ordinary Share price may decline and we may be unable to maintain compliance with the NASDAQ Listing Rules.
We are subject to credit risk in relation to the collectability of our trade receivables and contract assets.
A contract asset represents our right to consideration from customers in exchange for the provision of civil engineering works that we have transferred to the customers that is not yet unconditional. Contract assets arise when we have provided the civil engineering works under the relevant contracts but the works have yet to be certified by architects, quantity surveyors or other representatives appointed by the customers and/or our right to payment is still conditional on factors other than passage of time. Any amount previously recognized as a contract asset is reclassified to trade receivables at the point when our right to payment becomes unconditional other than passage of time.
12
There is no assurance that we will be able to bill all or any part of contract assets for our services completed according to the payment terms of the contracts and there is no assurance that the retention monies will be released by our customers to us on a timely basis and in full accordingly. Further, there can be no assurance that our customers will settle our invoices on time and in full. In the event that we are unable to collect a substantial portion of our trade receivables within the payment terms or at all, our cash flows and financial positions will be adversely affected. Any difficulty in collecting a substantial portion of our trade receivables and contract assets could materially and adversely affect our cash flows and financial positions.
We are a holding company whose principal source of operating cash is the income received from our Operating Subsidiaries.
We are dependent on the income generated by our Operating Subsidiaries in order to make distributions and dividends on the shares. The amount of distributions and dividends, if any, which may be paid to us from our Operating Subsidiaries will depend on many factors, including such subsidiary’s results of operations and financial condition, limits on dividends under applicable law, its constitutional documents, documents governing any indebtedness, and other factors which may be outside our control. If our Operating Subsidiaries do not generate sufficient cash flow, we may be unable to make distributions and dividends on the shares.
Our controlling shareholder has considerable influence over our corporate matters.
Our share capital is divided into Class A Ordinary Shares, Class B Ordinary Shares, Series A Preferred Shares and Series B Preferred Shares. Holders of Class A Ordinary Shares and Class B Ordinary Shares are entitled to receive notice of, attend, speak and vote at general meetings of the Company and vote together as a single class on all matters submitted to a vote of our shareholders. Each Class A Ordinary Share entitles its holder to one (1) vote, and each Class B Ordinary Share entitles its holder to twenty (20) votes, on all matters subject to a vote at general meetings of the Company. Series A Preferred Shares and Series B Preferred Shares do not carry voting rights with respect to matters subject to a vote at general meetings of the Company, except with respect to the matters specified in our Amended Memorandum and Articles.
Class A Ordinary Shares may not be converted into Class B Ordinary Shares, Series A Preferred Shares or Series B Preferred Shares. Class B Ordinary Shares may not be converted into Class A Ordinary Shares, Series A Preferred Shares or Series B Preferred Shares. Series A Preferred Shares may not be converted into Class B Ordinary Shares or Series B Preferred shares, and Series B Preferred Shares may not be converted into Class B Ordinary Shares or Series A Preferred Shares. Series A Preferred Shares and Series B Preferred Shares are convertible into Class A Ordinary Shares in accordance with our Amended Memorandum and Articles.
Provided that such transfer complies with applicable Nasdaq Listing Rules and subject to the lock-up agreements entered into in connection with private placements and the Transaction Agreement, our shareholders may freely transfer shares to another person by completing an instrument of transfer in a common form or in a form prescribed by the Nasdaq Listing Rules or in any other form approved by our directors, executed where she Shares are Fully Paid, by or on behalf of that shareholder; and where the Shares are partly paid, by or on behalf of that shareholder and the transferee. Where the shares of any class in question are not listed on any stock exchange or subject to the rules of any stock exchange, our directors may in their absolute discretion decline to register any transfer of such shares which are not fully paid up or on which our Company has a lien.
Our controlling shareholder, Dablam LLP, holds 1,995,000 Class B Ordinary Shares, collectively representing 71.4% of the aggregate voting power of our issued and outstanding ordinary shares. As a result of our current share structure and the concentration of ownership, Dablam LLP will hold considerable influence over corporate matters requiring shareholder approval and will independently control the operations of the Company, including without limitation, electing directors and approving material mergers, acquisitions or other business combination transactions. This concentrated control will limit your ability to influence corporate matters and could also discourage others from pursuing any potential merger, takeover or other change of control transactions, which could have the effect of depriving the holders of our Class A Ordinary Shares of the opportunity to sell their shares at a premium over the prevailing market price.
13
Our controlling shareholder may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.
Because our controlling shareholder, Dablam LLP, has considerable influence over our corporate matters, its interests may differ from the interests of our company as a whole. The controlling shareholder could, for example, appoint directors and management without the requisite experience, relations or knowledge to steer our company properly because of their affiliations or loyalty, and such actions may materially and adversely affect our business and financial condition. Currently, we do not have any arrangements to address potential conflicts of interest between the controlling shareholder and our company. If we cannot resolve any conflict of interest or dispute between us and the shareholders, we would have to rely on legal proceedings, which could disrupt our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.
If we fail to promote and maintain our brand effectively and cost-efficiently, our business and results of operations may be harmed.
We believe that developing and maintaining awareness of our brand effectively is critical to attracting new and retaining existing customers. Successful promotion of our brand and our ability to attract customers depend largely on the effectiveness of our marketing efforts and the success of the channels we use to promote our services. Our future marketing efforts will likely require us to incur additional expenses. These efforts may not result in increased revenue in the immediate future or at all and, even if they do, any increase in revenue may not offset the expenses incurred. If we fail to successfully promote and maintain our brand while incurring substantial expenses, our results of operations and financial condition would be adversely affected, which may impair our ability to grow our business.
We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party trademarks, patents, copyrights, know-how or other intellectual property rights that are infringed by our products, services or other aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such intellectual property rights against us in Hong Kong, the United States or other jurisdictions. If any third-party infringement claims are brought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims, regardless of their merits.
Events such as epidemics, natural disasters, adverse weather conditions, political unrest and terrorist attacks could significantly delay, or even prevent us from completing, our projects.
Our operations are subject to uncertainties and contingencies beyond our control that could result in material disruptions in our operations and adversely affect our business. These include epidemics, natural disasters, fire, adverse weather conditions, political unrest, wars and terrorist attacks. Any such events could cause us to reduce or halt our operation, adversely affect our business operation, increase our costs and/or prevent us from completing our projects, any one of which could materially and adversely affect our business, financial condition and results of operations.
In such an event, our business operations may also be severely disrupted due to a negative impact on investor confidence and risk appetites, the fund-raising activities of issuers and proposed listing applicants, the macroeconomic conditions as well as the financial conditions in Hong Kong. Our business operations, financial condition as well as our fund-raising activities as contemplated by this report may be materially and adversely affected as a result.
14
Failure to maintain safe construction sites and/or implement our safety management system may lead to the occurrence of personal injuries, property damages, fatal accidents or suspension or non-renewal of our registration under the Registered Specialist Trade Contractors Scheme of the Construction Industry Council.
Due to the nature of works in construction sites, risks of accidents or injuries to workers are inherent. Notwithstanding our occupational health and safety measures that are required to be followed by our employees and employees of our subcontractors, accidents leading to personal injuries, property damages and/or fatal accidents remain an inherent risk at work sites. There is no assurance that there will not be any violation of our safety measures or other related rules and regulations by our employees or employees of our subcontractors. Any such violation may lead to higher probability of occurrences, and/or increased seriousness, of personal injuries, property damages and/or fatal accidents at work sites, which may materially and adversely affect our business operations as well as our financial position to the extent not covered by insurance policies. Also, failure to maintain safe construction sites and/or to implement safety management measures resulting in the occurrence of serious personal injuries or fatal accidents may lead to negative publicity and/or suspension or non-renewal of our registration under the Registered Specialist Trade Contractors Scheme of the Construction Industry Council, which in turn adversely affect our reputation, financial position and results of operation.
In addition, any personal injuries and/or fatal accidents to our employees and employees of our subcontractors may lead to claims or other legal proceedings against us. Any such claims or legal proceedings could adversely and materially affect our financial position to the extent not covered by insurance policies. Also, notwithstanding the merits of any such claims or legal proceedings, we need to divert management resources and incur extra costs to handle these matters. Any such claims or legal proceedings could therefore have a material and adverse impact on our business operations.
Although the risks of accidents or injuries to workers are inherent due to the nature of works in the construction industry, such accident record may adversely affect our industry reputation, which may in turn affect our prospect of receiving tender invitations from potential new customers or being awarded with future tenders from both our existing and potential new customers. Furthermore, we may have to incur additional costs to strengthen our safety management measures, such as recruiting additional safety supervision staff, which may have an adverse impact on our profitability.
There is no assurance that we will be able to renew our registration under the Registered Specialist Trade Contractors Scheme of the Construction Industry Council.
Subcontractors engaged under public sector projects initiated by the Government are generally required to possess registration under the Registered Specialist Trade Contractors Scheme of the Construction Industry Council. Renewal of registration under the Registered Specialist Trade Contractors Scheme is required every three or five years and is generally subject to certain technical and relevant industry experience requirements. There is no assurance that we will be able to renew such registration every time in the future. In the event of non-renewal of such registration, our reputation, our ability to obtain future businesses, and our business and financial position and prospects could be materially and adversely affected.
We may be a party to legal proceedings from time to time and we cannot assure you that such legal proceedings will not have a material adverse impact on our business. In particular, there may be potential employees’ compensation claims and personal injury claims.
We may be involved in claims and litigations in respect of various matters from our customers, subcontractors, workers and other parties concerned with our works from time to time. Such claims may include in particular employees’ compensation claims and personal injury claims in relation to personal injuries suffered by workers as a result of accidents arising out of and in the course of employment of the injured workers. There is no assurance that we will not be involved in any claims or legal proceedings, nor can we assure you that any such claims or legal proceedings would not have a material adverse impact on our business. Should any claims against us fall outside the scope and/or limit of insurance coverage, our financial position may be adversely affected. Regardless of the merits of any outstanding and potential claims, we need to divert management resources and incur extra costs to handle these claims, which could affect our corporate image and reputation if they were published by the press. If the aforesaid claims were successfully made against us and are not covered by insurance policies, we may need to pay damages and legal costs, which in turn could adversely affect our results of operations and financial position.
15
Our insurance coverage may not be adequate to cover potential liabilities.
Certain risks disclosed elsewhere in this section such as risks in relation to customer concentration, our ability to obtain new contracts, our ability to retain and attract personnel, availability and performance of subcontractors, project and cost management, our ability to maintain and renew our registrations, credit risk and liquidity risk, are generally not covered by insurance because they are either uninsurable or it is not cost justifiable to insure against such risks. Insurance policies covering losses from acts of war, terrorism, or natural catastrophes are also either unavailable or cost prohibitive.
Further, we may be subject to liabilities against which we are not insured adequately or at all or liabilities against which cannot be insured. Should any significant liabilities arise due to accidents, natural disasters, or other events which are not covered or are inadequately covered by our insurance, our business may be adversely affected, potentially lead to a loss of assets, lawsuits, employee compensation obligations, or other forms of economic loss.
We cannot guarantee that our current levels of insurance are sufficient to cover all potential risks and losses. In addition, we cannot guarantee that we can renew our policies or can renew our policies on similar or other acceptable terms. If we suffer from severe unexpected losses or losses that far exceed the policy limits, it could have a material and adverse effect on our business, financial position, results of operations and prospect.
Possible difficulty in recruiting sufficient labor or significant increase in labor costs may hinder our future business strategies.
The civil engineering industry in Hong Kong has been facing the problem of labor shortage and ageing workforce. The supply and cost of labor in Hong Kong are affected by the availability of labor in the market as well as economic factors in Hong Kong including the inflation rate and standard of living. There is no guarantee that the supply of labor and labor costs will be stable. In addition, the Minimum Wage Ordinance (Chapter 608 of the Laws of Hong Kong) requires that an employee is entitled to be paid wages in respect of any wage period of not less than the minimum wage, which shall be derived by reference to the prescribed minimum hourly wage rate (currently set at HK$43.1 per hour (effective from May 1, 2026)). There is no assurance that the statutory minimum wage will not increase in the future. In the event that we or our subcontractors fail to retain existing labor and/or recruit sufficient labor in a timely manner to cope with the demand of our existing or future jobs and/or there is a significant increase in the costs of labor, we may not be able to complete our jobs on schedule and/or within budget and our operations and profitability may be adversely affected.
Civil engineering works is often labor-intensive and we cannot be certain that there will be sufficient workers for projects when needed. Any unpredicted rise in labor cost might be borne by us and may reduce our profit margin. Moreover, potential customers may be hesitant to engage us if the quotation price has to increase to fully consider any expected future increase in labor cost.
Fluctuations in exchange rates could have a material adverse effect on our results of operations and the price of the Class A Ordinary Shares.
Our revenues and expenses will be denominated predominantly in Hong Kong dollars. The value of the Hong Kong dollar against the U.S. dollar may fluctuate and may be affected by, among other things, changes in political and economic conditions. Although the exchange rate between the Hong Kong dollar to the U.S. dollar has been pegged since 1983, we cannot assure you that the Hong Kong dollar will remain pegged to the U.S. dollar.
Our business is conducted in Hong Kong, our books and records are maintained in H.K. dollar, which is the currency of Hong Kong, and the financial statements that we file with the SEC and provide to our shareholders are presented in United States dollars. Changes in the exchange rate between H.K. dollar and United States dollar affect the value of our assets and the results of our operations, when presented in United States dollars. Any significant fluctuations in the exchange rates between Hong Kong dollars to U.S. dollars may have a material adverse effect on our revenue and financial condition. We have not used any forward contracts, futures, swaps or currency borrowings to hedge our exposure to foreign currency risk.
16
Our business is susceptible to government policies and macroeconomic conditions.
The market growth of construction industry in Hong Kong highly correlates to government policies and macroeconomic environment. Particularly, during economic downturns, due to limited financial budgets, property developers and tenants are more conservative to invest capital resources to renovate their living spaces and the Government of Hong Kong may slow down the development of land and infrastructure development. On the other hand, government policies, such as urban renewal and development program and land sales, may affect the availability of land for property developers to construct and subsequently the demand for civil engineering projects in Hong Kong may deteriorate. As a result, the issue of overreliance on government policies and cyclical nature of construction works may adversely impact the development of civil engineering works market in Hong Kong.
We are exposed to risks of general economic downturn and deteriorating market conditions, such as Sino-U.S. trade conflicts.
As our business and operations are based in Hong Kong, our business growth is primarily dependent upon the economy and market condition in Hong Kong and the PRC. The market conditions are directly affected by, among other things, the global and local political and economic environments, such as uncertainties about the Sino-U.S. trade conflicts. Any sudden downturn in the general economic environment or change to political environment in Hong Kong and the PRC beyond our control may adversely affect the financial market sentiment in general. Severe fluctuations in market and economic sentiments may also lead to a prolonged period of sluggish performance of the real estate and construction industries. As such, our revenue and profitability may fluctuate and we cannot assure you that we will be able to maintain our historical financial performance in times of difficult or unstable economic conditions.
Cybersecurity incidents could disrupt our business operations, which could result in the loss of critical and confidential information, and harm our business.
Global cybersecurity threats and incidents directed at us or any of our third-party service providers we engage can range from uncoordinated individual attempts to gain unauthorized access to information technology systems to sophisticated and targeted measures known as advanced persistent threats. In the ordinary course of our business, we and our third-party service providers collect and store sensitive data, including our proprietary business information and intellectual property, and that of our customers, including personally identifiable information. Additionally, we rely increasingly on third-party providers to store and process data, and to communicate and work collaboratively. The secure processing, maintenance, and transmission of information are critical to our operations and we rely on the security procedures of these third-party providers. Although we employ comprehensive measures designed to prevent, detect, address, and mitigate these threats (including access controls, data encryption, vulnerability assessments, and maintenance of backup and protective systems), cybersecurity incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption, or unavailability of critical data and confidential or proprietary information (our own or that of third parties, including personally identifiable information of our customers) and the disruption of business operations. Any such compromises to our security, or that of our third-party providers, could cause customers to lose trust and confidence in us, and stop using our website and mobile application in their entirety. In addition, we may incur significant costs for remediation that may include liability for stolen assets or information, repair of system damage, and compensation to customers and business partners. We may also be subject to legal claims, government investigation, and additional state and federal statutory requirements.
Certain economic and business factors and their impacts on the construction industry and other general macroeconomic factors, including unemployment, material prices and interest rates that are largely beyond our control may adversely affect business and our results of operations.
Our business results depend on a number of industry-specific and general economic factors, many of which are beyond our control, and may adversely affect consumer behavior and our results of operations. The construction industry may affected by economic downturns, supply chain disruptions, logistics challenge, political instability, trade disputes, and changes in government regulation. These events can lead to disruptions in the construction industry, fluctuations in demand for our services, and increased operational costs.
General economic conditions, including slow global recovery from economic downturns, geopolitical conditions and uncertainty about the strength or pace of economic recovery may adversely affect our results of operations. Economic recession, a protracted economic slowdown, a worsening economy, increased unemployment, increased inflation, increased energy prices, rising interest rates, a downgrade of the U.S. government’s long-term credit rating, imposition of retaliatory tariffs on important U.S. imports and exports or other industry-wide cost pressures have affected and can continue to affect consumer behavior in the industry and consequently could reduce the demand for our services.
17
Risks Related to Our Proposed Business Combination and New Business Strategy
The proposed business combination may not be completed within the anticipated timeframe or at all, and the Transaction Agreement may be terminated in accordance with its terms.
On April 30, 2026, we entered into the Transaction Agreement with SKBL Merger Sub, Cove Kaz and KRLLC with respect to the Business Combination. The completion of the Business Combination is subject to numerous conditions, including, among others, approval by our shareholders, receipt of required governmental and third-party approvals, the effectiveness of a registration statement registering the shares of PubCo Class A Common Stock to be issued to our shareholders, the listing of such shares on the applicable trading market and the absence of a material adverse effect with respect to us or the Kaz Companies.
Certain closing conditions may not be satisfied or waived within the anticipated timeframe or at all. Governmental authorities may delay, condition or deny required approvals, and our shareholders may not approve the Business Combination. In addition, events occurring after the execution of the Transaction Agreement may prevent one or more of the representations, warranties or closing conditions under the Transaction Agreement from being satisfied.
The Transaction Agreement may be terminated under specified circumstances, including if the Business Combination has not been completed by the termination date set forth therein, the required shareholder approval is not obtained, a governmental authority permanently prohibits the Business Combination, a party materially breaches its representations, warranties or covenants, our board of directors changes or withdraws its recommendation, or the required disposition of our Hong Kong legacy business is not completed by the applicable deadline. If the Transaction Agreement is terminated, we may not realize any of the anticipated benefits of the Business Combination. Any delay in completing, or failure to complete, the Business Combination could materially and adversely affect our business, financial condition, results of operations and the market price of our Class A Ordinary Shares.
We will incur substantial transaction-related costs in connection with the Business Combination regardless of whether it is completed.
We have incurred, and expect to continue to incur, substantial costs in connection with the negotiation and completion of the Business Combination, including legal, accounting, financial advisory, financing, regulatory, filing, printing and other professional fees. We may also incur costs in connection with obtaining shareholder and regulatory approvals, preparing and filing the applicable registration statement and proxy materials, arranging the PIPE Financing, disposing of our Hong Kong legacy business, and preparing for the integration and operation of the PubCo following completion of the Business Combination.
A significant portion of these costs is payable regardless of whether the Business Combination is completed. We may also incur additional costs and expenses if the completion of the Business Combination is delayed, if regulatory authorities impose additional requirements, or if litigation or other disputes arise in connection with the Business Combination. These costs could exceed our current estimates and reduce the cash and other resources available to us for our existing operations or the operations of the PubCo. If the Business Combination is not completed, we will have incurred substantial expenses without realizing the expected benefits of the Business Combination, which could materially and adversely affect our financial condition and liquidity.
The pendency of the Business Combination may disrupt our existing business, divert management’s attention and adversely affect our relationships with customers, employees and other business partners.
Our management has devoted, and is expected to continue to devote, significant time and attention to the Business Combination. This diversion of management resources may impair our ability to operate our existing business effectively, address operational matters, retain personnel and pursue other business opportunities. The Business Combination may also create uncertainty among our customers, employees, suppliers, subcontractors, lenders and other business partners regarding our future operations and business strategy.
Our existing or prospective business partners may delay or defer decisions concerning their relationships with us, and our employees may experience uncertainty regarding their continued employment or future roles. Competitors may also seek to take advantage of such uncertainty. Any of these developments could adversely affect our existing business, regardless of whether the Business Combination is completed.
18
Completion of the Business Combination would fundamentally change the nature of our business, and we expect the executive leadership and management of Cove Kaz and the Kaz Companies will continue in their respective roles within the PubCo.
Historically, our principal operations have consisted of civil engineering activities in Hong Kong. The Transaction Agreement requires, as a condition to the obligations of Cove Kaz, KRLLC and SKBL Merger Sub to consummate the Business Combination, that we dispose of our Hong Kong legacy business in a manner reasonably satisfactory to Cove Kaz and have no operations or business in Hong Kong or China, or liabilities related thereto, as of the Closing Date. The proposed business strategy involves industries, markets, technologies, regulatory regimes and operational risks that are substantially different from those associated with our existing civil engineering business.
We do not have an established operating history in the mining or critical minerals industry. Following the consummation of the Business Combination, we expect that the PubCo will rely on the management and personnel of Cove Kaz and the Kaz Companies to operate its business and execute its business plans. There can be no assurance that the PubCo will successfully execute such business plans or that these key personnel will remain with PubCo. Any failure to execute such business plans, the loss of any such personnel, or PubCo’s inability to recruit and retain qualified personnel with relevant industry experience could materially and adversely affect the PubCo’s business, financial condition and results of operations.
The implementation of the new business strategy will require the PubCo to further develop or strengthen expertise in numerous areas, including geological exploration, mineral-resource evaluation, mine design, project development, metallurgy, mineral processing, environmental compliance, mine safety, infrastructure development, government relations and the marketing of mineral products. If the PubCo is unable to obtain and retain qualified personnel, develop the required operational capabilities or adapt to the risks and requirements of the mining industry, its business, financial condition and results of operations could be materially and adversely affected.
The PubCo’s mineral projects will require substantial capital, and financing may not be available on acceptable terms or at all.
The exploration, development and construction of mining and processing projects are capital intensive. Preliminary estimated development costs for the Northern Katpar and Upper Kairakty tungsten projects are at least $1.1 billion, and actual costs may be materially higher as a result of inflation, project optimization, construction delays, cost overruns, supply-chain disruptions, changes in regulatory requirements, adverse site conditions or other factors. The PubCo may also require substantial funding for definitive feasibility studies, exploration programs, environmental and technical studies, infrastructure, equipment, working capital and the development of its other mineral concessions in Kazakhstan.
Although the Export-Import Bank of the United States and the U.S. International Development Finance Corporation have issued letters of interest for potential project financing of up to $900 million and $700 million, respectively, such letters of interest do not constitute binding commitments to provide financing. Any financing remains subject to further due diligence, credit approval, documentation, satisfaction of conditions and other requirements. There is no assurance that any financing contemplated by these letters will be obtained, or that it will be obtained in the amounts or on the terms currently contemplated.
If sufficient funding is not available, the PubCo may be required to delay, reduce or abandon exploration, development, construction or processing activities. Additional equity financing could dilute the interests of existing shareholders, while debt financing could impose restrictive covenants, require security over project assets and increase the PubCo’s interest expense and financial risk. The inability to obtain sufficient financing on acceptable terms could materially and adversely affect the PubCo’s ability to develop its projects and implement its business strategy.
Mineral exploration and mine development are inherently speculative, and the PubCo may not successfully develop commercially viable mining operations.
Mineral exploration and development involve a high degree of risk. There is no assurance that the PubCo’s exploration activities will result in the discovery or confirmation of mineral deposits that can be economically extracted. Even if mineral resources are identified, numerous factors may affect whether such resources can be developed into commercially viable mines, including the grade, quality and continuity of mineralization; metallurgical recovery rates; commodity prices; capital and operating costs; access to power, water, transportation and other infrastructure; availability of qualified labor and equipment; permitting requirements; environmental and social considerations; and political and regulatory conditions.
The Northern Katpar and Upper Kairakty projects are advanced exploration and late-stage projects, but they have not commenced commercial production. On August 3, 2026 Cove Kaz announced that globally-recognized independent engineering firms had been selected to undertake a definitive feasibility study of the Northern Katpar tungsten project, including a tungsten refinery. The DFS is expected to be completed before the end of 2027. The results of that study or other technical work may differ materially from previous studies or current expectations. The PubCo may encounter previously unidentified geological, geotechnical, metallurgical, environmental or engineering issues that increase costs, delay development or render a project uneconomic.
The development of a mine generally requires significant expenditures over an extended period before production begins, and there may be substantial delays between the commencement of exploration and the commencement of commercial production. The PubCo may never develop any of its projects into an operating mine or generate revenue or positive cash flow from mining operations.
19
Our current and prospective investments are concentrated in Kazakhstan, which exposes us to legal, political, economic and currency risks associated with operating in an emerging market.
We have subscribed for an approximate 20% membership interest in KRLLC, subject to regulatory approval, for a subscription price of $20.0 million, and have made available to Cove Kaz a loan facility of $45.0 million, in each case to support businesses whose principal assets are mineral licenses and projects located in Kazakhstan, including the Northern Katpar and Upper Kairakty tungsten projects and other rare earth and critical minerals concessions. If the Business Combination is completed, substantially all of the PubCo’s mineral assets and operations will be located in Kazakhstan, and our financial condition and results of operations will become substantially dependent on conditions in that country.
Kazakhstan is classified by the International Monetary Fund (IMF) as part of the emerging market economies group, ranking 50th globally with a nominal GDP of approximately $360 billion as of April 2026 and, as such, presents risks that are generally more significant than those associated with investments in more developed countries. These include a legal and regulatory system that continues to evolve and that may be applied inconsistently or unpredictably, particularly with respect to subsoil use rights, mining licenses, foreign investment and taxation; the concentration of political and economic decision-making authority in the government, including periodic changes in mining, tax and currency regulations; the risk of social or political unrest; and the risk that Kazakhstan courts may not provide the same recourse or predictability that is available to us or investors in the United States. Our operations and investments in Kazakhstan will also be subject to fluctuations in the Kazakhstani tenge against the U.S. dollar, currency control laws that could restrict the movement of capital into or out of Kazakhstan, and the effects of inflation, sanctions or trade restrictions affecting the region.
Because our current exposure to Kazakhstan is limited to the amounts we have invested in or loaned to Cove Kaz and its affiliates, our existing financial exposure to these risks is limited to that amount. However, if the Business Combination is completed and the PubCo’s business becomes concentrated in Kazakhstan, any of the foregoing risks, individually or in combination, could have a material adverse effect on the PubCo’s business, financial condition, results of operations and the value of its securities.
The required dispositions of our existing businesses and assets may not be completed on acceptable terms or within the required timeframe and may expose us to continuing liabilities.
As conditions to the Business Combination, we are required to dispose of our Hong Kong legacy business and our interest in Reemag LLC. The Reemag disposition was completed in May 2026. With respect to the disposition of our Hong Kong legacy business, we may be unable to identify a suitable purchaser, obtain required approvals or complete the disposition within the required timeframe or on commercially acceptable terms, or at all. Any failure or delay in completing the disposition could delay or prevent the consummation of the Business Combination.
The consideration received in the disposition may be less than the carrying value or expected value of the applicable assets. We may also be required to provide representations, warranties, indemnities, transition services or other contractual protections to purchasers. Certain liabilities relating to the disposed businesses may remain with us or may be asserted against us after completion of the dispositions. The disposition may also result in tax liabilities, transaction costs, impairment charges or other losses.
Following the disposition, we will no longer benefit from the revenues, cash flows or assets of the disposed businesses. If the Business Combination is subsequently delayed or not completed, we may have limited or no operating business and may be required to seek another business combination, raise additional financing or take other actions to continue as a going concern.
The loan facility of up to $45.0 million we made to Cove Kaz exposes us to credit and liquidity risks.
On June 2, 2026, we entered into a loan agreement (the “Convertible Loan Agreement”) with Cove Kaz, which superseded the prior loan agreement between Cove Kaz and us dated April 21, 2026. Pursuant to the Convertible Loan Agreement, we agreed to make available to Cove Kaz a loan facility in an aggregate principal amount of up to $45.0 million, of which $23.1 million was advanced to Cove Kaz on April 22, 2026, and the remaining $21.9 million was advanced on June 10, 2026. Each advance bears simple interest at a rate of 10% per annum and is subject to the repayment and conversion provisions of the Convertible Loan Agreement. Our ability to recover the principal amount of the advances and accrued interest thereon depends on Cove Kaz’s financial condition, liquidity and ability to obtain financing or generate sufficient cash flows.
Cove Kaz’s business involves capital-intensive mineral exploration and development activities and may not generate sufficient revenue or cash flows to repay the advances when due. If the Business Combination is delayed or not completed, Cove Kaz may have limited resources with which to repay the advances. Any default or delay in repayment could result in a loss or impairment and reduce the cash available to us for our operations and other obligations.
In addition, because the loan facility was fully drawn as of June 10, 2026, our credit exposure to Cove Kaz has increased to the full $45.0 million principal amount, and our available liquidity has been correspondingly reduced. As a result, we may have less cash available to fund our existing operations, pursue other business opportunities, satisfy our obligations or respond to unforeseen circumstances. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.
20
The PubCo may not result in the anticipated benefits, and the market price of the PubCo’s common stock may be volatile.
We and Cove Kaz expect the Business Combination to create a company focused on the exploration, development and processing of critical minerals. However, the anticipated benefits of the Business Combination are subject to numerous assumptions and uncertainties. The PubCo may not successfully integrate the relevant businesses and assets, execute its development plans, secure sufficient financing, obtain required permits, complete construction, commence commercial production or generate revenue and positive cash flow within the anticipated timeframe or at all.
The market price of the PubCo’s common stock may be affected by, among other things, delays in project development, changes in mineral-resource estimates, financing needs, commodity-price fluctuations, regulatory developments, geopolitical events, sales by significant shareholders, the issuance of additional shares and differences between actual results and market expectations. If the anticipated benefits of the Business Combination are not realized, the market price of the PubCo’s common stock could decline, and investors may lose all or a substantial portion of their investment.
Risks Related to Doing Business in Hong Kong
Hong Kong’s legal system is evolving and has inherent uncertainties that could limit the legal protection available to you.
For the fiscal year ended March 31, 2026, 2025 and 2024, our revenue mainly derived from civil engineering services in Hong Kong. The Hong Kong legal system embodies uncertainties which could limit the legal protections available to you and us.
As one of the conditions for the handover of the sovereignty of Hong Kong to the PRC, the PRC had to accept some conditions such as Hong Kong’s Basic Law before its return. The Basic Law ensured Hong Kong will retain its own currency (the Hong Kong Dollar), legal system, parliamentary system and people’s rights and freedom for 50 years from 1997. This agreement gave Hong Kong the freedom to function in a high degree of autonomy. The Special Administrative Region of Hong Kong is responsible for its own domestic affairs including, but not limited to, the judiciary and courts of last resort, immigration and customs, public finance, currencies and extradition. Hong Kong continues using the English common law system.
Some international observers and human rights organizations have expressed doubts about the future of the relative political freedoms enjoyed in Hong Kong and the PRC’s pledge to allow a high degree of autonomy in Hong Kong. On July 14, 2020, the U.S. signed an executive order to end the special status enjoyed by Hong Kong post-1997. As the autonomy currently enjoyed may be compromised, it could potentially impact Hong Kong’s common law legal system and may, in turn, bring about uncertainty in, for example, the enforcement of our contractual rights. If the PRC were to, in fact, renege on its agreement to allow Hong Kong to function autonomously, this could potentially impact Hong Kong’s common law legal system and may in turn bring about uncertainty in, for example, the enforcement of our contractual rights. This could, in turn, materially and adversely affect our business and operations. Additionally, intellectual property rights and confidentiality protections in Hong Kong may not be as effective as in the U.S. or other countries. Accordingly, we cannot predict the effect of future developments in the Hong Kong legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections available to us, including our ability to enforce our agreements with our customers.
The enactment of Law of the PRC on Safeguarding National Security in the Hong Kong Special Administrative Region (the “Hong Kong National Security Law”) could impact our Operating Subsidiaries in Hong Kong.
On June 30, 2020, the Standing Committee of the PRC National People’s Congress adopted the Hong Kong National Security Law. This law defines the duties and government bodies of the Hong Kong National Security Law for safeguarding national security and four categories of offences - secession, subversion, terrorist activities, and collusion with a foreign country or external elements to endanger national security - and their corresponding penalties. On July 14, 2020, the former U.S. President Donald Trump signed the Hong Kong Autonomy Act, or HKAA, into law, authorizing the U.S. administration to impose blocking sanctions against individuals and entities which are determined to have materially contributed to the erosion of Hong Kong’s autonomy. On August 7, 2020 the U.S. government imposed HKAA - authorized sanctions on eleven individuals, including former HKSAR chief executive Carrie Lam. On October 14, 2020, the U.S. State Department submitted to relevant committees of Congress the report required under HKAA, identifying persons materially contributing to “the failure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law.” The HKAA further authorizes secondary sanctions, including the imposition of blocking sanctions, against foreign financial institutions that knowingly conduct a significant transaction with foreign persons sanctioned under this authority. The imposition of sanctions may directly affect the foreign financial institutions as well as any third parties or customers dealing with any foreign financial institution that is targeted. It is difficult to predict the full impact of the Hong Kong National Security Law and HKAA on Hong Kong and companies located in Hong Kong. If our Operating Subsidiaries in Hong Kong are determined to be in violation of the Hong Kong National Security Law or the HKAA by competent authorities, our business operations, financial position and results of operations could be materially and adversely affected.
21
Nasdaq may apply additional and more stringent criteria for our continued listing.
Nasdaq Listing Rule 5101 provides Nasdaq with broad discretionary authority over the initial and continued listing of securities in Nasdaq and Nasdaq may use such discretion to deny initial listing, apply additional or more stringent criteria for the initial or continued listing of particular securities, or suspend or delist particular securities based on any event, condition, or circumstance that exists or occurs that makes initial or continued listing of the securities on Nasdaq inadvisable or unwarranted in the opinion of Nasdaq, even though the securities meet all enumerated criteria for initial or continued listing on Nasdaq. In addition, Nasdaq has used its discretion to deny initial or continued listing or to apply additional and more stringent criteria in the instances, including but not limited to (i) where the company engaged an auditor that has not been subject to an inspection by PCAOB, an auditor that PCAOB cannot inspect, or an auditor that has not demonstrated sufficient resources, geographic reach, or experience to adequately perform the company’s audit; (ii) where a company planned a small public offering, which would result in insiders holding a large portion of the company’s listed securities. Nasdaq was concerned that an offering size was insufficient to establish the company’s initial valuation, and there would not be sufficient liquidity to support a public market for the company; and (iii) where the company did not demonstrate sufficient nexus to the U.S. capital market, including having no U.S. shareholders, operations, or members of the board of directors or management. In respect of any of the aforementioned concerns, we may be subject to additional and more stringent criteria of Nasdaq for our continued listing, which might cause delay or even denial of our listing application for Purchaser Common Stock.
If we fail to meet applicable listing requirements, Nasdaq may delist our Class A Ordinary Shares from trading, in which case the liquidity and market price of our Class A Ordinary Shares could decline.
We cannot assure you that we will be able to meet the continued listing standards of Nasdaq in the future. If we fail to comply with the applicable listing standards and Nasdaq delists our Class A Ordinary Shares, we and our shareholders could face significant material adverse consequences, including:
| ● | a limited availability of market quotations for our Class A Ordinary Shares; |
| ● | reduced liquidity for our Class A Ordinary Shares; |
| ● | a determination that our Class A Ordinary Shares are “penny stock”, which would require brokers trading in our Class A Ordinary Shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Class A Ordinary Shares; |
| ● | a limited amount of news about us and analyst coverage of us; and |
| ● | a decreased ability for us to issue additional equity securities or obtain additional equity or debt financing in the future. |
The recent joint statement by the SEC and PCAOB, proposed rule changes submitted by Nasdaq, and the HFCAA all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering securities.
On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in emerging markets.
On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in “Restrictive Market”, (ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.
22
On May 20, 2020, the U.S. Senate passed the HFCAA requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the HFCAA. On December 18, 2020, the HFCAA was signed into law. Additionally, in July 2020, the U.S. President’s Working Group on Financial Markets issued recommendations for actions that can be taken by the executive branch, the SEC, the PCAOB or other federal agencies and department with respect to Chinese companies listed on U.S. stock exchanges and their audit firms, in an effort to protect investors in the U.S.. In response, on November 23, 2020, the SEC issued guidance highlighting certain risks, and their implications to U.S. investors, associated with investments in China-based issuers and summarizing enhanced disclosures the SEC recommends China-based issuers make regarding such risks.
On December 2, 2021, the SEC adopted final amendments to its rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA, which took effect on January 10, 2022. We will be required to comply with these rules if the SEC identifies us as having a “non-inspection” year, as defined in the rules, under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCAA, including the listing and trading prohibition requirements described above. Under the HFCAA, our securities may be prohibited from trading on the Nasdaq or other U.S. stock exchanges if our auditor is not inspected by the PCAOB for three consecutive years, and this ultimately could result in our shares being delisted. Furthermore, on June 22, 2021, the U.S. Senate passed the AHFCAA, which was signed into law on December 29, 2022, amending the HFCAA and requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three consecutive years, shortening the timeline for the application of the HPCAA’s delisting and trading prohibition from three years to two, and thus, would reduce the time before securities may be prohibited from trading or delisted. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCAA, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
On December 16, 2021, the PCAOB issued a determination report which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China of the PRC; and (2) Hong Kong, a Special Administrative Region of the PRC, because of positions taken by PRC authorities in those jurisdictions, which determinations were vacated on December 15, 2022. Our current auditor, SRCO, C.P.A., Professional Corporation, is not headquartered in mainland China or Hong Kong and was not identified by the PCAOB in its report on December 16, 2021 as a firm subject to the PCAOB’s determinations, which determinations were vacated on December 15, 2022.
On August 26, 2022, the PCAOB signed a Statement of Protocol, or SOP, Agreement with the CSRC and China’s Ministry of Finance. The SOP, together with two protocol agreements governing inspections and investigation, establishes a specific, accountable framework to make possible complete inspections and investigations by the PCAOB of audit firms based in China and Hong Kong, as required under U.S. law. On December 15, 2022, the PCAOB announced it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong completely in 2022. The PCAOB vacated its previous 2021 determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control. The PCAOB is continuing to demand complete access in mainland China and Hong Kong moving forward and is already making plans to resume regular inspections in the second half of 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB has indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed. If the PCAOB in the future again determines it is unable to inspect and investigate completely auditors in mainland China and Hong Kong, then the companies audited by those auditors would be subject to a trading prohibition on U.S. markets pursuant to the HFCAA.
23
If the PCAOB in the future again determines it is unable to inspect and investigate completely auditors in mainland China and Hong Kong, then the lack of access to the PCAOB inspection in China would prevent the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China. As a result, investors could be deprived of the benefits of such PCAOB inspections, if the PCAOB again determines it is unable to inspect and investigate completely auditors in mainland China and Hong Kong. The inability of the PCAOB to conduct inspections of auditors in China would make it more difficult to evaluate the effectiveness of these accounting firms’ audit procedures or quality control procedures, which could cause existing and potential investors in our stock to lose confidence in our audit procedures and reported financial information and the quality of our financial statements. Although our auditor was not identified by the PCAOB in its report as a firm subject to the PCAOB’s determinations, which determinations were vacated on December 15, 2022, should the PCAOB be unable to fully conduct inspection of our auditor’s work papers in China, this could adversely affect us and our securities for the reasons noted above.
Our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this report, as an auditor of companies that are traded publicly in the U.S. and a firm registered with the PCAOB, is subject to laws in the U.S. pursuant to which the PCAOB conducts regular inspections to assess our auditor’s compliance with the applicable professional standards. Our auditor is headquartered in East Amherst, New York, and has been inspected by the PCAOB on a regular basis with the last inspection in 2023. However, the recent developments would add uncertainties to our offering securities and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements.
Risks Related to Ownership of Our Class A Ordinary Shares
The sale of a substantial amount of Class A Ordinary Shares in the public market could adversely affect the prevailing market price of our Class A Ordinary Shares.
Sales of substantial amounts of our securities in the public market, or the perception that such sales might occur, could adversely affect the market price of our Class A Ordinary Shares, and the market value of our other securities. Furthermore, in the future, we may issue additional Class A Ordinary Shares or other equity or debt securities convertible into Class A Ordinary Shares. Any such issuance could result in substantial dilution to our existing shareholders and could cause our share price to decline.
We are a “foreign private issuer,” and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for you to evaluate our performance and prospects.
We are a foreign private issuer and, as a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements. In addition, we will not be required to disclose detailed individual executive compensation information.
As a foreign private issuer, we will also be exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. However, we will still be subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5 under the Exchange Act. Since many of the disclosure obligations imposed on us as a foreign private issuer differ from those imposed on U.S. domestic reporting companies, you should not expect to receive the same information about us and at the same time as the information provided by U.S. domestic reporting companies.
The information we are required to file with or furnish to the SEC will be less extensive and less timely as compared to that required to be filed with the SEC by U.S. domestic issuers.
As a Cayman Islands company listed on the Nasdaq Capital Market, we are subject to the Nasdaq Capital Market corporate governance listing standards. However, Nasdaq Capital Market rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq Capital Market corporate governance listing standards. We do not currently plan to rely on home country practice with respect to any corporate governance matters. However, if we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would under the Nasdaq Capital Market corporate governance listing standards applicable to U.S. domestic issuers.
24
The dual-class share structure may adversely affect the trading market for the Class A Ordinary Shares.
Certain shareholder advisory firms have announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500, to exclude companies with multiple classes of shares and companies whose public shareholders hold no more than 5% of total voting power from being added to such indices. In addition, several shareholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the multi-class share structure may prevent the inclusion of the Class A Ordinary Shares in such indices and may cause shareholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Any such exclusion from indices could result in a less active trading market for our Class A Ordinary Shares. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of the Class A Ordinary Shares.
We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Class A Ordinary Shares less attractive to investors.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). We elected to avail ourselves of the extended transition period for implementing new or revised financial accounting standards. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although we could lose that status sooner (1) if our revenue exceed US$1.235 billion, (2) if we issue more than US$1 billion in non-convertible debt in a three-year period, or (3) if the market value of our shares held by non-affiliates exceeds US$700 million as of any March 31 before that time, in which case we would no longer be an emerging growth company as of the following March 31. We cannot predict if investors will find our Class A Ordinary Shares less attractive because we may rely on these exemptions. If some investors find our shares less attractive as a result, there may be a less active trading market for our shares and our stock price may be more volatile.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this report is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests and our financial statements may not be comparable to companies that comply with public company effective dates. We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company.
We are a “controlled company” defined under the Nasdaq Stock Market Rules. Although we do not intend to rely on the “controlled company” exemption under the Nasdaq listing rules, we could elect to rely on this exemption in the future and you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.
Dablam LLP holds 1,995,000 Class B Ordinary Shares, collectively representing 71.4% of the aggregate voting power of our issued and outstanding share capital. Accordingly, we are, and for so long as Dablam LLP continues to hold more than 50% of the voting power for the election of directors, will continue to be, a “controlled company” as defined under the Nasdaq Stock Market Rules. For so long as we remain a controlled company under that definition, we are permitted to elect to rely, and may rely, on certain exemptions from Nasdaq’s corporate governance requirements, including:
| ● | an exemption from the rule that a majority of our board of directors must be independent directors; |
| ● | an exemption from the rule that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and |
| ● | an exemption from the rule that our director nominees must be selected or recommended solely by independent directors. |
25
As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.
Although we do not intend to rely on the “controlled company” exemption under the Nasdaq listing rules, we could elect to rely on this exemption in the future. If we elected to rely on the “controlled company” exemption, a majority of the members of our board of directors might not be independent directors and our nominating and corporate governance and compensation committees might not consist entirely of independent directors. Our status as a controlled company could cause our Class A Ordinary Shares to look less attractive to certain investors or otherwise harm our trading price. As a result, the investors will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.
Future sales, or the perception of future sales, by us or our shareholder in the public market could cause the market price for our Class A Ordinary Shares to decline.
The sale of substantial amounts of Class A Ordinary Shares in the public market, or the perception that such sales could occur could harm the prevailing market price of our Class A Ordinary Shares. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. As of August 10, 2026, we have a total of 15,947,094 Class A Ordinary Shares outstanding. Of the outstanding Class A Ordinary Shares, 1,725,000 Class A Ordinary Shares sold by us in our initial public offering and up to 118,813,826 Class A Ordinary Shares, including Class A Ordinary Shares issuable upon exercise of warrants issued in the private placements dated as of October 28, 2025 and August 29, 2025, registered with the SEC for resale are freely tradable without restriction or further registration under the Securities Act of 1933, as amended (the “Securities Act”), except that any Class A Ordinary Shares held by our “affiliates,” as that term is defined in Rule 144 under the Securities Act, may be sold only pursuant to an effective registration statement or under Rule 144 or another available exemption from registration under the Securities Act.
The remaining outstanding Class A Ordinary Shares held by our shareholders may be sold in the public market in the future, subject to applicable lock-up agreements and the restrictions under Rule 144. In addition, as of August 10, 2026, we had 47,326,026 Series A Preferred Shares and 6,442 Series B Preferred Shares outstanding. Each Series A Preferred Share is convertible, at the option of its holder and without payment of any additional consideration, into a number of fully paid Class A Ordinary Shares determined in accordance with the applicable Series A conversion rate (as further described in the Amended Memorandum and Articles). Each Series B Preferred Share is convertible, at the option of its holder and without payment of any additional consideration, into a number of fully paid and non-assessable Class A Ordinary Shares determined by dividing its stated value by the applicable conversion price, which was initially US$2.40 per share and is subject to adjustment in accordance with our Amended Memorandum and Articles.
Subject to this limitation, up to 47,326,026 Class A Ordinary Shares are issuable upon conversion of all outstanding Series A Preferred Shares and up to 21,473,333 Class A Ordinary Shares are issuable upon conversion of all outstanding Series B Preferred Shares. Any Class A Ordinary Shares issued upon conversion may be sold in the public market pursuant to an effective registration statement or an available exemption from registration, subject to applicable lock-up arrangements and restrictions under the Securities Act.
If our shareholders sell a substantial amount of Class A Ordinary Shares, the prevailing market price for our Class A Ordinary Shares could be adversely affected. As restrictions on resale end, the market price of our Class A Ordinary Shares could drop significantly if the holders of our restricted shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our Class A Ordinary Shares or other securities.
The requirements of being a public company may strain our resources and divert management’s attention.
As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of the securities exchange on which we list, and other applicable securities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations will nonetheless increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results.
As a result of disclosure of information in this report and in filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business, brand and reputation and results of operations.
26
We also expect that being a newly listed public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
The market price of our Class A Ordinary Shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the price you paid.
The market price of our Class A Ordinary Shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:
| ● | actual or anticipated fluctuations in our revenue and other operating results; |
| ● | the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; |
| ● | actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our Company, or our failure to meet these estimates or the expectations of investors; |
| ● | announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments; |
| ● | price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; |
| ● | lawsuits threatened or filed against us; and |
| ● | other events or factors, including those resulting from war or incidents of terrorism, or responses to these events. |
We may experience extreme stock price volatility unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our Class A Ordinary Shares.
Recently, there have been instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with recent IPOs, especially among those with relatively smaller public floats. As a relatively small-capitalization company with relatively small public float, we may experience greater stock price volatility, extreme price run-ups, lower trading volume and less liquidity than large-capitalization companies. In particular, our Class A Ordinary Shares may be subject to rapid and substantial price volatility, low volumes of trades and large spreads in bid and ask prices. Such volatility, including any stock-run up, may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our Class A Ordinary Shares.
In addition, if the trading volumes of our Class A Ordinary Shares are low, persons buying or selling in relatively small quantities may easily influence prices of our Class A Ordinary Shares. This low volume of trades could also cause the price of our Class A Ordinary Shares to fluctuate greatly, with large percentage changes in price occurring in any trading day session. Holders of our Class A Ordinary Shares may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading. Broad market fluctuations and general economic and political conditions may also adversely affect the market price of our Class A Ordinary Shares. As a result of this volatility, investors may experience losses on their investment in our Class A Ordinary Shares. A decline in the market price of our Class A Ordinary Shares also could adversely affect our ability to issue additional Class A Ordinary Shares or other securities and our ability to obtain additional financing in the future. No assurance can be given that an active market in our Class A Ordinary Shares will develop or be sustained. If an active market does not develop, holders of our Class A Ordinary Shares may be unable to readily sell the Class A Ordinary Shares they hold or may not be able to sell their Class A Ordinary Shares at all.
27
Future financing may cause a dilution in your shareholding or place restrictions on our operations.
We may need to raise additional funds to finance further expansion of our capacity and business for our existing operations, acquisitions or strategic partnerships and the Business Combination, related transactions and PubCo. If additional funds are raised through the issuance of new equity or equity-linked securities of the Company other than on a pro rata basis to existing shareholders, the percentage ownership of such shareholders in the Company may be reduced, and such new securities may confer rights and privileges that take priority over those conferred by the shares. Alternatively, if we meet such funding requirements by way of additional debt financing, we may have restrictions placed on us through such debt financing arrangements which may:
| ● | further limit our ability to pay dividends or require us to seek consents for the payment of dividends; |
| ● | increase our vulnerability to general adverse economic and industry conditions; |
| ● | require us to dedicate a substantial portion of our cash flows from operations to service our debt, thereby reducing the availability of our cash flow to fund capital expenditure, working capital requirements and other general corporate needs; and |
| ● | limit our flexibility in planning for, or reacting to, changes in our business and our industry. |
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
As discussed above, we are a foreign private issuer, and therefore, not required to comply with all the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter. We would lose our foreign private issuer status if, for example, more than 50% of our Class A Ordinary Shares are directly or indirectly held by residents of the U.S. and we fail to meet additional requirements necessary to maintain our foreign private issuer status. If we lose our foreign private issuer status on this date, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the Nasdaq listing rules. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer, and accounting, reporting and other expenses in order to maintain a listing on a U.S. securities exchange.
You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in the Cayman Islands or Hong Kong based on U.S. or other foreign laws against us, our management or the experts named in this report.
Although we are incorporated in the Cayman Islands, we conduct substantially all of our operations outside the United States, currently in Hong Kong, and substantially all of our assets are located outside the United States, currently in Hong Kong. In addition, a majority of our directors and executive officers reside outside the United States, and substantially all of their assets are located outside the United States. As a result, it may be difficult for you to effect service of process within the U.S. upon us or these individuals, or to bring an action against us or against these individuals in the U.S. in the event that you believe your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of the Hong Kong may render you unable to enforce a judgment against our assets or the assets of our directors and officers.
Hong Kong is a Special Administrative Region of the PRC. A foreign judgment can be registered and enforced in Hong Kong either under the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319) (the “Ordinance”) or at common law. Registration of a foreign judgment under the Ordinance can be made by an ex parte application with the local court but this avenue is limited to judgments entered in designated jurisdictions, which currently include: Australia, Austria, Belgium, Bermuda, Brunei, France, Germany, India, Israel, Italy, Malaysia, The Netherlands, New Zealand, and Singapore and Sri Lanka. An action to enforce a foreign judgment at common law is a comparatively cumbersome process. It is in essence an independent suit in Hong Kong and the judgment creditor must follow normally applicable service procedures. Judgments entered in the U.S. and the United Kingdom can be enforced in Hong Kong only at common law. To be eligible for common-law recognition, the judgment must (1) be for a definite sum of money; (2) be final and conclusive; and (3) have been entered by a court with competent jurisdiction over the defendant. With respect to finality, a Hong Kong court will generally refrain from enforcing a judgment during the pendency of an appeal. This raises the possibility of undue delay and asset dissipation. With respect to the requirement of competent jurisdiction of the foreign judgment seeking to be enforced in Hong Kong, it is governed by private international law as interpreted in Hong Kong, not the law of the foreign forum. Jurisdiction can generally be asserted on the basis of the defendant’s physical presence in the foreign forum, appearance in the underlying legal proceeding or prior contractual consent to jurisdiction. Under the common law and the Ordinance, only limited defenses on the grounds such as fraud, due process and Hong Kong public policy can be raised against a duly registered foreign judgment. There is no mechanism for reconsideration of the merits of the underlying foreign litigation.
28
You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.
We are an exempted company incorporated under the laws of the Cayman Islands and conduct substantially all of our operations in Hong Kong through our wholly-owned Hong Kong Operating Subsidiaries. Most of our directors and substantially all of our executive officers reside outside the U.S. and a substantial portion of their assets are located outside of the U.S.. As a result, it may be difficult for our shareholders to effect service on these persons or bring an action against us or against these individuals in the Cayman Islands or in Hong Kong in the event that they believe that their rights have been infringed under the securities laws of the U.S. or otherwise. Even if shareholders are successful in bringing an action of this kind, the laws of the Cayman Islands and Hong Kong may render them unable to enforce a judgment against our assets or the assets of our directors and officers.
Our corporate affairs are governed by our Amended Memorandum and Articles, the Companies Act and the common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by our minority shareholders and the fiduciary duties of our directors under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law. Decisions of the Privy Council (which is the final Court of Appeal for British overseas territories such as the Cayman Islands) are binding on a court in the Cayman Islands. Decisions of the English courts, and particularly the Supreme Court and the Court of Appeal, are generally of persuasive authority, but are not binding, on a court in the Cayman Islands. Decisions of courts in other Commonwealth jurisdictions are similarly of persuasive but not binding authority. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws as compared to the United States, and some states (such as Delaware) have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, shareholders of Cayman Islands companies may not have the standing to initiate a shareholders’ derivative action in a federal court of the United States.
Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than the memorandum and articles of association and any special resolutions passed by such companies, and the register of mortgages and charges of such companies) or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our Amended Memorandum and Articles to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.
There is uncertainty as to whether the courts of the Cayman Islands would (i) recognize or enforce against the Company judgments of courts of the United States obtained against the Company or their directors or officers predicated upon the civil liability provisions of the federal securities laws of the United States or any state in the United States, or (ii) in original actions brought in the Cayman Islands, impose liabilities against the Company predicated upon the civil liability provisions of the federal securities laws of the United States or any state in the United States, so far as the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or state courts of the United States, the courts of the Cayman Islands will in certain circumstances recognize and enforce a foreign judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment: (i) must be final and conclusive, (ii) must be given by a foreign court of competent jurisdiction (the courts of the Cayman Islands will apply the rules of Cayman Islands private international law to determine whether the foreign court is a court of competent jurisdiction), and (iii) must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.
Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as the United States. To the extent we choose to follow home country practice with respect to corporate governance matters, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.
As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States.
It may be difficult to enforce a judgment of U.S. courts for civil liabilities under U.S. federal securities laws against us, our directors or officers in the Cayman Islands and Hong Kong.
As at the date of this report, our Executive Chairman and director, Mr. Paul E. Mann, Chief Executive Officer, Mr. Ngo Chiu Lam, Interim Chief Financial Officer, Ms. Sze Man Chan, and most members of the board of directors of Skyline Builders Group Holding Limited, including Mr. Chun Kit Yu and Mr. Vuk Jeremić, are based outside the United States. In particular, Mr. Ngo Chiu Lam, Ms. Sze Man Chan and Mr. Chun Kit Yu are based in Hong Kong.
29
We have been advised by our Cayman Islands legal counsel that there is uncertainty as to whether the courts of the Cayman Islands would:
| ● | recognize or enforce against us judgments of courts of the U.S. obtained against us or our directors or officers predicated upon certain civil liability provisions of federal securities laws of the U.S. or any state in the U.S.; and |
| ● | in original actions brought in the Cayman Islands impose liabilities against us predicated upon the civil liability provisions of the federal securities laws of the United States or any state in the United States, so far as the liabilities imposed by those provisions are penal in nature. |
In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or state courts of the U.S., the courts of the Cayman Islands will in certain circumstances recognize and enforce a foreign judgment of a foreign court of competent jurisdiction without any re-examination or re-litigation of matters adjudicated upon, based on the judgment that a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For e foreign judgment to be enforced in the Cayman Islands, such judgment:
| ● | must be final and conclusive; |
| ● | must be given by a foreign court of competent jurisdiction (the courts of the Cayman Islands will apply the rules of Cayman Islands private international law to determine whether the foreign court is a court of competent jurisdiction); and |
| ● | must not be; |
| ● | in respect of taxes, a fine or a penalty; |
| ● | inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud; or |
| ● | of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). |
Subject to the above limitations, in appropriate circumstances, a Cayman Islands court may give effect in the Cayman Islands to other kinds of final foreign judgments such as declaratory orders, orders for performance of contracts and injunctions.
David Fong & Co., our counsel to Hong Kong law, have advised us that there is uncertainty as to whether the courts of the Hong Kong would (i) recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States or (ii) entertain original actions brought in Hong Kong against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.
Our Hong Kong counsel also advised us that in Hong Kong, foreign judgments can be enforced under statute under the Foreign Judgments (Reciprocal Enforcement) Ordinance or under common law. The Foreign Judgments (Reciprocal Enforcement) Ordinance is a registration scheme for the recognition and enforcement of foreign judgments based on reciprocity but the United States is not a designated country under the Foreign Judgments (Reciprocal Enforcement) Ordinance. As a result, a judgment rendered by a court in the United States, including as a result of administrative actions brought by regulatory authorities, such as the SEC, and other actions, will not be enforced by the Hong Kong courts under the statutory regime. In addition, the Supreme People’s Court of the PRC and the Government of Hong Kong have entered into the “Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region pursuant to Choice of Court Agreements between Parties Concerned,” or the Arrangement. The Mainland Judgements (Reciprocal Enforcement) Ordinance gave effect to the Arrangement and is a registration scheme for recognition and enforcement of PRC judgements based on reciprocity. Other than the Arrangement, Hong Kong has not entered into any multilateral convention or bilateral treaty regarding the recognition and enforcement of foreign judgments. Accordingly, any judgments rendered by a court in the United States will need to be enforced under common law. In order to enforce a foreign judgment under common law in Hong Kong, the judgment must meet certain criteria before it can be enforced, such as the judgment being final and conclusive.
30
We employ a mail forwarding service, which may delay or disrupt our ability to receive mail in a timely manner.
Mail addressed to the Company and received at its registered office will be forwarded unopened to the forwarding address supplied by Company to be dealt with. None of the Company, its directors, officers, advisors or service providers (including the organization which provides registered office services in the Cayman Islands) will bear any responsibility for any delay howsoever caused in mail reaching the forwarding address. If such mail is delayed, it may impair your ability to communicate with us.
There can be no assurance that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our Class A Ordinary Shares.
In general, we will be treated as a PFIC for any taxable year in which either (1) at least 75% of our gross income (looking through certain 25% or more-owned subsidiaries) is passive income or (2) at least 50% of the average value of our assets (looking through certain 25% or more-owned subsidiaries) is attributable to assets that produce, or are held for the production of, passive income. Passive income generally includes, without limitation, dividends, interest, rents, royalties, and gains from the disposition of passive assets. If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder (as defined herein) of our securities, the U.S. Holder may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements. The determination of whether we are a PFIC is a fact-intensive determination made on an annual basis applying principles and methodologies that in some circumstances are unclear and subject to varying interpretation. Our actual PFIC status for any taxable year will not be determinable until after the end of such taxable year. Accordingly, there can be no assurance with respect to our status as a PFIC for our current taxable year or any other taxable year. We urge U.S. Holders to consult their own tax advisors regarding the possible application of the PFIC rules in light of their individual circumstances. For a more detailed explanation of the tax consequences of PFIC classification to U.S. Holders, see the section of this report captioned “Certain United States Federal Income Tax Considerations – Passive Foreign Investment Company Rules.”
We do not expect to pay dividends in the foreseeable future. You must rely on price appreciation of the Class A Ordinary Shares for return on your investment.
We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in the Class A Ordinary Shares as a source for any future dividend income.
Our board of directors (“BOD”) has complete discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law and the Amended Memorandum and Articles. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium account, provided that in no circumstances may a dividend be paid if this would result in our Company being unable to pay its debts as they fall due in the ordinary course of business. Even if we decide to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiary, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in the Class A Ordinary Shares will likely depend entirely upon any future price appreciation of the Class A Ordinary Shares. There is no guarantee that the Class A Ordinary Shares will appreciate in value in the future or even maintain the price at which you purchased the Class A Ordinary Shares. You may not realize a return on your investment in the Class A Ordinary Shares and you may even lose your entire investment in the Class A Ordinary Shares.
31
New climate-related disclosure obligations in proposed SEC rule amendments could have uncertain impacts on our business, impose additional reporting obligations on us, and increase our costs.
Following from 2022, the SEC proposed rule amendments that would implement a framework for the reporting of climate-related risks and create a wide range of new climate-related disclosure obligations for all registrants, including us. The proposed rules would require us to include certain climate-related information in registration statements and annual reports, including (i) climate-related risks and their actual or likely material impacts on our business, strategy, and outlook; (ii) our governance of climate-related risks and relevant risk management processes; (iii) information on our greenhouse gas emissions; (iv) certain climate-related financial statement metrics and related disclosures in a note to our audited financial statements; and (v) information about our climate-related targets, goals, and transition plans.
The proposed rules remain open to public comment and may be subject to challenges and litigation. Thus, the ultimate scope and impact of the proposed rules on our business remain uncertain. To the extent new rules, if finalized, impose additional reporting obligations on us, we could face substantial increased costs. Separately, the SEC also announced it is scrutinizing climate-change related disclosures in public filings, increasing the potential for enforcement if the SEC were to allege that our existing climate disclosures are misleading or deficient.
We are subject to changing law and regulations regarding regulatory matters, corporate governance and public disclosure that have increased both our costs and the risk of non-compliance.
We are subject to rules and regulations by various governing bodies, including, for example, the SEC, which are charged with the protection of investors and the oversight of companies whose securities are publicly traded, and to new and evolving regulatory measures under applicable law, including the laws of the Cayman Islands. Our efforts to comply with new and changing laws and regulations have resulted in and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.
Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes, we may be subject to penalty and our business may be harmed.
32
Item 4. Information on the Company
4.A. History and Development of the Company
Corporate History
We are a holding company with no material operations of our own. We conduct our operations through our wholly-owned Operating Subsidiaries.
Because we are incorporated under the laws of Cayman Islands, you may encounter difficulty protecting your interests as a shareholder, and your ability to protect your rights through the U.S. federal court system may be limited.
We are an exempted company with limited liability incorporated under the laws of the Cayman Islands on June 25, 2024, as a holding company. We operate our business primarily through our indirectly wholly-owned Operating Subsidiaries, Kin Chiu Engineering Limited and Kin Chiu Development Company Limited.
Kin Chiu Engineering Limited was incorporated in Hong Kong on April 24, 2012. Mr. Ngo Chiu Lam has been a shareholder and director of Kin Chiu Engineering Limited since its incorporation.
Skyline Builders (BVI) Holding Limited was incorporated on June 27, 2024 under the laws of the British Virgin Islands, as an intermediate holding company.
On July 24, 2024, Skyline Builders (BVI) Holding Limited acquired 7,450,000 shares, being the entire issued share capital, of Kin Chiu Engineering Limited from Mr. Ngo Chiu Lam at the consideration of HK$1. Subsequent to the transfer, Kin Chiu Engineering Limited became an indirect wholly-owned subsidiary of the Company.
On July 24, 2024, Supreme Development (BVI) Holdings Limited proposed to surrender 4,973,495,000 ordinary shares to the Company for cancellation, and the Company approved the surrender and cancellation of such shares on the same day. Subsequent to the surrender, the Company is wholly owned as to 26,505,000 ordinary shares by Supreme Development (BVI) Holdings Limited.
On July 24, 2024, the Company passed board resolutions and shareholder resolutions to re-designate (a) 4,923,495,000 authorized but unissued ordinary shares of par value of US$0.00001 each into 4,923,495,000 Class A Ordinary Shares of par value of US$0.00001 each; and (b) 50,000,000 authorized but unissued ordinary shares of par value of US$0.00001 each into 50,000,000 Class B Ordinary Shares of par value of US$0.00001 each, and re-designate a total of 26,505,000 issued ordinary shares of par value of US$0.00001 owned by Supreme Development (BVI) Holdings Limited) each into 26,505,000 Class A ordinary shares of par value of US$0.00001 each. Subsequent to the re-designation, the Company was owned as to 26,505,000 Class A Ordinary Shares by Supreme Development (BVI) Holdings Limited. Simultaneously, the Company issued 1,995,000 Class B ordinary shares of par value of US$0.00001 each to Supreme Development (BVI) Holdings Limited.
On July 30, 2024, Supreme Development (BVI) Holdings Limited entered into Sale and Purchase Agreements with Greet Harmony Global Limited, Ever Glory (BVI) Holdings Limited, Tight Core Limited, Mitsui Holding Co. Limited, Great Sage International Limited and Omen Wealth Limited, respectively. Pursuant to the Sales and Purchase Agreements, Supreme Development (BVI) Holdings Limited is to sell, and Greet Harmony Global Limited, Ever Glory (BVI) Holdings Limited, Tight Core Limited, Mitsui Holding Co. Limited, Great Sage International Limited and Omen Wealth Limited are to acquire, 4.90%, 4.90%, 4.90%, 4.80%, 4.80% and 4.70% of the issued Class A equity interests in Skyline Builders Group Holding Limited, at the consideration of US$292,456, US$292,456, US$292,456, US$286,488, US$286,488 and US$280,519, respectively. On the same date, Supreme Development (BVI) Holdings Limited executed the instrument of transfers whereby Supreme Development (BVI) Holdings Limited have transferred 1,298,745, 1,298,745, 1,298,745, 1,272,240, 1,272,240 and 1,245,735 Class A Ordinary Shares, out of its 26,505,000 Class A Ordinary Shares, to Greet Harmony Global Limited, Ever Glory (BVI) Holdings Limited, Tight Core Limited, Mitsui Holding Co. Limited, Great Sage International Limited and Omen Wealth Limited, respectively. Subsequent to the transfers, Skyline Builders Group Holding Limited is owned as to (i) 18,818,550 Class A Ordinary Shares and 1,995,000 Class B Ordinary Shares by Supreme Development (BVI) Holdings Limited; and (ii) 1,298,745, 1,298,745, 1,298,745, 1,272,240, 1,272,240 and 1,245,735 Class A Ordinary Shares by Greet Harmony Global Limited, Ever Glory (BVI) Holdings Limited, Tight Core Limited, Mitsui Holding Co. Limited, Great Sage International Limited and Omen Wealth Limited, respectively.
33
On October 9, 2024, the Company adopted a second amended and restated memorandum and articles of association.
On January 23, 2025, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Dominari Securities LLC, as representative of the underwriters named therein (the “Underwriter”), pursuant to which the Company agreed to sell to the Underwriter in a firm commitment underwriting public offering (the “Offering”) an aggregate of 1,500,000 Class A Ordinary Shares, par value US$0.00001 per share, at a public offering price of US$4.00 per share. The Company has also granted the Underwriters a 45-day option to purchase up to an additional 225,000 Class A Ordinary Shares to cover over-allotment, if any. The Class A Ordinary Shares were offered by the Company pursuant to a registration statement on Form F-1, as amended (File No. 333-282720), filed with the Securities and Exchange Commission the (“Commission”), which was declared effective by the SEC on December 31, 2024.
On January 24, 2025, the Company closed its initial public offering of 1,500,000 of the Company’s Class A Ordinary Shares. Under the terms of the Underwriting Agreement, the Company sold a total of 1,500,000 Class A Ordinary Shares at an offering price of US$4.00 per Ordinary Share for gross proceeds of US$6.0 million. A final prospectus relating to the Offering was filed with the SEC on January 24, 2025.
On February 6, 2025, Dominari Securities LLC, as the representative of the underwriters in the initial public offering of the Company, fully exercised its over-allotment option to purchase an additional 225,000 Class A Ordinary Shares of the Company at a price of US$4.00 per share, before deducting underwriting discounts. The closing for the sale of the over-allotment shares took place on February 10, 2025. The gross proceeds of the Company’s initial public offering, including the proceeds from the sale of the over-allotment shares, totaled approximately US$6.9 million, before deducting underwriting discounts and other related expenses.
On August 29, 2025, the Company closed a brokered private placement (the “August 2025 Private Placement”) of 1,359,314 Class A Ordinary Shares, 22,990,000 prefunded warrants to purchase Class A Ordinary Shares, Class A Ordinary Share Purchase Warrant As to purchase up to 24,349,314 Class A Ordinary Shares (the “A Warrants”), and Class A Ordinary Share Purchase Warrant Bs to purchase up to 24,349,314 Class A Ordinary Shares (the “B Warrants”). The Company received gross proceeds of approximately $17,775,000 from the August 2025 Private Placement, before deducting fees and expenses. The Company used approximately $7,000,000 of the proceeds from the August 2025 Private Placement to retire 18,500,000 Class A Ordinary Shares owned by Supreme Development (BVI) Holdings Limited, a company beneficially owned by Mr. Ngo Chiu Lam, Chief Executive Officer. The remaining proceeds were allocated for general working capital and other general corporate purposes. Following the completion of the offering and related transactions, Quantum Leap Energy LLC became the controlling shareholder of the Company. The 1,995,000 Class B Ordinary Shares were subsequently sold to Dablam LLP in December 2025.
On October 31, 2025, the Company entered into a subscription and unit purchase agreement with Kaz Resources LLC, a limited liability company engaged in the critical minerals space, pursuant to which the Company subscribed for an approximate 20% membership interest in the LLC, subject to regulatory approval, for a subscription price of $20,000,000. The investment marked the beginning of the Company’s new strategic direction focused on becoming a strategic supplier of critical minerals and nuclear fuels.
On November 3, 2025, the Company closed a brokered private placement (the “October 2025 Private Placement”) with certain accredited investors of (i) 17,370,909 Class A ordinary shares, par value $0.00001 per share (each, a “Class A Ordinary Share”) (and/or prefunded warrants in lieu of Class A Ordinary Shares (the “Pre-funded Warrants”)), and (ii) 17,370,909 Class A Ordinary Share Purchase Warrants to purchase Class A Ordinary Shares (the “Ordinary Warrants”). The gross proceeds of the October 2025 Private Placement were approximately $23,885,000, before deducting placement agent fees and other offering expenses payable by the Company.
On November 17, 2025, the Company, through Skyline Builders (BVI) Holding Limited, acquired Kin Chiu Development Company Limited from its shareholder, Mr. Ngo Chiu Lam. As a result, Kin Chiu Development Company Limited became an indirectly wholly-owned subsidiary of the Company.
On January 12, 2026, the Company held an extraordinary general meeting of shareholders, at which the shareholders approved (i) the redesignation of 950,000,000 authorized and unissued Class A Ordinary Shares as Series A Preferred Shares on a one-for-one basis and (ii) the adoption of the Company’s Third Amended and Restated Memorandum and Articles of Association. Following the redesignation, the Company’s authorized share capital of US$50,000 was divided into 4,000,000,000 Class A Ordinary Shares, 50,000,000 Class B Ordinary Shares and 950,000,000 Series A Preferred Shares, each with a par value of US$0.00001.
On January 23, 2026, the Company entered into a warrant exchange agreement (the “Exchange Agreement”) with the holders of Class A Ordinary Share Purchase Warrant A’s and Class A Ordinary Share Purchase Warrant B’s (collectively, the “Holder Warrants”), to purchase an aggregate of 48,698,628 Class A Ordinary Shares of the Company, that were purchased in a brokered private placement, as previously disclosed in the Company’s Forms 6-K filed on August 27, 2025 and September 2, 2025, to exchange the Holder Warrants issued on August 29, 2025, for an aggregate of 47,326,025 newly issued Series A Preferred Shares and allotted among the holders in accordance with the Exchange Agreement.
34
On February 6, 2026, the Company held an extraordinary general meeting of shareholders, at which the shareholders approved (i) an increase in the Company’s authorized share capital from US$50,000 to US$50,600 and the designation of 60,000,000 Series B Preferred Shares, par value US$0.00001 per share, and (ii) the adoption of the Company’s Fourth Amended and Restated Memorandum and Articles of Association. Following the increase and designation, the Company’s authorized share capital of US$50,600 was divided into 4,000,000,000 Class A Ordinary Shares, 50,000,000 Class B Ordinary Shares, 950,000,000 Series A Preferred Shares and 60,000,000 Series B Preferred Shares, each with a par value of US$0.00001.
On February 6, 2026, the Company adopted a further amended and restated memorandum and articles of association.
On February 13, 2026, the Company closed a brokered private placement pursuant to Regulation D under the Securities Act of 1933, as amended (the “Securities Act”) (the “Reg D Private Placement”) and (ii) a brokered private placement pursuant to Regulation S under the Securities Act (the “Reg S Private Placement”) of 6,322 of the Series B Convertible Preferred Shares. The gross proceeds of the Reg D Private Placement and Reg S Private Placement were approximately $31,590,000, before deducting placement agent fees and other offering expenses payable by the Company.
On March 13, 2026, the Company incorporated Global Critical Minerals LLC (“GCM LLC”) in Delaware, United States of America with limited liability, as a wholly-owned subsidiary of the Company. GCM LLC is an investment holding company with no business operation.
On March 25, 2026, the Company closed an offering of (i) $16,575,000 of the Company’s senior unsecured convertible notes (the “Notes”) in a brokered private placement pursuant to Regulation D under the Securities Act of 1933, as amended, (the “Reg D Note Private Placement”) and (ii) $600,000 of the Company’s Series B Preferred Shares in a brokered private placement pursuant to Regulation S under the Securities Act (the “Additional Reg S Private Placement”). The gross proceeds of the Private Placements were $17,175,000.00, before deducting placement agent fees and other offering expenses that were paid by the Company.
On March 31, 2026, the Company closed an offering of $3,000,000 of the Company’s senior unsecured convertible notes in a brokered private placement pursuant to Regulation D under the Securities Act of 1933, as amended, (the “Additional Reg D Note Private Placement”). The gross proceeds of the Private Placement was $3,000,000, before deducting placement agent fees and other offering expenses that were paid by the Company.
On April 22, 2026, we entered into a loan agreement with Cove Kaz, pursuant to which we provided Cove Kaz with a loan in the principal amount of US$23.1 million. The loan bears simple interest at a rate of 10% per annum from the date of the loan until the principal amount and accrued interest are repaid or converted in accordance with the terms of the loan agreement.
On April 30, 2026, we entered into the Transaction Agreement with SKBL Merger Sub, Cove Kaz and KRLLC with respect to the Business Combination. The Business Combination represents our proposed strategic transition from operating primarily a civil engineering business in Hong Kong to participating in the exploration, development, mining and processing of tungsten, rare earth elements and other critical minerals in Kazakhstan.
On May 14, 2026, the Company entered into an assignment and assumption agreement (the “Assignment and Assumption Agreement”) with Reemag LLC (“Reemag”) and the assignee of the Company’s membership interest in Reemag (the “Assignee”). Pursuant to the Assignment and Assumption Agreement, the Company has agreed to sell, transfer, and assign to the Assignee (i) its full 13.09% LLC membership interest in Reemag, (ii) certain future rights and obligations of the Company to acquire additional membership interests in Reemag under that certain Subscription Agreement between the Company and Reemag dated as of November 26, 2025, as amended by that certain First Amendment to Subscription Agreement dated as of March 26, 2026 (as so amended, the “Amended Subscription Agreement”), and (3) all other rights and obligations of the Company under the Amended Subscription Agreement, in consideration for a cash payment to the Company of $3,000,000.
On June 2, 2026, the Company entered into the Convertible Loan Agreement with Cove Kaz, which superseded the loan agreement dated April 21, 2026. Pursuant to the Convertible Loan Agreement, the Company agreed to make available to Cove Kaz a loan facility in an aggregate principal amount of up to US$45.0 million, consisting of the US$23.1 million advanced to Cove Kaz on April 22, 2026 and an additional commitment of US$21.9 million, which was fully drawn on June 10, 2026. Each advance bears simple interest at a rate of 10% per annum from the date on which such advance is made until the outstanding principal and accrued interest are repaid.
On June 9, 2026, the parties to the Transaction Agreement entered into Amendment No. 1 to the Transaction Agreement, which clarified that, as of the Closing Date, the Company must have no less than US$50.0 million in cash available in its bank accounts, reduced by any amounts loaned by the Company to a Kaz Company (as defined in the Transaction Agreement) prior to such closing.
On June 16, 2026, the Company announced that the Nasdaq trading symbol for its Class A Ordinary Shares would change from “SKBL” to “KAZR,” effective at the opening of trading on June 17, 2026.
On August 17, 2026, we announced that we have acquired two highly prospective gold and silver mineral properties in Nevada for an aggregate purchase price of US$136,000. The two properties acquired are (i) Mill Creek, an early-stage gold exploration project acquired from Paramount Gold (NYSE: PZG), and (ii) Irwin Mine, a past-producing property with historic high-grade intrusive-related gold and silver. Both mineral properties are at an early stage of exploration. We do not view these transactions as material to our business or operations at this time.
35
4.B. Business Overview
We are an exempted company with limited liability incorporated under the laws of the Cayman Islands on June 25, 2024, as a holding company. We operate our business primarily through our indirectly wholly-owned Operating Subsidiaries, Kin Chiu Engineering Limited and Kin Chiu Development Company Limited. For the fiscal years ended March 31, 2026, 2025 and 2024, we operate in a single segment that represents the Company’s core business as an Approved Public Works Contractor undertaking roads and drainage for customers in Hong Kong. Our construction activities mainly include public civil engineering works, such as road and drainage works, in Hong Kong. We mostly undertake civil engineering works in the role of subcontractor, while we are also fully qualified to undertake such works in the capacity of main contractor.
Kin Chiu Engineering Limited was founded in 2012. In our operating history of over 12 years, we have focused on providing civil engineering services in the role of subcontractor and built up our expertise and track record in civil engineering works. We take pride in our project portfolio in civil engineering works. In 2022, we were awarded with a public project with an initial contract sum of over HK$290 million (US$37.1 million). In July 2024, we were awarded with a public project with an initial contract sum of over HK$180 million (US$23.0 million) and a public project with an initial contract sum of over HK$80 million (US$10.2 million).
We, through our Operating Subsidiaries, are mainly engaged in public sector projects in Hong Kong. To a lesser extent, we also participate in private sector projects. Our public sector projects mainly involve infrastructure developments while private sector projects mainly involved residential and commercial developments.
In March 2020, we have successfully registered in the Approved Contractors List maintained by the Development Bureau of Hong Kong in the category of Roads and Drainage (Group B (Probation)), enabling us to directly tender for public works contracts in the capacity of main contractor. In addition, Kin Chiu Engineering Limited is a Registered Subcontractor in foundation and piling (sheet piles), general civil works (roadworks, road drainage and sewer and waterworks), other finishing trades and components (signage and graphics) and hoarding of the Registered Specialist Trade Contractors Scheme of the Construction Industry Council of Hong Kong.
We, through our Operating Subsidiaries, have achieved sustained growth in our business. For the fiscal year ended March 31, 2026, 2025 and 2024, our total revenue derived from civil engineering services was approximately US$50.1 million, US$46.0 million, and US$48.8 million , respectively. The number of customers with revenue contribution to us was 10 for the fiscal year ended March 31, 2026, 12 for the fiscal year ended March 31, 2025 and 12 for the fiscal year ended March 31, 2024.
Our Mission
Our mission is to become a leading civil engineering services provider in Hong Kong. We strive to provide quality services that comply with our customers’ quality standards, requirements and specifications.
Our Competitive Strengths
We believe that the following strengths have contributed to our success and differentiate us from our peers:
Established track record
In our operating history of over 12 years, we have focused on providing civil engineering services in the role of subcontractor and built up our expertise and track record in civil engineering works.
In March 2020, we have successfully registered in the Approved Contractors List maintained by the Development Bureau of Hong Kong in the category of Roads and Drainage (Group B (Probation)), enabling us to directly tender for public works contracts in the capacity of main contractor. Our status as an Approved Contractor has broadened the source of our projects. Since then, we have been successfully awarded with multiple civil engineering projects in the capacity of main contractor, including a public project with an initial contract sum of more than HK$200 million (US$25.6 million) in 2020 and a public project with an initial contract sum of approximately HK$100 million (US$12.8 million) in 2022
We believe our proven track record for providing quality work, our expertise in civil engineering works, our Approved Contractor status and our ability to deliver work on time are the crucial factors that enable us to gain trust from our existing customers and give us a competitive edge when tendering for projects.
36
Stable relationship with customers
We have established stable business relationship with our major customers. Our customers may either be the project owner, main contractor or subcontractor of the relevant projects. We had over three years business relationship with most of our major customers. We believe that our relationship with our major customers reinforce their confidence which would be taken into account by them in their future referrals of business opportunities or consideration of our tenders.
In March 2020, we have diversified our business and successfully registered in the Approved Contractors List maintained by the Development Bureau of Hong Kong in the category of Roads and Drainage (Group B (Probation)), enabling us to directly tender for public works contracts in the role of main contractor. As such, we are able to tender for public works contracts either as main contractor or subcontractor. We believe that this dual capacity in effect diversifies our income generating capacity and enlarges our customer base.
Experienced and dedicated management team
Our management team has extensive knowledge of and project experience in civil engineering industry in Hong Kong. Mr. Ngo Chiu Lam, our Chief Executive Officer, has over 25 years of experience in civil engineering industry. Mr. Lam is primarily responsible for the general corporate strategy, overall management of our operations and business expansion. Ms. Sze Man Chan, our Chief Financial Officer, has over 20 years of experience in the accounting, financing and auditing industry. Ms. Chan is primarily responsible for the financial management of the Company. We are supported by our strong team of employees, who possess the practical skills and experience required to handle our projects.
Stringent quality control
We have established a safety management and quality management system. Through systematic and effective control on our staff and labor together with supervision procedures, we uphold our standard of quality and reduce issues related to quality or non-conformity with specification and standards. We were accredited with ISO9001:2015 for construction of civil engineering works (roads and drainage). We believe that our stringent quality assurance system and strong commitment to environmental management will allow us to be better positioned to deliver quality work on time and within the budget required, thereby strengthening our position in the civil engineering industry in Hong Kong.
Our Growth Strategies
Our principal growth strategies include further strengthening our market position and increasing our market share in the Hong Kong civil engineering industry. We intend on achieving this growth by actively seeking new opportunities from our existing customer base as well as new potential customers. To achieve these goals, we plan on implementing the following strategies:
Enhance competitiveness and expanding our market share
We plan to further strengthen our market position in the civil engineering industry. We believe that we should focus on deploying our resources towards competing for addition and more sizeable civil engineering projects in Hong Kong. For the time being, our capacity is constrained by our available resources, including availability of our manpower and working capital. We plan to enhance our competitiveness by strengthening our manpower and working capital in order to capture the potential opportunities in the growing civil engineering market.
In March 2020, we have successfully registered in the Approved Contractors List maintained by the Development Bureau of Hong Kong in the category of Roads and Drainage (Group B (Probation)), enabling us to directly tender for public works contracts in the role of main contractor. By having the probationary status, we are only eligible to tender for public projects of aggregated value up to HK$400 million. We intend to apply for confirmed status, which would enable us to tender for any number of contracts provided the contract value of each contract does not exceed HK$400 million. Leveraging on our established track record of undertaking large scale civil engineering projects, we believe we can further strengthen our market position by undertaking more civil engineering projects in the role of main contractor.
37
Acquire machinery to enhance our capacity
We rely on the use of different types of machinery for our projects. As at March 31, 2026, we possessed 14 excavators, 3 generators, 1 truck and 1 crane. We believe that it is crucial for us to enhance our set of machinery in order to best equip our employees and our subcontractors to carry out their work. We believe that a larger fleet of machinery will allow us to (i) improve our overall work efficiency and technical capability; (ii) lower machinery rental expenses; and (iii) enhance our flexibility to deploy our resources more efficiently.
Enhancing our brand
We secured our new business through tender invitations from our customers. We believe we can broaden our customer base, attract more invitations from potential customers and improve our reputation by increasing our marketing efforts to promote our brand and market presence in the civil engineering industry in Hong Kong.
We plan to (i) further enhance our web pages for advertising our services; (ii) placing advertisements in newspaper and industry publications; (iii) sponsoring business events organized by construction contractors and participating events organized by industry players; (iv) updating our promotional booklets yearly and sending promotional materials for advertising our services; and (v) approaching potential customers more actively to secure new business opportunities.
Our Services
We, through our Operating Subsidiaries, are mainly engaged in public sector projects in Hong Kong. To a lesser extent, we also participate in private sector projects. For the fiscal years ended March 31, 2026, 2025 and 2024, our total revenue derived from civil engineering services was approximately US$50.1 million, US$46.0 million, and US$48.8 million.
We mainly engaged in public civil engineering works, such as road and drainage works. Road and drainage works mainly include construction of footway, drain, ducts and pipelines. In the performance of road and drainage works, we may be required to (i) clear the construction site and make demolition of existing structures; (ii) install concrete and reinforcing steel bars; (iii) conduct excavation, deposition, disposal and compaction of fill material; and (iv) plant trees, plants, irrigation system and general establishment works.
The following tables set forth the breakdown of our revenue by project sectors for each of the fiscal years ended March 31, 2026, 2025 and 2024.
| For the fiscal years ended March 31 | ||||||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||||||
| Revenue US$ | % of Total Revenue | Revenue US$ | % of Total Revenue | Revenue US$ | % of Total Revenue | |||||||||||||||||||
| Public | 50,111,828 | 100.0 | 46,009,519 | 100.0 | 48,298,181 | 98.9 | ||||||||||||||||||
| Private | - | - | - | - | 523,438 | 1.1 | ||||||||||||||||||
| Total | 50,111,828 | 100.0 | 46,009,519 | 100.0 | 48,821,619 | 100.0 | ||||||||||||||||||
38
Operation Workflow
We identify potential projects mainly through invitation for tender from customers. Our quantity inspectors and management are primarily responsible for submitting the tender. We may conduct site visits to better assess the complexity of the work involved. Our tender submission generally includes a schedule of rates. We estimate the costs to be incurred based on our past experience, the recent price trends for the subcontracting services, the types of materials required for the project, duration, site constraints and locations, our capacity and complexity of the project. In general, it takes approximately one week to two months to identify potential projects and to submit the tender.
After we have submitted our tender, our customers or their consultants may require us to attend interviews to have a better understanding of our personnel, management, expertise and experience in civil engineering. We may be required to answer queries in relation to our tender submission and make amendments to the pricing or scope of service. Our customers generally confirm our engagement by issuing a letter of award or entering into a formal contract with us.
We usually form a project management team, consisting of project manager, site agent, quantity surveyor, site foreman and safety supervisor. Our project management team is generally responsible for (i) supervising the project’s progress, the budget and quality of services rendered; and (ii) ensuring the work performed complies with our customers’ requirements, completed on schedule, within the budget determined and in compliance with all applicable statutory requirements. In general, we determine the manpower required based on the timeline, scale and complexity of the projects as well as the existing workload of our staff.
Depending on the contract terms and specification, we may procure construction materials from suppliers directly and enter into contracts with them. We generally engage our suppliers on a project-by-project basis and the materials are generally delivered directly to the project sites. We may engage subcontractors to perform a part of the site work under our supervision and our project management team will hold regular meetings with our subcontractors to ensure quality works are provided.
In general, we submit monthly progress reports to our customers and our customers make progress payments to us on a monthly basis. We report to our customers with reference to works done in the previous month and our customers or their consultants will certify the payment application with our value of works done.
Once the work is complete, our customers or their consultants inspect the work to ensure that it meets their requirement and standard. Generally it takes approximately six months to four years for us to complete the project, depending on the scale and complexity of the project and the customers’ timeline.
Our contracts generally include a defects liability period of 12 months following completion of works. During the period, we are typically required to rectify any defect at our own cost if the defect is due to our failure to comply with the contractual obligation.
Pricing strategy
We believe that accurately estimating the cost of project is essential to our overall profitability. Our tender price is generally determined by adding certain mark-ups over our estimated costs. Pricing of our services is determined on a case-by-case basis and is dependent on various factors, which generally include (i) the scope of services; (ii) the price trend for the types of subcontracting services as well as the materials required; (iii) the complexity and the location of the project; (iv) the estimated quantity and type of equipment required; (v) the completion time requested by our customers; and (vi) the availability of human and financial resources.
In consideration the percentage of mark-up for each project, we generally consider (i) the size, complexity and duration of the project; (ii) our business relationship with the customer; (iii) the customer’s payment history and financial background; (iv) the prospect of obtaining future projects from the customer; (v) the possibility of establishing our reputation in the industry; and (vi) the prevailing market conditions.
39
Environment
The nature of our business does not impose any serious threats with respect to social responsibility and/or environmental protection matters. We ensure our operations comply with environmental requirements pursuant to the laws in Hong Kong, including primarily those in relation to air pollution control, waste disposal and compliance with the Air Pollution Control (Non-road Mobile Machinery) (Emission) Regulation (Chapter 311Z of the Laws of Hong Kong).
Customers
Our customers may either be the project owner, main contractor or subcontractor of the relevant projects. The number of customers with revenue contribution to us was 10 for the fiscal year ended March 31, 2026, 12 for the fiscal year ended March 31, 2025 and 12 for the fiscal year ended March 31, 2024. The total revenue attributable to our five largest customers in aggregate accounted for approximately 87.3%, 82.7%, and 84.9% of the total revenue for the fiscal year ended March 31, 2026, 2025 and 2024.
In the fiscal year ended March 31, 2026, 3 of our customers accounted for more than 10% of our annual revenue, all being construction contractors in Hong Kong, for 36.8%, 18.9% and 16.3%, respectively. In the fiscal year ended March 31, 2025, 5 of our customers accounted for more than 10% of our annual revenue, all being construction contractors in Hong Kong, for 31.1%, 18.6%, 12.0%, 10.8% and 10.2%, respectively. In the fiscal year ended March 31, 2024, 4 of our customers accounted for more than 10% of our annual revenue, all being construction contractors in Hong Kong, for 33.4%, 14.7%, 14.0% and 13.9%, respectively. We undertake civil engineering projects on a project-by-project basis and do not enter into any long-term contracts with any one customer.
Suppliers
We purchase materials from our suppliers for the provision of our services. The major types of materials sourced from our suppliers include concrete, steel and consumables. We engage our suppliers for the provision of materials on a project-by-project basis and have not entered into any long-term agreement with them. We have also not committed to a minimum purchase amount with any of our suppliers. We have generally not experienced any material difficulties in procuring materials, historically.
We engage subcontractors from time to time to perform a part of the site work under our supervision. We have not entered into any long-term agreement with our subcontractors and have generally not experienced any material difficulties in procuring subcontracting services, historically. We evaluate who to engage with as our subcontractors by taking into account the quality of their service, their qualifications and experience relevant to the project, skills and technique required for the project, the prevailing market price, the delivery time, their availability and fee quotations. We typically obtain quotations from different suitable subcontractors for comparison’s sake and select our subcontractors based on the factors listed above.
Our five largest suppliers accounted for approximately 82.9%, 69.3%, and 79.8% of our total purchase from suppliers for the fiscal years ended March 31, 2026, 2025 and 2024, respectively. For the year ended March 31, 2026, four suppliers accounted for approximately 45.6%, 13.9%, 11.8% and 11.1% of the Company’s total cost of revenue. For the year ended March 31, 2025, three suppliers accounted for approximately 31.8%, 16.8% and 11.1% of the Company’s total cost of revenue. For the year ended March 31, 2024, two suppliers accounted for approximately 38.1% and 12.6% of the Company’s total cost of revenue.
Machinery
We rely on the use of different types of machinery for our projects. As of March 31, 2026, we possessed 14 excavators, 3 generators, 1 truck and 1 crane. We generally deploy these machinery for the use of our employees and our subcontractors in our projects. Depending on the service capacity and availability of our equipment, we may also lease certain equipment from rental service providers.
Market and Competition
The rollout and commencement of projects such as Kwu Tung North and Fanling North of New Development Area, Kau Yi Chau Artificial Island under the Lantau Tomorrow Vision, Tung Chung New Town Extension in the coming few years, shall sustain demand for civil engineering works. Driven by (i) continuous government funding support to promote productivity, uplifting built quality, improving site safety and enhancing environmental performance; (ii) the Government’s continuous effort in enhancing rail connectivity, which requires extensive civil engineering works; (iii) rapid advancement in technology to optimize productivity and reduce costs such as the building information management and industrialized building system, it is expected that the Hong Kong civil engineering industry will continue to grow.
40
Seasonality
We do not experience any seasonality in our business.
Insurance
We mainly undertook projects in the role of subcontractors for the fiscal year ended March 31, 2026, 2025 and 2024. For projects that we act as subcontractor, the main contractors are responsible for maintaining employees’ compensation insurance, third party liability insurance and contractor’s all risk insurance for the entirety of the project team, which cover the liability to make payment in the case of death, injury or disability, under the Employees’ Compensation Ordinance and at common law, for injuries sustained at work for full-time and part-time employees. Such insurance policies cover and protect (i) all employees of the main contractors and subcontractors of all tiers, including us; (ii) as well as the work performed on the construction site. For projects that we act as main contractor, we are responsible for maintaining the above insurance.
We also maintain employees’ compensation insurance for our directors and employees at our office and business insurance with China BOCOM Insurance Co., Ltd.. We believe that our current insurance policies are sufficient for our operations.
Licenses
As of the date of this report, Kin Chiu Engineering Limited is (i) an Approved Contractor under the category of Roads and Drainage (Group B (Probation)) of the Approved Contractors List maintained by the Development Bureau of Hong Kong; and (ii) a Registered Subcontractor under foundation and piling (sheet piles), general civil works (roadworks, road drainage and sewer and waterworks), other finishing trades and components (signage and graphics) and hoarding of the Registered Specialist Trade Contractors Scheme of the Construction Industry Council of Hong Kong. We have obtained all licenses required for carrying on our business activities as at the date of this report.
Legal Proceedings
We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business. As of the date hereof, neither we nor any of our subsidiaries have been involved in any litigation, claim, administrative action or arbitration which had a material adverse effect on the operations or financial condition of the Company.
Intellectual Property
As of the date of this report, we have not registered any patent or trademark. We have registered our domain name and website. You can find our website at http://kinchiu.com/.
41
Properties
As of the date of this report, we entered into the following lease agreements:
| Location | Term of lease | Usage | ||
| Office A, 15/F, Tower A, Capital Tower, No. 38 Wai Yip Street, Kowloon Bay, Hong Kong | October 1, 2023 to September 30, 2026 |
Office | ||
| Private Car Parking Space No. P156 & P157 on Lower G/F, Unit 7 & 8 on 15th Floor of Tower One, Ever Gain Plaza, No. 88 Container Port Road, Kwai Chung, New Territories | November 1, 2022 to October 31, 2025 |
Office and Car Parking Space |
Employees
As of March 31, 2026, we employed a total of 73 employees, located in Hong Kong and United States. The following table sets forth a breakdown of our employees by function:
| Functional Area | Number of Employees | |||
| Management | 3 | |||
| Project supervision | 3 | |||
| Safety supervision | 4 | |||
| Quantity surveyors | 10 | |||
| Finance and administration | 12 | |||
| Site workers | 41 | |||
| Total | 73 | |||
We consider that we have maintained a good relationship with our employees and have not experienced any significant disputes with our employees or any disruption to our operations due to any labor disputes. In addition, we have not experienced any difficulties in the recruitment and retention of experienced core staff or skilled personnel.
Our remuneration package includes salary and discretionary bonuses. In general, we determine employees’ salaries based on their qualifications, position and seniority. In order to attract and retain valuable employees, we review the performance of our employees annually which will be taken into account in annual salary review and promotion appraisal. We provide a defined contribution to the Mandatory Provident Fund as required under the Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong) for our eligible employees in Hong Kong.
Recent Developments
Proposed Business Combination
On April 30, 2026, we entered into the Transaction Agreement with SKBL Merger Sub, Cove Kaz and KRLLC. The Business Combination represents our proposed strategic transition from operating primarily a civil engineering business in Hong Kong to becoming a strategic supplier of critical minerals and nuclear fuels, including through the exploration, development, mining and processing of tungsten, rare earth elements and other critical minerals in Kazakhstan, with a particular focus on supplying customers in the United States.
42
Pursuant to the Transaction Agreement, KRLLC will form AIFC NewCo, and, prior to the Closing Date, KCMLLP will merge with and into AIFC NewCo, with AIFC NewCo continuing as the surviving entity. KRLLC will distribute to us a percentage of the Equity Interest in AIFC NewCo equal to the fair market value of the KRLLC Redeemed Interests in exchange for the redemption of all of the KRLLC Redeemed Interests. In addition, KRLLC will sell its entire Equity Interest in AIFC NewCo and contribute all of its rights and interests in and to the KRLLC Receivable to Cove Kaz in exchange for newly issued shares of PubCo Class B Common Stock and the right to receive Earnout Shares, if and to the extent earned.
Cove Kaz will convert from a Delaware limited liability company into a Delaware corporation and is expected to operate under the name Kaz Resources Inc (“PubCo”). SKBL Merger Sub will merge with and into us, with our Company continuing as the surviving company and becoming a subsidiary of the PubCo. Subject to the terms of the Transaction Agreement, each of our issued and outstanding Class A and Class B Ordinary Shares immediately prior to the SKBL Merger Effective Time, other than dissenting shares, will be converted into one share of PubCo Class A Common Stock. Each SKBL Preferred A Share issued and outstanding immediately prior to the SKBL Merger Effective Time, other than any dissenting shares, will be converted into one share of PubCo Series A Preferred Stock, and each SKBL Preferred B Share issued and outstanding immediately prior to the SKBL Merger Effective Time, other than any Dissenting Shares, will be converted into one share of PubCo Series B Preferred Stock. Each outstanding restricted stock award with respect to SKBL Ordinary Shares will be assumed by PubCo and converted into a restricted stock award with respect to an equal number of shares of PubCo Class A Common Stock, generally subject to the same terms and conditions applicable immediately prior to the SKBL Merger Effective Time.
The mineral assets expected to be held by the PubCo include interests in critical-minerals projects located in Kazakhstan. KCMLLP, which will become part of PubCo’s corporate group through its merger with and into AIFC NewCo, holds 15 licenses in Kazakhstan relating to rare earth elements, lithium and other critical minerals. On February 13, 2026, Cove Kaz entered into a definitive agreement to acquire a 70% controlling interest in Severniy Katpar LLP, a Kazakhstan corporation, from JSC Tau-Ken Samruk, the national mining company of Kazakhstan, which continues to hold a minority 30% interest. The transaction was completed on April 30, 2026. Severniy Katpar holds mineral licenses to the Northern Katpar and Upper Kairakty tungsten projects in east-central Kazakhstan, and is reported to hold the largest known undeveloped tungsten resource globally. The Kaz Companies also hold concessions relating to rare earth elements, lithium and other critical minerals. The Business Combination is intended to position the PubCo as a supplier of tungsten, rare earth elements and other critical minerals, with a particular focus on customers in the United States.
The completion of the Business Combination is subject to numerous conditions, including, among others, approval by our shareholders, receipt of required governmental and third-party approvals, the effectiveness of a registration statement registering the shares of PubCo Class A Common Stock to be issued to our shareholders, approval of such shares for listing on the applicable trading market and the absence of a material adverse effect with respect to us or the Kaz Companies. There can be no assurance that these or the other conditions set forth in the Transaction Agreement will be satisfied or waived or that the Business Combination will be completed on the anticipated terms or at all.
Loan to Cove Kaz
On June 2, 2026, the Company entered into the Convertible Loan Agreement with Cove Kaz, which superseded the loan agreement dated April 21, 2026. Pursuant to the Convertible Loan Agreement, the Company agreed to make available to Cove Kaz a loan facility in an aggregate principal amount of up to US$45.0 million, consisting of the US$23.1 million advanced to Cove Kaz on April 22, 2026 and an additional commitment of US$21.9 million, which was fully drawn on June 10, 2026. Each advance bears simple interest at a rate of 10% per annum from the date on which such advance is made until the outstanding principal and accrued interest are repaid.
Disposition of Existing Businesses and Investments
The Transaction Agreement requires us to dispose of our Hong Kong legacy business in a manner reasonably satisfactory to Cove Kaz prior to the completion of the Business Combination. At the closing of the Business Combination, we must have no operations or business in Hong Kong or China or liabilities related thereto. Accordingly, if the Business Combination proceeds, we expect that the civil engineering operations described elsewhere in this annual report will not form part of the PubCo following the closing.
The Transaction Agreement also requires us to complete the Reemag disposition prior to the earlier of the closing of the Business Combination and November 26, 2026. The Reemag disposition was completed in May 2026.
43
Assignment and Assumption Agreement
On May 14, 2026, the Company entered into an assignment and assumption agreement (the “Assignment and Assumption Agreement”) with Reemag LLC (“Reemag”) and the assignee of the Company’s membership interest in Reemag (the “Assignee”). Pursuant to the Assignment and Assumption Agreement, the Company has agreed to sell, transfer, and assign to the Assignee (i) its full 13.09% LLC membership interest in Reemag, (ii) certain future rights and obligations of the Company to acquire additional membership interests in Reemag under that certain Subscription Agreement between the Company and Reemag dated as of November 26, 2025, as amended by that certain First Amendment to Subscription Agreement dated as of March 26, 2026 (as so amended, the “Amended Subscription Agreement”), and (3) all other rights and obligations of the Company under the Amended Subscription Agreement, in consideration for a cash payment to the Company of $3,000,000.
Acquisition of Mineral Properties
On August 17, 2026, we announced that we have acquired two highly prospective gold and silver mineral properties in Nevada for an aggregate purchase price of US$136,000. The two properties acquired are (i) Mill Creek, an early-stage gold exploration project acquired from Paramount Gold (NYSE: PZG), and (ii) Irwin Mine, a past-producing property with historic high-grade intrusive-related gold and silver. Both mineral properties are at an early stage of exploration. We do not view these transactions as material to our business or operations at this time.
4.C. Organizational structure
The following diagram illustrates the organizational structure of the Group:
4.D. Property, plants and equipment
As of the date of this report, we entered into the following lease agreements:
| Location | Term of lease | Usage | ||
| Office A, 15/F, Tower A, Capital Tower, No. 38 Wai Yip Street, Kowloon Bay, Hong Kong | October
1, 2023 to September 30, 2026 |
Office | ||
| Private Car Parking Space No. P156 & P157 on Lower G/F, Unit 7 & 8 on 15th Floor of Tower One, Ever Gain Plaza, No. 88 Container Port Road, Kwai Chung, New Territories | November
1, 2022 to October 31, 2025 |
Office and Car Parking Space |
Item 4A. Unresolved Staff Comments
None.
44
Item 5. Operating and Financial Review and Prospects
5.A. Operating Results
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this annual report. This discussion and analysis and other parts of this annual report contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this annual report. You should carefully read the “Risk Factors” section of this annual report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.
Overview
We are an exempted company with limited liability incorporated under the laws of the Cayman Islands on June 25, 2024, as a holding company. We operate our business primarily through our indirectly wholly-owned Operating Subsidiaries, Kin Chiu Engineering Limited and Kin Chiu Development Company Limited. For the fiscal years ended March 31, 2026, 2025 and 2024, we operate in a single segment that represents the Company’s core business as an Approved Public Works Contractor undertaking roads and drainage for customers in Hong Kong. Our construction activities mainly include public civil engineering works, such as road and drainage works, in Hong Kong. We mostly undertake civil engineering works in the role of subcontractor, while we are also fully qualified to undertake such works in the capacity of main contractor.
Kin Chiu Engineering Limited was founded in 2012. In our operating history of over 12 years, we have focused on providing civil engineering services in the role of subcontractor and built up our expertise and track record in civil engineering works. We take pride in our project portfolio in civil engineering works. In 2024, we were awarded with a public project with an initial contract sum of over HK$180 million (US$23.0 million) and a public project with an initial contract sum of over HK$80 million (US$10.2 million).
We, through our Operating Subsidiaries, are mainly engaged in public sector projects in Hong Kong. To a lesser extent, we also participate in private sector projects. Our public sector projects mainly involve infrastructure developments while private sector projects mainly involved residential and commercial developments.
In March 2020, we have successfully registered in the Approved Contractors List maintained by the Development Bureau of Hong Kong in the category of Roads and Drainage (Group B (Probation)), enabling us to directly tender for public works contracts in the capacity of main contractor. In addition, Kin Chiu Engineering Limited is a Registered Subcontractor in foundation and piling (sheet piles), general civil works (roadworks, road drainage and sewer and waterworks), other finishing trades and components (signage and graphics) and hoarding of the Registered Specialist Trade Contractors Scheme of the Construction Industry Council of Hong Kong.
During the year ended March 31, 2026, the Company acquired Kin Chiu Development Company Limited from its shareholder. As a result, Kin Chiu Development Company Limited became an indirectly wholly-owned subsidiary. In addition, Global Critical Minerals LLC (“GCM LLC”) was incorporated in the Delaware, United States of America with limited liability on March 13, 2026, as a wholly-owned subsidiary of the Company. GCM LLC is an investment holding company with no business operation.
We, through our Operating Subsidiaries, have achieved sustained growth in our business. For each of the fiscal years ended March 31, 2026, 2025 and 2024, our total revenue derived from civil engineering services was approximately US$50.1 million, US$46.0 million and US$48.8 million, respectively. The number of customers with revenue contribution to us was 12 for the fiscal year ended March 31, 2024, and 12 for the fiscal year ended March 31, 2025, and 10 for the fiscal year ended March 31, 2026.
45
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).
Skyline Group and its subsidiaries resulting from Reorganization has always been under the common control of the same controlling shareholder before and after the Reorganization. The consolidation of Skyline Group and its subsidiaries has been accounted for at historical cost and prepared on the basis as if the transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements. Results of operations for the periods presented comprise those of the previously separate entities combined from the beginning of the period to the end of the period, eliminating the effects of intra-entity transactions.
The consolidated financial statements include the financial statements of Skyline Group and its wholly owned subsidiaries. All intercompany transactions and balances among Skyline Group and its subsidiaries have been eliminated upon consolidation.
Summary of Results of Operations
Comparison of Years Ended March 31, 2026 and 2025
The following table sets forth key components of our results of operations for the years ended March 31, 2026 and 2025. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.
| 2026 | 2025 | variance | variance | |||||||||||||
| US$ | US$ | US$ | % | |||||||||||||
| Revenues | 50,111,828 | 46,009,519 | 4,102,309 | 8.9 | % | |||||||||||
| Cost of revenue | (46,817,877 | ) | (43,090,207 | ) | (3,727,670 | ) | 8.7 | % | ||||||||
| Gross profit | 3,293,951 | 2,919,312 | 374,639 | 12.8 | % | |||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | (7,181,105 | ) | (1,360,051 | ) | (5,821,054 | ) | 428.0 | % | ||||||||
| Allowance for expected credit losses | (8,196,074 | ) | (5,315 | ) | (8,190,759 | ) | 154,106.5 | % | ||||||||
| Total operating expenses | (15,377,179 | ) | (1,365,366 | ) | (14,011,813 | ) | 1,026.2 | % | ||||||||
| (Loss)/Income from operations | (12,083,228 | ) | 1,553,946 | (13,637,174 | ) | (877.6 | )% | |||||||||
| Other income/(expense) | ||||||||||||||||
| Interest expense | (771,946 | ) | (891,379 | ) | 119,433 | (13.4 | )% | |||||||||
| Change in fair value of convertible notes | (3,648,265 | ) | - | (3,648,265 | ) | N/A | ||||||||||
| Change in fair value of other investments | 23,437,041 | - | 23,437,041 | ) | N/A | |||||||||||
| Other income, net | 949,592 | 238,677 | 710,915 | 297.8 | % | |||||||||||
| Total other income/(expense), net | 19,966,422 | (652,702 | ) | 20,619,124 | (3,159.0 | )% | ||||||||||
| Income before income taxes and equity in net profits of affiliates | 7,883,194 | 901,244 | 6,981,950 | 774.7 | % | |||||||||||
| Income tax credit/(expense) | 1,176,560 | (179,325 | ) | 1,355,885 | (756.1 | )% | ||||||||||
| Income before equity in net profit of affiliates | 9,059,754 | 721,919 | 8,337,835 | 1,155.0 | % | |||||||||||
| Equity in net profits of affiliates | 4,048 | 5,528 | (1,480 | ) | (26.8 | )% | ||||||||||
| Net income | 9,063,802 | 727,447 | 8,336,355 | 1,146.0 | % | |||||||||||
| Other comprehensive (loss)/income | ||||||||||||||||
| Foreign currency translation adjustment | (256,577 | ) | 15,599 | (272,176 | ) | (1,744.8 | )% | |||||||||
| Comprehensive income | 8,807,225 | 743,046 | 8,064,179 | 1,085.3 | % | |||||||||||
| Net income | 9,063,802 | 727,447 | 8,336,355 | 1,146.0 | % | |||||||||||
| Deemed dividend distribution on Series A preferred shares through additional paid-in capital | (16,593,954 | ) | - | (16,593,954 | ) | N/A | ||||||||||
| Net (loss)/income attributable to common stockholders | (7,530,152 | ) | 727,447 | (8,257,599 | ) | (1,135.1 | )% | |||||||||
46
Revenue
The following table sets forth the breakdown of our revenue by sector for the years ended March 31, 2026 and 2025 respectively:
| 2026 | 2025 | variance | Variance | |||||||||||||
| USD | USD | US$ | % | |||||||||||||
| Revenue | ||||||||||||||||
| Public | 50,111,828 | 46,009,519 | 4,102,309 | 8.9 | ||||||||||||
| Private | - | - | - | NA | ||||||||||||
| Total revenue | 50,111,828 | 46,009,519 | 4,102,309 | 8.9 | ||||||||||||
Our revenue was US$50,111,828 for the year ended March 31, 2026, as compared to US$46,009,519 for the year ended March 31, 2025, representing an increase of approximately US$ 4,102,309 or approximately 8.9%. The increase in our revenue was mainly driven by substantial work progress on ongoing high-value and sizeable public sector projects, reflecting a higher volume of work performed during the year ended March 31, 2026.
Cost of revenue
The following table sets forth the breakdown of our cost of revenue for the years ended March 31, 2026 and 2025:
| 2026 | 2025 | variance | Variance | |||||||||||||
| US$ | US$ | US$ | % | |||||||||||||
| Cost of revenue | ||||||||||||||||
| Subcontracting charges | 33,846,362 | 26,069,561 | 7,776,801 | 29.8 | ||||||||||||
| Material and consumables | 6,509,333 | 5,780,719 | 728,614 | 12.6 | ||||||||||||
| Direct labor costs | 4,858,959 | 8,942,955 | (4,083,996 | ) | (45.7 | ) | ||||||||||
| Overhead costs | 1,603,223 | 2,296,972 | (693,749 | ) | (30.2 | ) | ||||||||||
| 46,817,877 | 43,090,207 | 3,727,670 | 8.7 | |||||||||||||
Our cost of revenue primarily consists of subcontracting charges, material and consumables costs, direct labor costs, and overhead costs such as depreciation of plant and equipment that are directly attributable to services provided. We incurred a cost of revenue of US$46,817,877 for the year ended March 31, 2026, as compared to US$43,090,207 for the year ended March 31, 2025, an increase of US$3,727,670 or 8.7%. The increase was generally in line with the increase in revenue, while the decrease in direct labor costs and overhead costs for the year ended March 31, 2026 was mainly driven by subcontracting certain works to optimize resource allocation. This reflected a leaner in-house workforce, improved productivity and effective cost control measures.
Gross profit and gross profit margin
Our total gross profit was US$3,293,951 for the year ended March 31, 2026, compared to US$2,919,312 for the year ended March 31, 2025, an increase of US$374,639 or 12.8%. Our total gross profit margin rose slightly from 6.3% for the year ended March 31, 2025, to 6.6% for the year ended March 31, 2026, primarily due to continued benefits from competitive subcontractor pricing and ongoing strict cost control management which maintained and improved cost efficiency throughout the year.
47
General and administrative expenses
General and administrative expenses mainly consist of administrative staff costs, consultancy fees, bank charges, legal and professional fee, auditor’s remuneration, and other miscellaneous administrative expenses. We incurred general and administrative expenses of US$7,181,105 for the year ended March 31, 2026, compared to US$1,360,051 for the year ended March 31, 2025, an increase of US$5,821,054 or 428.0%. The increase in general and administrative expenses was primarily due to several significant changes: (i) Staff costs (including directors’ remuneration) rose by 64.9% from US$687,695 for the year ended March 31, 2025 to US$1,133,708 for the year ended March 31, 2026 due to increase in directors’ emoluments; (ii) Legal and professional fee increased from US$176,995 for the year ended March 31, 2025 to US$1,922,406 for the year ended March 31, 2026, mainly because of higher ongoing compliance-related fees for regulatory and reporting obligation purpose; (iii) Marketing services fee increased from US$nil for the year ended March 31, 2025 to US$834,347 for the year ended March 31, 2026, related to marketing activities for investor relation and training; and (iv) Share-based compensation expenses increased from US$nil for the year ended March 31, 2025 to US$2,235,000 for the year ended March 31, 2026 as a result of certain share award granted to a director that vested on March 31, 2026.
Allowance for expected credit losses
Allowance for expected credit losses increased by US$8,190,759 to US$8,196,074 for the year ended March 31, 2026, compared with US$5,315 for the year ended March 31, 2025, primarily due to an increase in the expected non-collection of certain aged accounts receivable balances. The allowance was determined after considering customer-specific credit risk, aging and payment status, historical collection experience and current economic conditions.
Other income/(expenses), net
Other income/(expenses), net mainly represents various income streams including bank interest income, imputed interest income, consultancy fee income, change in cash value of life insurance policy, change in fair value of convertible notes, change in fair value of other investments, remeasurement of provision for long service payment, distribution fee income, sundry income and interest expenses. The overall change in other income/(expenses), net by 3,159.0%, from US$652,702 for the year ended March 31, 2025 to US$19,966,422 for the year ended March 31, 2026, was primarily driven by the change in fair value of other investments of US$23,437,041, change in fair value related to convertible notes of US$3,648,265 and presence of the distribution fee income of US$629,214 for the year ended March 31, 2026, which related to the resale of construction machinery and equipment during the year ended March 31, 2026.
On the other hand, we incurred an interest expense of US$771,946 for the year ended March 31, 2026, as compared to US$891,379 for the year ended March 31, 2025, a decrease of US$119,433 or 13.4%. The decrease in interest expense was primarily due to a lower average interest rate, reflecting the full impact of the successive interest rate cuts. The decline in the HSBC Prime Lending Rate and HIBOR directly translated into reduced borrowing costs across our outstanding bank loans and other borrowings.
Income tax credit/(expense)
Our company, Skyline Builders Group Holding Limited, was incorporated in the Cayman Islands. Our wholly-owned subsidiary, Skyline Builders (BVI) Holding Limited, was incorporated in the British Virgin Islands. Pursuant to the current rules and regulations, the Cayman Islands and British Virgin Islands currently levy no taxes on individuals or corporations based upon profits, income, gains, or appreciations and there is no taxation in the nature of inheritance tax or estate duty. Therefore, the Company is not subject to any income tax in the Cayman Islands or British Virgin Islands.
Our indirectly wholly-owned subsidiary, Global Critical Minerals LLC, was incorporated in the state of Delaware which is subject to U.S. federal corporate income tax at the statutory rate of 21.0% plus applicable state taxes on its taxable income.
Our indirectly wholly-owned subsidiaries in Hong Kong, Kin Chiu Engineering Limited and Kin Chiu Development Company Limited, are subject to Hong Kong Profits Tax. Hong Kong adopts a two-tiered profits tax regime, under which the first HK$2,000,000 (approximately US$256,131) of assessable profits of only one of these subsidiaries is taxed at 8.25%, while any profits exceeding HK$2,000,000 and the assessable profits of the other subsidiary are taxed at the standard rate of 16.5%. For the years ended March 31, 2026 and 2025, the Group had assessable profits in Hong Kong. A provision for Hong Kong Profits Tax has been made in the consolidated financial statements based on the applicable two-tiered tax rates as described above.
We incurred income tax credit of US$1,176,560 for the year ended March 31, 2026, compared to income tax expenses of US$179,325 for the year ended March 31, 2025, an increase of US$1,355,885 or 756.1%. The change was mainly attributable to the recognition of significant deferred tax assets arising from expected credit loss provisions, partially offset by higher current tax arising from increased assessable profits of the Hong Kong subsidiaries.
48
Net income and total comprehensive income
As a result of the foregoing, we reported a net income for the year of US$9,063,802 for the year ended March 31, 2026, as compared to a net income of US$727,447 for the year ended March 31, 2025, an increase of US$8,336,355 or 1,146.0%.
Total comprehensive income for the year was US$7,786,729 for the year ended March 31, 2026, as compared to total comprehensive income of US$743,046 for the year ended March 31, 2025, and an increase of US$8,529,775 or 1,147.9%.
The decrease in other comprehensive income for the year ended March 31, 2026 was attributed to adjustments in foreign exchange translations during the year ended March 31, 2026.
Summary of Results of Operations
Comparison of Years Ended March 31, 2025 and 2024
The following table sets forth key components of our results of operations for the years ended March 31, 2025 and 2024. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.
| 2025 | 2024 | variance | variance | |||||||||||||
| US$ | US$ | US$ | % | |||||||||||||
| Revenues | 46,009,519 | 48,821,619 | (2,812,100 | ) | (5.8 | )% | ||||||||||
| Cost of revenue | (43,090,207 | ) | (45,928,093 | ) | 2,837,886 | (6.2 | )% | |||||||||
| Gross profit | 2,919,312 | 2,893,526 | 25,786 | 0.9 | % | |||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | (1,360,051 | ) | (1,040,245 | ) | 319,806 | 30.7 | % | |||||||||
| Allowance for credit losses | (5,315 | ) | (197,527 | ) | 192,212 | 97.3 | % | |||||||||
| Total operating expenses | (1,365,366 | ) | (1,237,772 | ) | 127,594 | 10.3 | % | |||||||||
| Income from operations | 1,553,946 | 1,655,754 | (101,808 | ) | (6.1 | )% | ||||||||||
| Other (expense)/income | ||||||||||||||||
| Interest expense | (891,379 | ) | (733,220 | ) | 158,159 | 21.6 | % | |||||||||
| Other income, net | 238,677 | 191,892 | 46,785 | 24.4 | % | |||||||||||
| Total other (expense)/income, net | (652,702 | ) | (541,328 | ) | 111,374 | 20.6 | % | |||||||||
| Income before income taxes and equity in net profits of affiliates | 901,244 | 1,114,426 | (213,182 | ) | (19.1 | )% | ||||||||||
| Income tax expense | (179,325 | ) | (150,734 | ) | (28,591 | ) | (19.0 | )% | ||||||||
| Income before equity in net profit of affiliates | 721,919 | 963,692 | (241,773 | ) | (25.1 | )% | ||||||||||
| Equity in net profits/(losses) of affiliates | 5,528 | (33,780 | ) | 39,308 | 116.4 | % | ||||||||||
| Net income | 727,447 | 929,912 | (202,465 | ) | (21.8 | )% | ||||||||||
| Other comprehensive income | ||||||||||||||||
| Foreign currency translation adjustment | 15,599 | 9,138 | 6,461 | 70.7 | % | |||||||||||
| Comprehensive income | 743,046 | 939,050 | (196,004 | ) | (20.9 | )% | ||||||||||
49
Revenue
Our revenue was US$46,009,519 for the year ended March 31, 2025, as compared to US$48,821,619 for the year ended March 31, 2024, representing a decrease of approximately US$2,812,100 or approximately 5.8%. The decrease in our revenue was mainly driven by (i) the substantial completion of certain sizeable public sector projects, partially offset by increase in revenue from ongoing high-value projects and newly awarded projects; and (ii) the absence of new private projects during the year ended March 31, 2025.
The following table sets forth the breakdown of our revenue by sector for the years ended March 31, 2025 and 2024 respectively:
| 2025 | 2024 | variance | variance | |||||||||||||
| USD | USD | US$ | % | |||||||||||||
| Revenue | ||||||||||||||||
| Public | 46,009,519 | 48,298,181 | (2,288,662 | ) | (4.7 | )% | ||||||||||
| Private | - | 523,438 | (523,438 | ) | (100.0 | )% | ||||||||||
| Total revenue | 46,009,519 | 48,821,619 | (2,812,100 | ) | (5.8 | )% | ||||||||||
Our revenue from public sector projects was US$46,009,519 for the year ended March 31, 2025, as compared to US$48,298,181 for the year ended March 31, 2024, representing a decrease of approximately US$2,288,662 or approximately 4.7%. This decrease was mainly due to (i) the lower volume of work performed by our Group on sizeable projects as a result of the substantial completion during the year ended March 31, 2025 and most of the revenue has already been recognized in prior years; and (ii) was partially offset by the increase in revenue from ongoing sizeable public projects and from newly awarded public projects during the year ended March 31, 2025.
Our revenue from private sector projects was US$nil for the year ended March 31, 2025, as compared to US$523,438 for the year ended March 31, 2024, representing a decrease of approximately US$523,438 or approximately 100.0%. The decrease in revenue from private sector projects was primarily due to the completion of smaller projects during the year ended March 31, 2024, with the absence of new private projects awarded during the year ended March 31, 2025.
Cost of revenue
The following table sets forth the breakdown of our cost of revenue for the years ended March 31, 2025 and 2024:
| 2025 | 2024 | variance | variance | |||||||||||||
| US$ | US$ | US$ | % | |||||||||||||
| Cost of revenue | ||||||||||||||||
| Subcontracting charges | 26,069,561 | 21,897,573 | 4,171,988 | 19.1 | % | |||||||||||
| Material and consumables | 5,780,719 | 6,986,461 | (1,205,742 | ) | (17.3 | )% | ||||||||||
| Direct labor costs | 8,942,955 | 13,102,868 | (4,159,913 | ) | (31.7 | )% | ||||||||||
| Overhead costs | 2,296,972 | 3,941,191 | (1,644,219 | ) | (41.7 | )% | ||||||||||
| 43,090,207 | 45,928,093 | (2,837,886 | ) | (6.2 | )% | |||||||||||
Our cost of revenue primarily consists of subcontracting charges, material and consumables costs, direct labor costs, and overhead costs such as depreciation of plant and equipment that are directly attributable to services provided. We incurred a cost of revenue of US$43,090,207 for the year ended March 31, 2025, as compared to US$45,928,093 for the year ended March 31, 2024, a decrease of US$2,837,886 or 6.2%. The decrease was generally in line with the decrease in revenue while the increase in subcontracting charges for the year ended March 31, 2025 was mainly attributable to optimization of resource allocation and it was more cost-effective to subcontract certain works which included reinforcement structured works to our subcontractors to meet project demand.
Gross profit and gross profit margin
Our total gross profit was US$2,919,312 for the year ended March 31, 2025, compared to US$2,893,526 for the year ended March 31, 2024, an increase of US$25,786 or 0.9%. Our total gross profit margin rose slightly from 5.9% for the year ended March 31, 2024, to 6.3% for the year ended March 31, 2025, primarily due to benefits from competitive subcontractor pricing and strict cost control management which improved cost efficiency.
50
General and administrative expenses
General and administrative expenses mainly consist of administrative staff costs, consultancy fees, bank charges, legal and professional fee, auditor’s remuneration, and other miscellaneous administrative expenses. We incurred general and administrative expenses of US$1,360,051 for the year ended March 31, 2025, compared to US$1,040,245 for the year ended March 31, 2024, an increase of US$319,806 or 30.7%. The increase in general and administrative expenses was primarily due to several significant changes. Staff costs (including directors’ remuneration) rose by 35.7% from US$506,890 for the year ended March 31, 2024 to US$687,695 for the year ended March 31, 2025 due to increase in directors’ emoluments. In addition, legal and professional fee increased from US$nil for the year ended March 31, 2024 to US$176,996 for the year ended March 31, 2025, mainly because of one-off expenses in relation to Reorganization and post-Listing fee for compliance purpose.
Other income, net
Other income, net mainly represents various income streams including bank interest income, imputed interest income, consultancy fee income, change in cash value of life insurance policy, remeasurement of provision for long service payment and sundry income. The overall increase in other income, net by 24.4%, from US$191,892 for the year ended March 31, 2024 to US$238,677 for the year ended March 31, 2025, is primarily driven by remeasurement of provision for long service payments of US$86,072 during the year ended March 31, 2025.
Interest expense
We incurred an interest expense of US$891,379 for the year ended March 31, 2025, as compared to US$733,220 for the year ended March 31, 2024, an increase of US$158,159 or 21.6%. Despite the increase in the balance of our bank and other borrowings to US$12,044,435 as of March 31, 2025, from US$10,928,069 as of March 31, 2024, the increase in interest expense was primarily due to the higher average balance of outstanding bank and other borrowings, reflecting increased financing requirements for ongoing projects during the year ended March 31, 2025.
Income tax expense
Our company, Skyline Builders Group Holding Limited, was incorporated in the Cayman Islands. Our wholly-owned subsidiary, Skyline Builders (BVI) Holding Limited, was incorporated in the British Virgin Islands. Pursuant to the current rules and regulations, the Cayman Islands and British Virgin Islands currently levy no taxes on individuals or corporations based upon profits, income, gains, or appreciations and there is no taxation in the nature of inheritance tax or estate duty. Therefore, the Company is not subject to any income tax in the Cayman Islands or British Virgin Islands.
Our indirectly wholly-owned subsidiary, Kin Chiu Engineering Limited, is subject to income tax within Hong Kong at the applicable tax rate on taxable income. Hong Kong profit tax rates are 8.25% on assessable profits up to HK$2,000,000 (US$256,664) and 16.5% on any part of assessable profits over HK$2,000,000 (US$256,664). For the years ended March 31, 2025, and 2024, our Group had assessable profits in Hong Kong and a provision for paying the Hong Kong profits tax has been made accordingly.
We incurred income tax expenses of US$179,325 for the year ended March 31, 2025, compared to US$150,734 for the year ended March 31, 2024, a increase of US$28,591 or 19.0%. Our effective tax rate was approximately 19.9% for the year ended March 31, 2025, and approximately 13.5% for the year ended March 31, 2024.
51
Net income and total comprehensive income
As a result of the foregoing, we reported a net profit for the year of US$727,447 for the year ended March 31, 2025, as compared to US$929,912 for the year ended March 31, 2024, a decrease of US$202,465 or 21.8%.
Total comprehensive income for the year was US$743,046 for the year ended March 31, 2025, as compared to US$939,050 for the year ended March 31, 2024, and a decrease of US$196,004 or 20.9%.
The increase in other comprehensive income was attributed to positive adjustments in foreign exchange translations.
Comparison of Years Ended March 31, 2024 and 2023
The following table sets forth key components of our results of operations for the years ended March 31, 2024 and 2023. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.
| 2024 | 2023 | variance | variance | |||||||||||||
| US$ | US$ | US$ | % | |||||||||||||
| Revenues | 48,821,619 | 44,555,081 | 4,266,538 | 9.6 | % | |||||||||||
| Cost of revenue | (45,928,093 | ) | (43,332,532 | ) | (2,595,561 | ) | 6.0 | % | ||||||||
| Gross profit | 2,893,526 | 1,222,549 | 1,670,977 | 136.7 | % | |||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | (1,040,245 | ) | (785,244 | ) | (255,001 | ) | 32.5 | % | ||||||||
| Allowance for credit losses | (197,527 | ) | 418,922 | (616,449 | ) | (147.2 | )% | |||||||||
| Total operating expenses | (1,237,772 | ) | (366,322 | ) | (871,450 | ) | 237.9 | % | ||||||||
| Income from operations | 1,655,754 | 856,227 | 799,527 | 93.4 | % | |||||||||||
| Other income/(expense) | ||||||||||||||||
| Interest expense | (733,220 | ) | (354,125 | ) | (379,095 | ) | 107.1 | % | ||||||||
| Other income, net | 191,892 | 610,036 | (418,144 | ) | (68.5 | )% | ||||||||||
| Total other income/(expense), net | (541,328 | ) | 255,911 | (797,239 | ) | (311.5 | )% | |||||||||
| Income before income taxes and equity in net losses of affiliates | 1,114,426 | 1,112,138 | 2,288 | 0.2 | % | |||||||||||
| Income tax expense | (150,734 | ) | (116,641 | ) | (34,093 | ) | 29.2 | % | ||||||||
| Income before equity in net losses of affiliates | 963,692 | 995,497 | (31,805 | ) | (3.2 | )% | ||||||||||
| Equity in net losses of affiliates | (33,780 | ) | (115,943 | ) | 82,163 | (70.9 | )% | |||||||||
| Net income | 929,912 | 879,554 | 50,358 | 5.7 | % | |||||||||||
| Other comprehensive income/(loss) | ||||||||||||||||
| Foreign currency translation adjustment | 9,138 | (5,798 | ) | 14,936 | (257.6 | )% | ||||||||||
| Comprehensive income | 939,050 | 873,756 | 65,294 | 7.5 | % | |||||||||||
Revenue
Our revenue was US$48,821,619 for the year ended March 31, 2024, as compared to US$44,555,081 for the year ended March 31, 2023, representing an increase of approximately US$4,266,538 or approximately 9.6%. The increase in our revenue was mainly driven by the number of our projects contributing revenue, which increased from 15 for the year ended March 31, 2023, to 16 for the year ended March 31, 2024. The number of our high value projects contributing revenue of over US$3,000,000 during the year increased from 4 for the year ended March 31, 2023, to 6 for the year ended March 31, 2024.
52
We secured our new business through direct invitations for tenders from customers and we receive from time to time invitations to submit tenders from construction contractors. For the fiscal years ended March 31, 2024 and 2023, we submitted 3 and 5 tenders to our potential customers, respectively, and our tender success rate was approximately 67% and 60% for the respective year. We believe that our proven track record of quality works, our expertise in wet trades operations, and our ability to deliver work on time are the crucial factors that enable us to gain our customers’ trust and give us a competitive edge when tendering for projects. Our stable tender success rate demonstrates our competitiveness in the public civil engineering works and the satisfaction of our customers with our services.
The following table sets forth the breakdown of our revenue by sector for the years ended March 31, 2024 and 2023 respectively:
| 2024 | 2023 | variance | variance | |||||||||||||
| USD | USD | US$ | % | |||||||||||||
| Revenue | ||||||||||||||||
| Public | 48,298,181 | 43,341,572 | 4,956,609 | 11.4 | % | |||||||||||
| Private | 523,438 | 1,213,509 | (690,071 | ) | (56.9 | )% | ||||||||||
| Total revenue | 48,821,619 | 44,555,081 | 4,266,538 | 9.6 | % | |||||||||||
Our revenue from public sector projects was US$48,298,181 for the year ended March 31, 2024, as compared to US$43,341,572 for the year ended March 31, 2023, representing an increase of approximately US$4,956,609 or approximately 11.4%. This increase was mainly due to the increase in number of projects and the higher volume of work performed by our Group on ongoing sizable public projects that commenced in the previous year.
Our revenue from private sector projects was US$523,438 for the year ended March 31, 2024, as compared to US$1,213,509 for the year ended March 31, 2023, representing a decrease of approximately US$690,071 or approximately -56.9%. The decrease in revenue from private sector projects was primarily due to the completion of sizable projects in 2023 and the new projects awarded as of March 31, 2024 are smaller in size.
Cost of revenue
The following table sets forth the breakdown of our cost of revenue for the years ended March 31, 2024 and 2023:
| 2024 | 2023 | variance | variance | |||||||||||||
| US$ | US$ | US$ | % | |||||||||||||
| Cost of revenue | ||||||||||||||||
| Subcontracting charges | 21,897,573 | 18,125,465 | 3,772,108 | 20.8 | % | |||||||||||
| Material and consumables | 6,986,461 | 9,703,165 | (2,716,704 | ) | (28.0 | )% | ||||||||||
| Direct labor costs | 13,102,868 | 11,391,278 | 1,711,590 | 15.0 | % | |||||||||||
| Overhead costs | 3,941,191 | 4,112,624 | (171,433 | ) | (4.2 | )% | ||||||||||
| 45,928,093 | 43,332,532 | 2,595,561 | 6.0 | % | ||||||||||||
Our cost of revenue primarily consists of subcontracting charges, material and consumables costs, direct labor costs, and overhead costs such as depreciation of equipment that are directly attributable to services provided. We incurred a cost of revenue of US$45,928,093 for the year ended March 31, 2024, as compared to US$43,332,532 for the year ended March 31, 2023, an increase of US$2,595,561 or 6.0%. The increase was generally in line with the increase in revenue while the decrease in material and consumables costs for the year ended March 31, 2024, was mainly attributable to more efficient use of materials and the completion of certain material-intensive projects in the previous year.
Gross profit and gross profit margin
Our total gross profit was US$2,893,526 for the year ended March 31, 2024, as compared to US$1,222,549 for the year ended March 31, 2023, an increase of US$1,670,977 or 136.7%. The increase in total gross profit was mainly attributable to the increase in revenue for the year ended March 31, 2024, as compared to the year ended March 31, 2023, as discussed above. Additionally, this improvement in gross profit can be attributed to the project’s transition from the early stages, characterized by preliminary planning and design costs, site preparation costs, high initial material costs and a higher proportion of overhead costs, to the middle stages. In the middle stages, we benefited from more efficient revenue recognition, economies of scale, and reduced cost per unit. Consequently, our total gross profit margin improved from 2.7% for the year ended March 31, 2023, to 5.9% for the year ended March 31, 2024.
53
General and administrative expenses
General and administrative expenses mainly consist of administrative staff costs, consultancy fees, bank charges, depreciation, and other miscellaneous administrative expenses. We incurred general and administrative expenses of US$1,040,245 for the year ended March 31, 2024, compared to US$785,244 for the year ended March 31, 2023, an increase of US$255,001 or 32.5%. The increase in general and administrative expenses was primarily due to several significant changes. Consultancy fees increased from US$7,588 in 2023 to US$218,877 in 2024 related to the supporting services of the bank financing. Bank charges increased by 209.9% from US$29,950 in 2023 to US$92,800 in 2024, attributed to higher transaction volumes and new banking arrangements. Staff costs rose by 14.1% from US$402,692 for the year ended March 31, 2023 to US$459,404 for the year ended March 31, 2024 due to the addition of new full-time staff in the surveyors department and administration and finance department.
Other income
Other income mainly represents various income streams including bank interest income, imputed interest income, government subsidies, consultancy fee income, and sundry income. The overall decrease in other income by 68.5%, from US$610,036 for the year ended March 31, 2023 to US$191,892 for the year ended March 31, 2024, is primarily driven by the absence of substantial government subsidies from Covid-19 Anti-epidemic fund, which dropped from US$371,830 to US$0. The subsidy aimed to provide financial support to employers to pay staff wages and maintain employment during Covid-19.
Interest expense
We incurred an interest expense of US$733,220 for the year ended March 31, 2024, as compared to US$354,125 for the year ended March 31, 2023, an increase of US$379,095 or 107.1%. Despite the increase in the balance of our bank borrowings to US$10,928,069 as of March 31, 2024, from US$5,289,497 as of March 31, 2023, the increase in interest expense was primarily due to the higher average balance of bank borrowings during the year ended March 31, 2024. This increase in average balance resulted in a significant rise in interest on bank loans from US$276,097 for the year ended March 31, 2023 to US$640,572 for the year ended March 31, 2024, a difference of US$364,475 or 132.0%. Additionally, there were notable increases in interest on lease liabilities and other finance costs.
Income tax expense
Our company, Skyline Builders Group Holding Limited, was incorporated in the Cayman Islands. Our wholly-owned subsidiary, Skyline Builders (BVI) Holding Limited, was incorporated in the British Virgin Islands. Pursuant to the current rules and regulations, the Cayman Islands and British Virgin Islands currently levy no taxes on individuals or corporations based upon profits, income, gains, or appreciations and there is no taxation in the nature of inheritance tax or estate duty. Therefore, the Company is not subject to any income tax in the Cayman Islands or British Virgin Islands.
Our indirectly wholly-owned subsidiary, Kin Chiu Engineering Limited, is subject to income tax within Hong Kong at the applicable tax rate on taxable income. Hong Kong profit tax rates are 8.25% on assessable profits up to HK$2,000,000 (US$256,410) and 16.5% on any part of assessable profits over HK$2,000,000 (US$256,410). For the years ended March 31, 2024, and 2023, our Group had assessable profits in Hong Kong and a provision for paying the Hong Kong profits tax has been made accordingly.
We incurred income tax expenses of US$150,734 for the year ended March 31, 2024, compared to US$116,641 for the year ended March 31, 2023, an increase of US$34,093 or 29.2%. Our effective tax rate was approximately 13.9% for the year ended March 31, 2024, and approximately 11.7% for the year ended March 31, 2023. The increase in effective tax rate in 2024 because the government subsidy income of US$371,830 in 2023 was not subjected to profit tax, while in 2024, most of the income is subjected to profit tax.
Net income and total comprehensive income
As a result of the foregoing, we reported a net profit for the year of US$929,912 for the year ended March 31, 2024, as compared to US$879,554 for the year ended March 31, 2023, an increase of US$50,358 or 5.7%.
Total comprehensive income for the year was US$939,050 for the year ended March 31, 2024, as compared to US$873,756 for the year ended March 31, 2023, and increase of US$65,294 or 7.5%.
The increase in other comprehensive income was attributed to higher profits and positive adjustments in foreign exchange translations.
54
Discussion of Certain Balance Sheet Items
The following table sets forth selected information from our consolidated balance sheets as of March 31, 2026 and 2025. This information should be read together with our consolidated financial statements and related notes included elsewhere in this prospectus.
| 2026 | 2025 | variance | variance | |||||||||||||
| US$ | US$ | US$ | % | |||||||||||||
| ASSETS | ||||||||||||||||
| Current assets: | ||||||||||||||||
| Cash and cash equivalents | 4,627,050 | 718,625 | 3,908,425 | 543.9 | % | |||||||||||
| Accounts receivable, net | 7,465,036 | 10,032,305 | (2,567,269 | ) | (25.6 | )% | ||||||||||
| Contract assets, current portion | 434,603 | 4,636,670 | (4,202,067 | ) | (90.6 | )% | ||||||||||
| Prepayments and other current assets | 8,630,554 | 7,020,687 | 1,609,867 | 22.9 | % | |||||||||||
| Restricted Cash | 46,197,750 | — | 46,197,750 | N/A | ||||||||||||
| Total current assets | 67,354,993 | 22,408,287 | 44,946,706 | 200.6 | % | |||||||||||
| Non-current assets: | ||||||||||||||||
| Equity method investments | 1,318,195 | 1,324,129 | (5,934 | ) | (0.4 | )% | ||||||||||
| Property, plant and equipment, net | 325,658 | 241,809 | 83,849 | 34.7 | % | |||||||||||
| Finance lease right-of-use assets, net | 6,769 | 87,385 | (80,616 | ) | (92.3 | )% | ||||||||||
| Operating right-of-use assets, net | 135,708 | 162,886 | (27,178 | ) | (16.7 | )% | ||||||||||
| Life insurance policy, cash surrender value | 1,448,925 | 1,390,388 | 58,537 | 4.2 | % | |||||||||||
| Contract assets, net of current portion | 1,825,986 | 1,029,078 | 796,908 | 77.4 | % | |||||||||||
| Deposits for acquisition of plant and equipment | 1,770,959 | 1,784,389 | (13,430 | ) | (0.8 | )% | ||||||||||
| Other investment | 46,161,262 | — | 46,161,262 | N/A | ||||||||||||
| Deferred tax assets | 1,412,011 | 65,241 | 1,346,770 | 2,064.3 | % | |||||||||||
| TOTAL ASSETS | 121,760,466 | 28,493,592 | 93,266,874 | 327.3 | % | |||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
| Bank overdrafts | 201,671 | — | 201,671 | N/A | ||||||||||||
| Accounts payable | 1,935,086 | 1,797,735 | 137,351 | 7.6 | % | |||||||||||
| Contract liabilities | 752,186 | 2,322,911 | (1,570,725 | ) | (67.6 | )% | ||||||||||
| Bank borrowings | 11,982,316 | 12,044,435 | (62,119 | ) | (0.5 | )% | ||||||||||
| Finance lease liabilities, current portion | — | 56,795 | (56,795 | ) | (100.0 | )% | ||||||||||
| Operating lease liabilities, current portion | 76,271 | 115,372 | (39,101 | ) | (33.9 | )% | ||||||||||
| Due to related parties | 4,186,846 | 1,360,024 | 2,826,822 | 207.9 | % | |||||||||||
| Accrued expenses and other current liabilities | 2,962,366 | 1,770,319 | 1,192,047 | 67.3 | % | |||||||||||
| Income tax payable | 413,940 | 372,816 | 41,124 | 11.0 | % | |||||||||||
| Total current liabilities | 22,510,682 | 19,840,407 | 2,670,275 | 13.5 | % | |||||||||||
| Non-current liabilities: | ||||||||||||||||
| Convertible note | 19,567,461 | — | 19,567,461 | N/A | ||||||||||||
| Operating lease liabilities, net of current portion | 52,411 | 26,700 | 25,711 | 96.3 | % | |||||||||||
| Other long-term liabilities, net of current portion | 11,055 | 34,362 | (23,307 | ) | (67.8 | )% | ||||||||||
| TOTAL LIABILITIES | 42,141,609 | 19,901,469 | 22,240,140 | 111.8 | % | |||||||||||
| SHAREHOLDERS’ EQUITY | ||||||||||||||||
| Preferred Shares - series A, $0.00001 par value, 950,000,000 shares authorized; 47,326,026 shares issued and outstanding | 473 | — | 473 | N/A | ||||||||||||
| Preferred Shares - series B, $0.00001 par value, 60,000,000 shares authorized; 6,442 shares issued and outstanding | — | — | — | N/A | ||||||||||||
| Class A Ordinary shares, 4,000,000,000 shares (March 31, 2025: 4,950,000,000 shares) authorized, par value US$0.00001 each, 15,486,491 and 28,230,000 Class A ordinary shares issued and outstanding as of March 31, 2026 and 2025, respectively | 155 | 282 | (127 | ) | (45.0 | )% | ||||||||||
| Class B Ordinary shares, 50,000,000 shares authorized, par value US$0.00001 each, 1,995,000 Class B ordinary shares issued and outstanding as of March 31, 2026 and 2025 | 20 | 20 | — | — | ||||||||||||
| Class A Ordinary Shares to be issued | 2,235,000 | — | 2,235,000 | N/A | ||||||||||||
| Additional paid-in capital | 82,342,816 | 5,764,699 | 76,578,117 | 1,328.4 | % | |||||||||||
| (Accumulated losses)/retained earnings | (4,708,368 | ) | 2,821,784 | (7,530,152 | ) | (266.9 | )% | |||||||||
| Accumulated other comprehensive (loss)/ income | (251,239 | ) | 5,338 | (256,577 | ) | (4,806.6 | )% | |||||||||
| Total shareholders’ equity | 79,618,857 | 8,592,123 | 71,026,734 | 826.6 | % | |||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 121,760,466 | 28,493,592 | 93,266,874 | 327.3 | % | |||||||||||
55
Cash and Cash Equivalents
Our cash and cash equivalents increased from US$718,625 as of March 31, 2025, to US$4,627,050 as of March 31, 2026. The fluctuation was mainly a result of our business operations, proceeds from private placement as well as repayments and proceeds from bank and other borrowings.
Restricted Cash
Our restricted cash increased from US$Nil as of March 31, 2025, to US$46,197,750 as of March 31, 2026. The increase was primarily attributable to proceeds received from our private placement in relation to convertible notes and issuance of Series B preferred shares conducted during the year ended March 31, 2026.
Accounts Receivable
Our accounts receivable decreased from US$10,032,305 as of March 31, 2025, to US$7,465,036 as of March 31, 2026, primarily due to the increase in the allowance of expected credit losses recognized during the year.
Contract Assets
Our contract assets decreased significantly from US$5,665,748 as of March 31, 2025, to US$2,260,589 as of March 31, 2026, representing a 60.1% decrease. The decrease was mainly due to (i) the decrease of unbilled revenue of construction contracts from US$4,157,343 as of March 31, 2025 to US$Nil as of March 31, 2026; primarily due to the continued improvement in certification processing times by independent surveyors and the ongoing reduction in the number of projects near year end pending from independent surveyor certification as of March 31, 2026 and partially offset by (ii) the increase of retention receivable from US$1,605,163 as of March 31, 2025 to US$2,322,369 as of March 31, 2026 as a result of the increase in the amount of work performed in several ongoing projects during the year ended March 31, 2026.
Prepayments and other current assets
Prepayments and other current assets mainly comprised the prepayment for insurance, rental, utilities and other deposits, and advance payment to subcontractors. Our other receivables increased from US$7,020,687 as of March 31, 2025 to US$ 8,630,554 as of March 31, 2026 mainly attributed to (i) the increase in advances to a subcontractor which was primarily due to projects that necessitated substantial cash flows for the procurement of materials required to achieve a key milestone and a setup of new work stages that start after March 2026. It is anticipated that cost of revenue will be recognized subsequently upon the completion of these milestone and work stage; and partially offset by (ii) the decrease in prepayment relating to marketing activities for investor relation and training from US$1,000,000 as of March 31, 2025 to US$161,373 as of March 31, 2026, as the prepaid amount was recognized as an expense during the year ended March 31, 2026.
Right-of-Use (“ROU”) Assets
Our Right-of-Use (“ROU”) assets consists of finance lease right-of-use assets and operating right-of-use assets, which experienced a decrease in value from US$250,271 as of March 31, 2025, to US$142,477 as of March 31, 2026. The finance lease right-of-use assets decreased by US$80,616, representing a 92.3% reduction. Similarly, the operating right-of-use assets decreased by US$27,178, equating to a 16.7% reduction. This reduction was attributed to the amortization of the assets recognized during the year ended March 31, 2026. Besides, there was an addition of ROU assets recorded as of March 31, 2026.
56
Accounts Payable
Our accounts payable mainly comprised trade payables to subcontractors and suppliers of materials. Our accounts payable increased from US$1,797,735 as of March 31, 2025, to US$1,935,086 as of March 31, 2026, primarily due to the increase in the purchase of materials and subcontracting charges during the year ended March 31, 2026, to cope with our business growth.
Accrued expenses and other current liabilities
Our accrued expenses and other current liabilities mainly comprise accrued salaries, accrued interest and other payables. Our accrued expenses and other current liabilities increased from US$1,770,319 as of March 31, 2025 to US$2,962,366 as of March 31, 2026 mainly due to accrued legal and professional fee as of March 31, 2026.
Contract Liabilities
Our contract liabilities decreased from US$2,322,911 as of March 31, 2025 to US$752,186 as of March 31, 2026, primarily due to advance payments from one of our customers reaching a key milestone, resulting in revenue recognition during the year ended March 31, 2026.
Due to related parties
Our amounts due to related parties comprised amount due to a director and amount due to joint ventures. Amount due to a director rose from US$617,944 as of March 31,2025 to US$3,546,480 as of March 31, 2026, marking an increase of US$2,928,536. This increase was primarily due to advances from a director for operational use. Conversely, the amounts due to joint ventures decreased from US$742,080 as of March 31,2025 to US$640,366 as of March 31, 2026, mainly attributable to the repayment to joint ventures.
Bank and Other Borrowings
As of March 31, 2025, and 2026, we had outstanding bank and other borrowings balances of US$12,044,435 and US$11,982,316 respectively. The decrease in the outstanding bank and other borrowings balances was mainly due to scheduled principal repayments made during the year ended March 31, 2026.
Lease Liabilities
Lease liabilities comprised finance lease liabilities and operating lease liabilities. As of March 31, 2026 and 2025, we had lease liabilities of US$128,682 and US$198,867, respectively. The decrease in our lease liabilities was mainly due to amortization of lease liabilities during the year ended March 31, 2026.
57
5.B. Liquidity and Capital Resources
Liquidity and Capital Resources
Our sources of funds have primarily been our equity capital, cash generated from our operations, financial support from controlling shareholder, bank and other borrowings, issuance of shares, warrants and convertible notes. Our primary liquidity requirements are to finance our working capital needs, fund our capital expenditures, and support the growth of our operations. Going forward, we expect these sources to continue to be our principal sources of liquidity, and we use these proceeds to finance a portion of our liquidity requirements.
Since inception, there have been periods where we maintained a working capital deficit and negative operating cashflows. As of March 31, 2026, our cash and cash equivalents and restricted cash amounted to US$50,824,800. Net cash used in operating activities for the year ended March 31, 2026 amounted to US$2,845,066 and a net income for the year ended March 31, 2026 amounted to US$9,063,802. Our working capital requirements and operating cashflows are influenced by the size of our operations, the contract sum of our work contracts, the progress of execution on our work contracts, the timeliness related to the survey certification process by the customers which are determined by the operation scales of our customers, the geographical dispersion, and the complexity of the projects, the timing for collecting accounts receivable and repayment of accounts payable. The disproportionate fluctuations in the contract assets impact the Company’s liquidity and capital resources, which lead to the mismatch between cashflow and operation expenditures. The Company may need to rely more on external financing, such as bank loans or lines of credits to maintain the operational and strategic flexibility.
As of March 31, 2026, we had the total outstanding bank and other borrowings of US$11,982,316 which was repayable on demand and according to respective payment schedules and US$10,650,901 is available for revolving. The unutilized amount was US$1,467,992 as of March 31, 2026. There was no material covenant stated in the indebtedness incurred as of March 31, 2026. We are not committed to draw down the unutilized amount.
Components and details of available and utilized bank and other borrowings as of March 31, 2026 are as follows:
| Repayment terms(4) | Interest rate % | Available | As of March 31, 2026 Utilized | Unutilized | Maturity Date (dd/mm/yyyy) | |||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Guarantee Loan 1 | (1) | Monthly repay | HSBC Prime Lending Rate (“BLR”) minus 2.25% | — | 137,579 | — | 13/4/2032 | |||||||||
| (5) | — | 180 | — | 15/4/2026 | ||||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Guarantee Loan 2 | (1) | Monthly repay | HSBC Prime Lending Rate (“BLR”) minus 2.25% | — | 93,477 | — | 23/10/2032 | |||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Guarantee Loan 3 | (1) | Monthly repay | HSBC Prime Lending Rate (“BLR”) minus 2.25% | — | 106,321 | — | 2/4/2033 | |||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Guarantee Loan 4 | (1) | Monthly repay | HSBC Prime Lending Rate (“BLR”) minus 2.25% | — | 348,477 | — | 14/6/2034 | |||||||||
| (7) | — | 319 | — | 14/5/2026 | ||||||||||||
58
| Repayment terms(4) | Interest rate % | Available | As of March 31, 2026 Utilized | Unutilized | Maturity Date (dd/mm/yyyy) | |||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Post-Shipment Buyer Loans | (3) | Repay upon maturity | 2.5% per annum over 1-month HIBOR | Limit up to US$5,102,692 in aggregate for Post-Shipment Buyer Loans and MA Loan 1 | 112,567 | Limit up to US$1,085,290 in aggregate for Post-Shipment Buyer Loans and MA Loan 1 | 20/4/2026 | |||||||||
| 153,081 | 14/5/2026 | |||||||||||||||
| 367,394 | 15/5/2026 | |||||||||||||||
| 433,729 | 15/5/2026 | |||||||||||||||
| 53,578 | 21/5/2026 | |||||||||||||||
| 40,822 | 22/5/2026 | |||||||||||||||
| 150,529 | 15/6/2026 | |||||||||||||||
| 216,864 | 9/7/2026 | |||||||||||||||
| 267,891 | 10/7/2026 | |||||||||||||||
| 511,545 | 27/7/2026 | |||||||||||||||
| 176,043 | 7/8/2026 | |||||||||||||||
| 79,092 | 20/8/2026 | |||||||||||||||
| 357,188 | 24/8/2026 | |||||||||||||||
| 239,827 | 24/8/2026 | |||||||||||||||
| 214,313 | 28/8/2026 | |||||||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Advance to Manufacturer (“MA”) Loan 1 | (3) | Repay upon maturity | 2.5% per annum over 1-month HIBOR | Limit up to US$5,102,692 in aggregate for Post-Shipment Buyer Loans and MA Loan 1 | 399,286 | Limit up to US$1,085,290 in aggregate for Post-Shipment Buyer Loans and MA Loan 1 | 19/4/2026 | |||||||||
| 137,773 | 11/5/2026 | |||||||||||||||
| 105,881 | 12/5/2026 | |||||||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Funds from Factoring | (3) | Repay upon maturity | 2% per annum over 1–month HIBOR | Limit up to US$3,827,019 in aggregate for Funds from Factoring | 160,040 | — | 6/4/2026 | |||||||||
| 167,346 | 13/4/2026 | |||||||||||||||
| 84,577 | 13/4/2026 | |||||||||||||||
| 619,087 | 16/4/2026 | |||||||||||||||
| 382,702 | 5/5/2026 | |||||||||||||||
| 17,580 | 27/5/2026 | |||||||||||||||
| 494,776 | 27/5/2026 | |||||||||||||||
| 179,153 | 8/6/2026 | |||||||||||||||
| 505,909 | 16/6/2026 | |||||||||||||||
| 403,512 | 19/6/2026 | |||||||||||||||
| 357,669 | 22/6/2026 | |||||||||||||||
| 239,827 | 24/6/2026 | |||||||||||||||
| 214,840 | 29/6/2026 | |||||||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – MA Loan 2 | (3) | Repay upon maturity | 2.5% per annum over 1-day HIBOR | Limit up to US$2,296,211 in aggregate for MA Loan 2 & Post Shipment Buyer Loan | 68,886 | Limit up to US$382,702 in aggregate for MA Loan 2 & Post Shipment Buyer Loan | 20/4/2026 | |||||||||
| 65,059 | 13/5/2026 | |||||||||||||||
| 255,135 | 18/5/2026 | |||||||||||||||
| 219,416 | 26/5/2026 | |||||||||||||||
| 88,021 | 28/5/2026 | |||||||||||||||
59
| Repayment terms(4) | Interest rate % | Available | As of March 31, 2026 Utilized | Unutilized | Maturity Date (dd/mm/yyyy) | |||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Post Shipment Buyer Loan | (3) | Repay upon maturity | 2.5% per annum over 1-day HIBOR | Limit up to US$2,296,211 in aggregate for MA Loan 2 & Post Shipment Buyer Loan | 98,227 | Limit up to US$382,702 in aggregate for MA Loan 2 & Post Shipment Buyer Loan | 20/4/2026 | |||||||||
| 276,821 | 7/5/2026 | |||||||||||||||
| 320,194 | 14/5/2026 | |||||||||||||||
| 197,729 | 22/5/2026 | |||||||||||||||
| 324,021 | 20/8/2026 | |||||||||||||||
| The Hongkong and Shanghai Banking Corporation Limited –Universal Life Insurance (ULI) Loan (I) | (9) | Repay upon maturity | 1% per annum over HIBOR | Limit up to US$642,670 in aggregate for Funds from Factoring | 489,654 | — | 28/2/2030 | |||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Universal Life Insurance (ULI) Loan (II) | (9) | Repay upon maturity | 1% per annum over HIBOR | Limit up to US$203,973 in aggregate for Funds from Factoring | 155,408 | — | 28/3/2030 | |||||||||
| Riverchain One Limited | (8) | Repay upon maturity | 12% | — | 892,971 | — | 10/4/2026 | |||||||||
| Total | 11,982,316 | 1,467,992 | ||||||||||||||
| Repayment terms(4) | Interest rate % | Available | As of March 31, 2025 Utilized | Unutilized | Maturity Date (dd/mm/yyyy) | |||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Guarantee Loan 1 | (1) | Monthly repay | HSBC Prime Lending Rate (“BLR”) minus 2.25% | — | 138,622 | — | 13/4/2031 | |||||||||
| (5) | — | 111 | — | 23/4/2025 | ||||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Guarantee Loan 2 | (1) | Monthly repay | HSBC Prime Lending Rate (“BLR”) minus 2.25% | — | 94,186 | — | 23/10/2031 | |||||||||
| (6) | — | 234 | — | 12/5/2025 | ||||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Guarantee Loan 3 | (1) | Monthly repay | HSBC Prime Lending Rate (“BLR”) minus 2.25% | — | 107,128 | — | 2/4/2032 | |||||||||
| (6) | — | 361 | — | 13/5/2025 | ||||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Guarantee Loan 4 | (1) | Monthly repay | HSBC Prime Lending Rate (“BLR”) minus 2.25% | — | 351,120 | — | 14/6/2033 | |||||||||
| (7) | — | 643 | — | 14/5/2025 | ||||||||||||
60
| Repayment terms(4) | Interest rate % | Available | As of March 31, 2025 Utilized | Unutilized | Maturity Date (dd/mm/yyyy) | |||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Post-Shipment Buyer Loans | (3) | Repay upon maturity | 2.5% per annum over 1-month HIBOR | Limit up to US$5,141,388 in aggregate for Post-Shipment Buyer Loans and MA Loan 1 | 300,771 | Limit up to US$2,574 in aggregate for Post-Shipment Buyer Loans and MA Loan 1 | 2/5/2025 | |||||||||
| 167,095 | 6/5/2025 | |||||||||||||||
| 268,638 | 6/5/2025 | |||||||||||||||
| 89,974 | 30/5/2025 | |||||||||||||||
| 98,972 | 6/6/2025 | |||||||||||||||
| 77,121 | 8/6/2025 | |||||||||||||||
| 366,324 | 8/6/2025 | |||||||||||||||
| 307,198 | 9/6/2025 | |||||||||||||||
| 192,802 | 7/7/2025 | |||||||||||||||
| 186,375 | 11/7/2025 | |||||||||||||||
| 246,787 | 21/7/2025 | |||||||||||||||
| 547,558 | 24/7/2025 | |||||||||||||||
| 268,638 | 25/7/2025 | |||||||||||||||
| 190,231 | 28/7/2025 | |||||||||||||||
| 21,594 | 11/8/2025 | |||||||||||||||
| 293,058 | 15/8/2025 | |||||||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Advance to Manufacturer (“MA”) Loan 1 | (3) | Repay upon maturity | 2.5% per annum over 1-month HIBOR | Limit up to US$5,141,388 in aggregate for Post-Shipment Buyer Loans and MA Loan 1 | 257,069 | Limit up to US$2,574 in aggregate for Post-Shipment Buyer Loans and MA Loan 1 | 23/4/2025 | |||||||||
| 231,362 | 24/4/2025 | |||||||||||||||
| 186,375 | 28/4/2025 | |||||||||||||||
| 52,699 | 29/5/2025 | |||||||||||||||
| 231,363 | 29/5/2025 | |||||||||||||||
| 179,949 | 23/6/2025 | |||||||||||||||
| 379,178 | 26/6/2025 | |||||||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Funds from Factoring | (3) | Repay upon maturity | 2% per annum over 1–month HIBOR | Limit up to US$2,570,694 in aggregate for Funds from Factoring | 106,535 | — | 27/5/2025 | |||||||||
| 21,765 | 9/6/2025 | |||||||||||||||
| 293,121 | 15/6/2025 | |||||||||||||||
| 200,246 | 12/5/2025 | |||||||||||||||
| 274,522 | 15/5/2025 | |||||||||||||||
| 242,931 | 18/5/2025 | |||||||||||||||
| 247,943 | 21/5/2025 | |||||||||||||||
| 547,401 | 22/5/2025 | |||||||||||||||
| 267,738 | 25/5/2025 | |||||||||||||||
| 56,694 | 27/5/2025 | |||||||||||||||
| 303,480 | 7/5/2025 | |||||||||||||||
| 8,318 | 6/5/2025 | |||||||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – MA Loan 2 | (3) | Repay upon maturity | 2.5% per annum over 1-day HIBOR | Limit up to US$2,313,625 in aggregate for MA Loan 2 & Post Shipment Buyer Loan | 435,733 | Limit up to US$1,287 in aggregate for MA Loan 2 & Post Shipment Buyer Loan | 23/6/2025 | |||||||||
| 334,190 | 24/6/2025 | |||||||||||||||
| 321,337 | 25/6/2025 | |||||||||||||||
| 194,087 | 30/6/2025 | |||||||||||||||
61
| Repayment terms(4) | Interest rate % | Available | As of March 31, 2025 Utilized | Unutilized | Maturity Date (dd/mm/yyyy) | |||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Post Shipment Buyer Loan | (3) | Repay upon maturity | 2.5% per annum over 1-day HIBOR | Limit up to US$2,313,625 in aggregate for MA Loan 2 & Post Shipment Buyer Loan | 132,391 | Limit up to US$1,287 in aggregate for MA Loan 2 & Post Shipment Buyer Loan | 26/6/2025 | |||||||||
| 95,116 | 7/7/2025 | |||||||||||||||
| 111,825 | 7/7/2025 | |||||||||||||||
| 366,324 | 14/7/2025 | |||||||||||||||
| 244,216 | 18/7/2025 | |||||||||||||||
| 78,406 | 21/7/2025 | |||||||||||||||
| The Hongkong and Shanghai Banking Corporation Limited –Universal Life Insurance (ULI) Loan (I) | (9) | Repay upon maturity | 1% per annum over HIBOR | Limit up to US$647,544 in aggregate for Funds from Factoring | 616,709 | 28/2/2030 | ||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Universal Life Insurance (ULI) Loan (II) | (9) | Repay upon maturity | 1% per annum over HIBOR | Limit up to US$205,520 in aggregate for Funds from Factoring | 195,733 | 28/3/2030 | ||||||||||
| AR Horizon Limited | (8) | Repay upon maturity | 12% | — | 514,138 | — | 8/4/2025 | |||||||||
| Total | 10,891,674 | 12,044,435 | 257 | |||||||||||||
62
Components and details of available and utilized bank borrowings as of March 31, 2024 are as follows:
| Repayment terms(4) | Interest rate % | Available | As of March 31, 2024 Utilized | Unutilized | Maturity Date (dd/mm/yyyy) | |||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Guarantee Loan 1 | (1),(5) | Monthly repay | HSBC Prime Lending Rate (“BLR”) minus 2.25% | — | 143,422 | — | 13/4/2031 | |||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Guarantee Loan 2 | (1),(6) | Monthly repay | HSBC Prime Lending Rate (“BLR”) minus 2.25% | — | 96,007 | — | 23/10/2031 | |||||||||
| Hang Seng Bank – Term Loan | (2) | Monthly repay | 2% per annum over 3 – month HIBOR | — | 269,805 | — | 28/03/2028 | |||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Guarantee Loan 3 | (1),(6) | Monthly repay | HSBC Prime Lending Rate (“BLR”) minus 2.25% | — | 110,141 | — | 2/4/2032 | |||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Guarantee Loan 4 | (1),(7) | Monthly repay | HSBC Prime Lending Rate (“BLR”) minus 2.25% | — | 359,054 | — | 14/6/2033 | |||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Post-Shipment Buyer Loans | (3) | Repay upon maturity | 2.5% per annum over HIBOR | Limit up to US$5,111,821 in aggregate for Post-Shipment Buyer Loans and MA Loan 1 | 190,415 | Limit up to US$16,550 in aggregate for Post-Shipment Buyer Loans and MA Loan 1 | 15/4/2024 | |||||||||
| 16,677 | 15/4/2024 | |||||||||||||||
| 191,693 | 20/4/2024 | |||||||||||||||
| 214,696 | 13/5/2024 | |||||||||||||||
| 230,032 | 13/5/2024 | |||||||||||||||
| 200,639 | 19/5/2024 | |||||||||||||||
| 217,252 | 19/5/2024 | |||||||||||||||
| 178,914 | 27/5/2024 | |||||||||||||||
| 204,473 | 28/5/2024 | |||||||||||||||
| 284,984 | 24/6/2024 | |||||||||||||||
| 178,914 | 5/8/2024 | |||||||||||||||
| 191,693 | 5/8/2024 | |||||||||||||||
| 166,134 | 5/8/2024 | |||||||||||||||
| 287,540 | 12/8/2024 | |||||||||||||||
| 146,965 | 19/8/2024 | |||||||||||||||
| 191,693 | 19/8/2024 | |||||||||||||||
| 146,965 | 22/8/2024 | |||||||||||||||
| 157,189 | 23/8/2024 | |||||||||||||||
| 213,419 | 23/8/2024 | |||||||||||||||
63
| Repayment terms(4) | Interest rate % | Available | As of March 31, 2024 Utilized | Unutilized | Maturity Date (dd/mm/yyyy) | |||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Advance to Manufacturer (“MA”) Loan 1 | (3) | Repay upon maturity | 2.5% per annum over HIBOR | Limit up to US$5,111,821 in aggregate for Post-Shipment Buyer Loans and MA Loan 1 | 207,029 | Limit up to US$16,550 in aggregate for Post-Shipment Buyer Loans and MA Loan 1 | 16/4/2024 | |||||||||
| 198,083 | 6/5/2024 | |||||||||||||||
| 255,591 | 6/5/2024 | |||||||||||||||
| 72,844 | 8/5/2024 | |||||||||||||||
| 191,693 | 28/5/2024 | |||||||||||||||
| 191,693 | 5/6/2024 | |||||||||||||||
| 138,019 | 11/6/2024 | |||||||||||||||
| 230,032 | 26/6/2024 | |||||||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Funds from Factoring | (3) | Repay upon maturity | 2% per annum over 1 – month HIBOR | Limit up to US$2,555,910 in aggregate for Funds from Factoring | 182,286 | Limit up to US$1,861 in aggregate for Funds from Factoring | 2/5/2024 | |||||||||
| 73,548 | 7/5/2024 | |||||||||||||||
| 1,291 | 29/5/2024 | |||||||||||||||
| 22,285 | 18/6/2024 | |||||||||||||||
| 475 | 19/6/2024 | |||||||||||||||
| 157,758 | 20/6/2024 | |||||||||||||||
| 31,596 | 26/6/2024 | |||||||||||||||
| 214,383 | 22/3/2024 | |||||||||||||||
| 12,381 | 30/3/2024 | |||||||||||||||
| 358,385 | 9/4/2024 | |||||||||||||||
| 33,448 | 14/4/2024 | |||||||||||||||
| 142,847 | 15/4/2024 | |||||||||||||||
| 202,438 | 25/4/2024 | |||||||||||||||
| 15,517 | 26/4/2024 | |||||||||||||||
| 12,340 | 30/4/2024 | |||||||||||||||
| 439,955 | 2/5/2024 | |||||||||||||||
| 11,918 | 29/5/2024 | |||||||||||||||
| 256,676 | 9/6/2024 | |||||||||||||||
| 710 | 17/6/2024 | |||||||||||||||
| 170,160 | 18/6/2024 | |||||||||||||||
| 213,652 | 25/6/2024 | |||||||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – MA Loan 2 | (3) | Repay upon maturity | 2.5% per annum over HIBOR | Limit up to US$2,300,320 in aggregate for MA Loan 2 & Post-Shipment Buyer Loan | 255,591 | — | 24/4/2024 | |||||||||
| 255,591 | 24/4/2024 | |||||||||||||||
| 255,591 | 25/4/2024 | |||||||||||||||
| 319,489 | 25/4/2024 | |||||||||||||||
| 191,694 | 7/5/2024 | |||||||||||||||
64
| Repayment terms(4) | Interest rate % | Available | As of March 31, 2024 Utilized | Unutilized | Maturity Date (dd/mm/yyyy) | |||||||||||
| The Hongkong and Shanghai Banking Corporation Limited – Post-Shipment Buyer Loan | (3) | Repay upon maturity | 2.5% per annum over HIBOR | Limit up to US$2,300,320 in aggregate for MA Loan 2 & Post-Shipment Buyer Loan | 383,387 | — | 28/4/2024 | |||||||||
| 332,268 | 29/4/2024 | |||||||||||||||
| 306,709 | 29/4/2024 | |||||||||||||||
| Total | 9,968,051 | 10,928,069 | 18,411 | |||||||||||||
| (1) | The loan is secured by The Hong Kong Mortgage Corporation Limited. There is no material covenant stated in this borrowing. |
| (2) | The loans are secured by the personal guarantees from Mr. Ngo Chiu Lam and Mr. Wong Chak Lam. There is no material covenant stated in this borrowing. Loans are redrawn once the repayment is made in accordance with the maturity dates, subject to the aggregate amount outstanding of such facilities shall at no time exceed the stated combined limit and sub-limits. |
| (3) | The loans contain a repayment on demand clause. |
| (4) | The loan tenor and the guarantee period of the loan was extended under the Partial Principal Repayment Arrangement with effective from June 13,2024. |
| (5) | The loan tenor and the guarantee period of the loan was extended under the Partial Principal Repayment Arrangement with effective from May 23,2024. |
| (6) | The loan tenor and the guarantee period of the loan was extended under the Partial Principal Repayment Arrangement with effective from June 2,2024. |
| (7) | The loan tenor and the guarantee period of the loan was extended under the Partial Principal Repayment Arrangement with effective from June 14,2024. |
| (8) | The loan is secured by the assignment of receivables of a project. There is no material covenant stated in this borrowing. |
| (9) | The loans are secured by the life insurance policy from Mr. Ngo Chiu Lam and Mrs. Po Lok Sze. The loan contains a repayment on demand clause. |
As of March 31, 2026, we had outstanding bank and other borrowings of US$11,982,316. As of March 31, 2026, US$42,077,767 was repaid according to our monthly repayment schedule and upon loan maturity. The funds for these repayments were sourced mainly from cash flows generated from our operations. After the repayments, we re-drew from our banking facilities of Post-Shipment buyer loans, MA loans and Factoring, resulting in an outstanding balance of US$11,982,316 as of March 31, 2026.
65
As of March 31, 2026, we have cash requirements for bank and other borrowings, leases, long-serviced payment obligations, convertible notes, and other liabilities. For lease-related information, see Note 8 of our consolidated financial statements included elsewhere in this prospectus. For bank and other borrowings-related information, see Note 11 of our consolidated financial statements.
As of March 31, 2026, we have the following obligations:
| ● | Short-term: Other liabilities of US$22,510,682 are comprised of various payables, including accounts payable, amounts due to related parties and accrued expenses payables expected to be settled based on contractual terms. |
| ● | Long-term: Long-serviced payment obligations of US$11,055 are expected to be paid out based on individual plan participants, although cash outflows cannot be estimated reliably. Additionally, operating lease liabilities of US$52,411 are expected to be paid out based on lease terms. Furthermore, convertible notes obligations of US$19,567,461 are expected to be paid out or converted into shares on the maturity of the senior unsecured convertible note. |
Cash Flows
The following table sets forth a summary of our cash flows information for the years indicated:
| 2026 | 2025 | |||||||
| US$ | US$ | |||||||
| Cash (used in) provided by | ||||||||
| Operating activities | (2,845,066 | ) | (3,005,991 | ) | ||||
| Investing activities | (23,202,472 | ) | (1,612,158 | ) | ||||
| Financing activities | 76,076,480 | 5,011,152 | ||||||
| Effect of exchange rate changes | 77,233 | 2,027 | ||||||
| Net change in cash and cash equivalents | 50,106,175 | 395,030 | ||||||
| Cash, cash equivalents and restricted cash at the beginning of the year | 718,625 | 323,595 | ||||||
| Cash, cash equivalents and restricted cash at the end of the year | 50,824,800 | 718,625 | ||||||
66
Operating Activities
Our operating cash inflows are primarily derived from our revenue from public civil engineering works such as road and drainage works, in Hong Kong, whereas our operating cash outflows mainly include subcontracting costs, direct labor costs, the purchase of materials, as well as other working capital needs.
Cash used in operating activities amounted to US$2,845,066 for the year ended March 31, 2026, mainly derived from (i) net income of US$9,063,802 for the year ended March 31, 2026; (ii) the increase in accounts receivable, net by US$5,728,964; (iii) the decrease in contract assets, net by US$3,410,033; (iv) an increase in accounts payable by US$151,471; (v) a decrease in contract liabilities by US$1,559,309; (vi) an increase in accrued expenses and other current liabilities by US$1,199,961 and (vii) change in fair value of investments by US$23,437,041.
Cash used in operating activities amounted to US$3,005,991 for the year ended March 31, 2025, mainly derived from (i) net income of US$727,447 for the year ended March 31, 2025; (ii) the increase in accounts receivable, net by US$2,220,351; (iii) the decrease in contract assets by US$485,554; (iv) a decrease in accounts payable by US$245,877; (v) an increase in contract liabilities by US$1,170,396; and (vi) an increase in accrued expenses and other current liabilities by US$311,462.
Investing Activities
Cash used in investing activities amounted to US$23,202,472 for the year ended March 31, 2026, mainly derived from purchase of other investments of US$23,000,000, and purchase of property, plant and equipment of US$205,878.
Cash used in investing activities amounted to US$1,612,158 for the year ended March 31, 2025, mainly derived from deposits paid for acquisition of plant and equipment of US$1,781,573, and proceeds from the redemption of the life insurance policy of US$159,251.
Financing Activities
Cash provided by financing activities amounted to US$76,067,480 for the year ended March 31, 2026, which was mainly attributable to (i) proceeds from new bank and other borrowings of US$42,106,410; (ii) the repayment of bank and other borrowings of US$42,077,767; (iii) proceeds from issuance of Series B preferred shares of US$32,190,000 (iv) proceeds from issuance of Class A ordinary shares through private placement of US$41,660,000; (v) proceed from issuance of convertible notes of $19,575,000; (vi) issuance cost paid pursuant to issuance of Class A ordinary shares of US$4,832,800; (vii) payment pursuant to Class A shares retirement of US$7,000,000; (viii) issuance cost paid pursuant to issuance of Series B preferred shares of US$3,456,350, and (ix) issuance cost paid pursuant to issuance of convertible notes of US$2,235,150.
Cash provided by financing activities amounted to US$5,011,152 for the year ended March 31, 2025, which was mainly attributable to (i) proceeds from new bank borrowings of US$42,102,242; (ii) the repayment of bank borrowings of US$41,641,140; (iii) repayments of lease liabilities of US$141,913; and (iv) net proceeds from Listing of US$4,807,322.
Off-Balance Sheet Arrangements
For the periods presented, we did not have, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or for some other contractually narrow or limited purpose.
Commitments and Contingencies
In the normal course of business, we are subject to contingencies, such as legal proceedings and claims arising out of its business, which cover a wide range of matters. Liabilities for contingencies are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. If the assessment of a contingency indicates that it is probable that a material loss is incurred and the amount of the liability can be estimated, then the estimated liability is accrued in our financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed.
67
The following table summarizes our contractual obligations as of March 31, 2026:
| Payments due by period | ||||||||||||||||||||
| Contractual obligations | Total | Less than 1 year | 1 – 2 years | 3 – 5 years | More than 5 years | |||||||||||||||
| US$ | US$ | US$ | US$ | US$ | ||||||||||||||||
| Bank and Other Borrowings(1) | 11,982,316 | 10,846,499 | 251,168 | 648,174 | 236,475 | |||||||||||||||
| Operating lease payments(2) | 128,682 | 85,979 | 42,703 | - | - | |||||||||||||||
| Convertible Notes(3) | 19,567,461 | - | - | 19,567,461 | - | |||||||||||||||
| 31,678,459 | 10,932,478 | 293,871 | 20,215,635 | 236,475 | ||||||||||||||||
The following table summarizes our contractual obligations as of March 31, 2025:
| Payments due by period | ||||||||||||||||||||
| Contractual obligations | Total | Less than 1 year | 1 – 2 years | 3 – 5 years | More than 5 years | |||||||||||||||
| US$ | US$ | US$ | US$ | US$ | ||||||||||||||||
| Bank and Other Borrowings(4) | 12,044,435 | 10,777,850 | 252,934 | 775,644 | 238,007 | |||||||||||||||
| Finance lease liabilities(5) | 56,795 | 56,795 | - | - | - | |||||||||||||||
| Operating lease payments(6) | 142,072 | 115,372 | 26,700 | - | - | |||||||||||||||
| 12,243,302 | 10,950,017 | 279,634 | 775,644 | 238,007 | ||||||||||||||||
| (1) | As of March 31, 2026, our contractual obligation to repay outstanding bank and other borrowings totaled US$11,982,316. |
| (2) | We leased our offices which are classified as operating lease in accordance with Topic 842. As of March 31, 2026, our future lease payments totaled US$128,682. |
| (3) | As of March 31, 2026, the Company has outstanding convertible notes with an aggregate principal amount of US$19,567,461 convertible notes in the consolidated financial statements. These notes bear interest at 6% per annum and mature on March 25,2029 and March 31,2029 respectively.
|
| (4) | As of March 31, 2025, our contractual obligation to repay outstanding bank and other borrowings totaled US$12,044,435. |
| (5) | As of March 31, 2025, our contractual obligation to repay outstanding finance leases totaled US$56,795 |
| (6) | We leased our offices which are classified as operating lease in accordance with Topic 842. As of March 31, 2025, our future lease payments totaled US$142,072. |
Capital Expenditures
For the year ended March 31, 2026, we have purchased property, plant and equipment amounting to US$205,878. As of the date of this prospectus, we did not purchase any material equipment for operational use. We do not have any other material commitments to capital expenditures as of the date of this prospectus.
Trend Information
Other than as disclosed in “Risk Factors” in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition for the years ended March 31, 2026, 2025 and 2024.
68
Seasonality
The nature of our business is not affected by seasonal variations.
Quantitative and Qualitative Disclosure about Market Risk
Concentration Risk
Financial instruments that potentially subject the Company to the concentration of credit risks consist of cash and cash equivalents, accounts receivable, and contract assets. The maximum exposures of such assets to credit risk are their carrying amounts as of the balance sheet dates. The Company deposits its cash and cash equivalents with financial institutions located in Hong Kong. As of March 31, 2026 and 2025, US$4,627,050, and US$718,625 were deposited with financial institutions located in Hong Kong. The Deposit Protection Scheme introduced by the Hong Kong Government insured each depositor at one bank for a maximum amount of US$102,054 (HK$800,000). Otherwise, these balances are not covered by insurance. The Company believes that no significant credit risk exists as these financial institutions have high credit quality and the Company has not incurred any losses related to such deposits.
For the year ended March 31, 2026, 100% of the Company’s total revenue contributed within Hong Kong, and 64%, 34% and 2% of the Company’s total assets contributed within Hong Kong, Kazakhstan and United States, respectively; for the years ended March 31, 2025 and 2024, revenue and assets within Hong Kong contributed 100% of the Company’s total revenue. The Company has a concentration of its revenue and accounts receivable with specific customers.
During the fiscal year ended March 31, 2026, (i) there were three customers that generated income which accounted for over 10% of the total revenue generated for that year, and (ii) there were four subcontractors that accounted for over 10% of the total purchases for that year.
During the fiscal year ended March 31, 2025, (i) there were five customers that generated income which accounted for over 10% of the total revenue generated for that year, and (ii) there were two subcontractors that accounted for over 10% of the total purchases for that year.
During the fiscal year ended March 31, 2024, (i) there were four customers that generated income which accounted for over 10% of the total revenue generated for that year, and (ii) there was one subcontractor that accounted for over 10% of the total purchases for that year.
As of March 31, 2026, (i) there were three customers which accounted for over 10% of the consolidated accounts receivable; and (ii) there were two suppliers which accounted for over 10% of the total consolidated accounts payable.
As of March 31, 2025, (i) there were five customers which accounted for over 10% of the consolidated accounts receivable; and (ii) there were two suppliers which accounted for over 10% of the total consolidated accounts payable.
Credit Risk
For the credit risk related to accounts receivable, our Group performs periodic credit evaluations of our customers’ financial condition and generally does not require collateral. Our Group establishes an allowance for credit losses based upon estimates, factors surrounding the credit risk of specific customers, and other information. The allowance amounts were immaterial for all periods presented. Our management believes that its contract acceptance, billing, and collection policies are adequate to minimize material credit risk. Application for progress payment of contract works is made on a regular basis. Our Company seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by the Directors.
69
Interest Rate Risk
Fluctuations in market interest rates may negatively affect our financial condition and results of operations. We are exposed to floating interest rate risk on cash deposits and floating rate bank and other borrowings. Our Group has not used any derivative financial instruments to manage the interest risk exposure. In respect of the exposure to cash flow interest rate risk arising from floating rate non-derivative instruments held by our Group at the end of the reporting period, the impact on our profit after tax is estimated as an annualized impact on interest expense or income of such a change in interest rates.
Equity Price Risk
The fair value of our outstanding Convertible Notes is subject to market risk and other factors due to the convertible feature. The fair value of the Convertible Notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines in value. The fair value of Convertible Notes is presented for disclosure purposes only. Accordingly, increases or decreases in the fair value of the Convertible Notes may result in corresponding losses or gains in our consolidated statements of operations and comprehensive income and may cause volatility in our reported results of operations.
Liquidity Risk
Liquidity risk is the risk that our Company will encounter difficulty in meeting the obligations associated with our financial liabilities that are settled by delivering cash or another financial asset. We will make the maximum effort to maintain sufficient liquidity to meet our liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to our reputation.
Typically, we have sufficient cash on demand to meet expected operational expenses for a period of 90 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
Labor Price Risk
Our business requires a substantial number of personnel. Any failure to retain stable and dedicated labor by us may lead to disruption to our business operations. Although we have not experienced any labor shortage to date, we have observed an overall tightening and increasingly competitive labor market. We have experienced, and expect to continue to experience, increases in labor costs due to increases in salary, social benefits, and employee headcount. We compete with other companies in our industry and other labor-intensive industries for labor, and we may not be able to offer competitive remuneration and benefits compared to them. If we are unable to manage and control our labor costs, our business, financial condition, and results of operations may be materially and adversely affected.
Inflation Risk
Our Company monitors changes in price levels. Historically inflation has not materially affected our business or the results of our operations. However, significant increases in the price of raw materials and labor that cannot be passed to our customers could adversely impact our results of operations.
Currency Risk
Our Group’s operating activities are transacted in HK$. Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities. Our Group considers the foreign exchange risk in relation to transactions denominated in HK$ with respect to USD is not significant as HK$ is pegged to US$.
70
5.C. Research and Development, Patent and Licenses, etc.
We did not conduct any research and development activities for the fiscal year ended March 31, 2026, 2025 and 2024.
Trademark
As of the date of this report, we have not registered any trademarks.
Internet Domain Name
As of the date of this report, we have registered our domain name and website. You can find our website at http://kinchiu.com/.
Due to our limited exposure to intellectual property risk in our business, we have not implemented any measures to protect our intellectual property. Since our inception, there have not, to our knowledge, been any infringements of intellectual property rights owned by the Company, including but not limited to any claims and threatened claims or proceedings initiated by us; and we have not been subject to any third party claims relating to intellectual property made against us.
Licenses
As of the date of this report, Kin Chiu Engineering Limited is (i) an Approved Contractor under the category of Roads and Drainage (Group B (Probation)) of the Approved Contractors List maintained by the Development Bureau of Hong Kong; and (ii) a Registered Subcontractor under foundation and piling (sheet piles), general civil works (roadworks, road drainage and sewer and waterworks), other finishing trades and components (signage and graphics) and hoarding of the Registered Specialist Trade Contractors Scheme of the Construction Industry Council of Hong Kong. We have obtained all licenses required for carrying on our business activities as at the date of this report.
5.D. Trend Information
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the years ended March 31, 2026, 2025 and 2024 that are reasonably likely to have a material effect on our total net revenues, income, profitability, liquidity or capital reserves, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
71
5.E. Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our combined financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the combined financial statements and accompanying notes. The Company bases its estimates on historical experience, current business factors, and various other assumptions that the Company believes are necessary to consider to form a basis for making judgments about the carrying values of assets and liabilities, the recorded amounts of revenue and expenses, and the disclosure of contingent assets and liabilities. The Company is subject to uncertainties such as the impact of future events, economic and political factors, and changes in the Company’s business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in the preparation of the Company’s financial statements will change as new events occur, as more experience is acquired, as additional information is obtained, and as the Company’s operating environment evolves.
We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. See Note 2 to our financial statements appearing at this report for a description of our other significant accounting policies.
Item 6. Directors, Senior Management and Employees
6.A. Directors and Senior Management
The following table sets forth information regarding our Directors and Executive Officers as at the date of this report:
| Name | Age | Position | ||
| Paul E. Mann | 50 | Executive Chairman, Director | ||
| Ngo Chiu Lam | 48 | Chief Executive Officer | ||
| Sze Man Chan | 45 | Chief Financial Officer | ||
| Chun Kit Yu | 36 | Independent Director | ||
| Vuk Jeremic | 51 | Independent Director | ||
| John M. Melkon | 58 | Independent Director |
The business and working experience and areas of responsibility of our Directors and Executive Officers are set out below:
Paul E. Mann is the Executive Chairman and a director of the Company. Mr. Mann co-founded ASP Isotopes Inc. in September 2021 and has served as the Chairman and Chief Executive Officer and a member of its board of directors of ASP Isotopes Inc. since incorporation. Paul also served as the Chief Financial Officer of ASP Isotopes Inc. until September 2022. Prior to ASPI, Paul was Chief Financial Officer of PolarityTE, Inc., a biotechnology company, from June 2018 until April 2020. Prior to that, he was responsible for Healthcare investments at DSAM Partners LLC, a global hedge fund. Earlier in his career, he was a portfolio manager at Highbridge Capital where he managed investments in healthcare and biotechnology. Prior to Highbridge Capital, from August 2013 to March 2016, he worked at Soros Fund Management where he was responsible for billions of dollars of investments in healthcare and chemicals companies. During his career as a healthcare and chemicals investor, Paul has helped create and fund numerous early stage and start-up companies. Prior to moving to the buy-side, Paul spent 11 years as a sell-side analyst at Morgan Stanley and Deutsche Bank. He co-managed the healthcare research team at Morgan Stanley, one of the top ranked teams in Institutional Investor, Greenwich and Reuters. He was also corporate broker to over half the UK Pharmaceutical Companies. Paul started his career as a research scientist at Procter and Gamble and he is named as the inventor of numerous skin creams in the Oil of Olay range of cosmetics. Between 2000 and 2023 he was a nonexecutive, independent director at Abeona Therapeutics (NASDAQ: ABEO), where he was the chair of the audit committee, and he is currently a director at Healthtech Solution Inc. (OTC: HLTT), where he is chairman of the board and serves on the audit committee. He was the co-founder and Chairman of Varian Biopharma, a private biotechnology company focused on precision oncology until its sale in 2023. Paul has an MA (Cantab) and an MEng from Cambridge University, UK where he studied Natural Sciences and Chemical Engineering and he is a CFA charter holder.
Ngo Chiu Lam is the Chief Executive Officer of the Company. He is responsible for the general corporate strategy, overall management of our operations and business expansion. Mr. Lam has over 25 years of experience in civil engineering industry. Mr. Lam founded Kin Chiu Engineering Limited in April 2012 and has been its director ever since. Prior to founding Kin Chiu Engineering Limited, Mr. Lam worked at a number of construction companies as foreman.
Sze Man Chan is the interim Chief Financial Officer of the Company. She is a member of the Hong Kong Institute of Certified Public Accountants and has over 22 years of experience in accounting and auditing for public companies and private companies. Ms. Chan currently serves as a non-executive director of Tongda Group Holdings Limited (HKEx: 698), and as an independent non-executive director of Prosperous Future Holdings Limited (HKEx: 1259), Chi Kan Holdings Limited (HKEx: 9913), Weiye Holdings Limited (HKEx: 1570), China Wantian Holdings Limited (HKEx: 1854), and Shanghai XNG Holdings Limited (HKEx: 3666), all of which are listed on the Stock Exchange of Hong Kong Limited. In addition, Ms. Chan is currently an independent director of Green Circle Decarbonize Technology Limited (NYSE: GCDT), a company listed on the New York Stock Exchange. Ms. Chan received a bachelor’s degree in business administration (majoring in Accountancy) from the Hong Kong University of Science and Technology.
72
Chun Kit Yu is an Independent Director of the Company. Mr. Yu has over 10 years of experience in auditing, accounting and financial management. From 2011 to 2016, Mr. Yu worked at various international accounting firms, namely, BDO Limited from October 2011 to October 2013 with his last position as senior associate, KPMG from July 2014 to August 2015 with his last position as assistant manager. From February 2016 to November 2016, he worked at Bowker Asia Limited, which is a subsidiary of Win Hanverky Holdings Limited (HKEx: 3322), a company listed on the Stock Exchange of Hong Kong Limited, with his last position as assistant internal audit manager. Mr. Yu was an assistant manager of a subsidiary of Kingston Financial Group Limited (HKEx: 1031), a company listed on the Stock Exchange of Hong Kong Limited, from December 2016 to December 2017. Since January 2018, Mr. Yu has been the financial controller and company secretary of Boltek Holdings Limited (HKEx: 8601), a company listed on the Stock Exchange of Hong Kong Limited. Since September 2019, Mr. Yu has been the company secretary of Global Uin Intelligence Holdings Limited (HKEx: 8496), a company listed on the Stock Exchange of Hong Kong Limited. Since April 2022 and February 2024, Mr. Yu has been an independent non-executive director of Sinohope Technology Holdings Limited (HKEx: 1611) and WK Group (Holdings) Limited (HKEx: 2535), both companies listed on the Stock Exchange of Hong Kong Limited. Since August 2024, Mr. Yu has been an executive director of Junee Limited (NASDAQ: JUNE), a company listed on the Nasdaq Capital Market.
Mr. Yu obtained a Bachelor of Business Administration (Hons) in Accounting & Finance from the Hong Kong Polytechnic University in October 2011. He was admitted as a member of the Hong Kong Institute of Certified Public Accountants in July 2015.
Vuk Jeremic is an Independent Director of the Company. Mr. Jeremić is the President of the Center for International Relations and Sustainable Development (CIRSD), a global public policy think tank, and the Editor-in-Chief of the quarterly magazine Horizons – Journal of International Relations and Sustainable Development. He is a Professor of Practice in International Governance and Diplomacy at the Sciences Po Paris School of International Affairs. Mr. Jeremić is a Senior Advisor to Eurasia Group, world’s leading geopolitical risk analysis firm, providing insights and advice to top international corporations, financial institutions, and governments worldwide. From 2017 to 2024, Mr. Jeremić served as Senior Advisor to Partners Group, leading global private equity firm based in Switzerland, with USD 147 billion in assets under management. In June 2012, Mr. Jeremić was directly elected by the majority of world’s nations to be the President of the 67th session of the UN General Assembly, in the first contested vote since the end of the Cold War. During his term in office he played a leading role in steering the UN towards the establishment of the Sustainable Development Goals (SDGs). Mr. Jeremić served as Serbia’s Minister of Foreign Affairs from 2007 to 2012. In 2007, he chaired the Council of Europe’s Committee of Ministers. Mr. Jeremić holds a bachelor’s degree in Theoretical and Experimental Physics from Cambridge University and a master’s degree in Public Administration/International Development from Harvard University’s John F. Kennedy School of Government.
John M. Melkon serves as a senior advisor to the United States Military Academy at West Point. From 2012 to 2026, he served as a director and assistant professor at West Point, where he was involved in establishing and leading the Critical Minerals Consortium, and he serves as Co-Chair of the Bilateral Defense Committee between the United States and South Africa. Mr. Melkon previously served as Senior Operations Advisor to United States Army Africa from 2009 to 2012 and as a Strategic Operations Officer for the U.S. Department of Defense from 2006 to 2009. He also previously worked as an International Banking Associate at Credit Suisse First Boston and served as a U.S. Army Special Forces Officer. Mr. Melkon received an A.B. in History from Princeton University, an MBA from the Lowry Mays School of Business and an MPIA with honors from the George Bush School of Government and Public Service at Texas A&M University, and an M.A. in European Politics and a Certificate of Professional Achievement in Enterprise Risk Management from Columbia University. He is currently a Ph.D. candidate at Stellenbosch University and a Professor of Practice at North-West University in South Africa.
Family Relationship
There are no family relationships among our directors and executive officers.
6.B. Compensation
For so long as we qualify as a foreign private issuer, we are not required to comply with the proxy rules applicable to U.S. domestic companies, including the requirement applicable to emerging growth companies to disclose the compensation of our executive officers on an individual, rather than an aggregate, basis. For the fiscal years ended March 31, 2026, 2025 and 2024, we paid an aggregate compensation of HK$3,634,200 (approximately US$465,416, HK$1,716,329, and HK$686,000, respectively, to our executive officers and directors. We have not set aside any amount to provide pension, retirement or other similar benefits to our executive officers and directors. We have also not made any agreements with our directors or executive officers to provide benefits upon termination of employment.
73
6.C. Board Practices
Corporate Governance Practices
Foreign Private Issuer
We qualify as a “foreign private issuer” under the SEC rules and Nasdaq rules. As a foreign private issuer, we will be exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors, and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. Also, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information. However, we will file with the SEC, within 120 days after the end of each fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm, and we will submit to the SEC from time to time, on Form 6-K, reports of information that would likely be material to an investment decision in our Class A Ordinary Shares.
Furthermore, Nasdaq Rule 5615(a)(3) provides that a foreign private issuer, such as us, may rely on our home country corporate governance practices in lieu of certain of the rules in the Nasdaq Rule 5600 Series and Rule 5250(d), except that we must comply with Nasdaq’s Notification of Noncompliance requirement (Rule 5625), the Voting Rights requirement (Rule 5640), and that we have an audit committee that satisfies Rule 5605(c)(3), including having committee members that meet the independence requirements of Rule 5605(c)(2)(A)(ii). The exemptions are subject to our disclosure of which requirements we are not following and the equivalent Cayman Islands requirements. Below are some of the exemptions afforded to foreign private issuers under the Nasdaq rules:
| ● | Exemption from the requirement that we disclose within four business days of any determination to grant a waiver of the code of business conduct and ethics to directors and officers. |
| ● | Exemption from the requirement that our board of directors be composed of independent directors. |
| ● | Exemption from the requirement that our audit committee have a minimum of three members. |
| ● | Exemption from the requirement that we hold annual shareholders’ meetings. |
| ● | Exemption from the requirement that our board of directors have a remuneration committee composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. |
| ● | Exemption from the requirement that director nominees are selected, or recommended for selection by our board of directors, either by (i) independent directors constituting a majority of our board of directors’ independent directors in a vote in which only independent directors participate, or (ii) a committee comprised solely of independent directors and governed by a formal written charter or board resolution, as applicable, addressing the nomination process as adopted. |
We intend to comply with all of the rules generally applicable to U.S. domestic companies listed on the Nasdaq. We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other Nasdaq corporate governance rules. We also intend to comply with Cayman Islands corporate governance requirements under the Companies Act applicable to us at the same time. If we rely on our home country corporate governance practices in lieu of certain of the rules of Nasdaq, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq. We may utilize these exemptions for as long as we continue to qualify as a foreign private issuer.
We have adopted a code of business conduct and ethics, which is applicable to all of our directors, executive officers and employees and is publicly available.
74
Board of Directors
Our board of directors consist of four directors. A director who is, directly or indirectly, interested in a contract or transaction or proposed contract or transaction with our company shall declare the nature of his or her interest at a meeting of our directors. Subject to the Nasdaq Listing Rules and disqualification by the chairman of the relevant board meeting, a director may vote in respect of any contract or transaction or proposed contract or transaction notwithstanding that he or she may be interested therein provided the director discloses to his fellow directors the nature and extent of any material interests in respect of any contract or transaction or proposed contract or transaction and if he or she does so his or her vote shall be counted and he or she may be counted in the quorum at any meeting of our directors at which any such contract or transaction or proposed contract or transaction is considered. Our directors may exercise all the powers of our Company to issue debentures, debenture stock, bonds, and other securities, whether outright or as collateral security for any debt, liability or obligation of our company or of any third party. None of our non-executive directors have a service contract with us that provides for benefits upon termination of service.
We recognize the importance and benefit of having a board of directors composed of highly talented and experienced individuals having regard to the need to foster and promote diversity among board members with respect to attributes such as gender, ethnicity and other factors. In support of this goal, we will consider criteria that promote diversity, including with regard to gender, ethnicity, and other dimensions; and consider the level of representation of women on our board of directors along with other markers of diversity.
Committees of the Board of Directors
A company of which more than 50% of the voting power held by a single entity is considered a “controlled company” under the Nasdaq rules. A controlled company is not required to comply with the Nasdaq corporate governance rules requiring a board of directors to have a majority of independent directors to have independent audit, compensation, and nominating and corporate governance committees. We are a “controlled company” as defined under the Nasdaq rules.
We established three committees under the board of directors: an audit committee, a compensation committee, and a nominating and corporate governance committee. We adopted a charter for each of the three committees. Each committee’s members and functions are described below.
Audit Committee.
Our audit committee consist of Mr. Chun Kit Yu, Mr. Vuk Jeremic and Mr. John M. Melkon. Mr. John M. Melkon is the chairperson of our audit committee. We have determined that each of our audit committee members satisfies the “independence” requirements of Rule 5605(c)(2) of the Nasdaq rules and meets the independence standards under Rule 10A-3 under the Exchange Act. We have determined that Mr. Chun Kit Yu as a person who has the following attributes: understanding of GAAP and financial statements, ability to assess the application of GAAP for accounting estimates, accruals and reserves, experience with financial statements, understanding of internal controls and knowledge of audit committee functions that qualifies as an “audit committee financial expert” within the meaning of the SEC rules and possesses financial sophistication within the meaning of the Nasdaq rules. The audit committee will oversee our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee will be responsible for, among other things:
| ● | appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; |
| ● | reviewing with the independent auditors any audit problems or difficulties and management’s response; |
| ● | discussing the annual audited financial statements with management and the independent auditors; |
| ● | reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; |
| ● | reviewing and approving all proposed related-party transactions; |
| ● | meeting separately and periodically with management and the independent auditors; and |
| ● | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. |
75
Compensation Committee.
Our compensation committee consist of Mr. Chun Kit Yu, Mr. Vuk Jeremic and Mr. John M. Melkon. Mr. John M. Melkon is the chairman of our compensation committee. We have determined that each of our compensation committee members satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq rules. The compensation committee will assist the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee will be responsible for, among other things:
| ● | reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers; |
| ● | reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; |
| ● | reviewing periodically and approving any incentive compensation or equity plans, programs, or similar arrangements; and |
| ● | selecting compensation consultant, legal counsel, or other adviser only after taking into consideration all factors relevant to that person’s independence from management. |
Nominating and Corporate Governance Committee.
Our nominating and corporate governance committee consist of Mr. Chun Kit Yu, Mr. Vuk Jeremic and Mr. John M. Melkon. Mr. John M. Melkon is the chairman of our nominating and corporate governance committee. We have determined that each of our nominating and corporate governance committee members satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq rules. The nominating and corporate governance committee will assist the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee will be responsible for, among other things:
| ● | selecting and recommending to the board nominees for election by the shareholders or appointment by the board; |
| ● | reviewing annually with the board the current composition of the board in regard to characteristics such as independence, knowledge, skills, experience, and diversity; |
| ● | making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and |
| ● | advising the board periodically in regard to significant developments in the law and practice of corporate governance, as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken. |
76
Duties of Directors
Under Cayman Islands law, our directors and officers owe fiduciary duties to our company. These include, among others (i) a duty to act in good faith in what the director or officer believes to be in the best interests of the company as a whole; (ii) a duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose; (iii) a duty not to improperly fetter the exercise of future discretion; (iv) a duty to exercise authority for the purpose for which it is conferred and a duty to exercise powers fairly as between different sections of shareholders; (v) a duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests; and (vi) a duty to exercise independent judgment. In addition to the above, our directors also owe a duty of care which is not fiduciary in nature. This duty has been defined as a requirement to act as a reasonably diligent person having both the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company and the general knowledge skill and experience which that director has.
As set out above, our directors have a duty not to put themselves in a position of conflict and this includes a duty not to engage in self-dealing, or to otherwise benefit as a result of their position at the expense of the Company. However, in some instances what would otherwise be a breach of this duty, this duty can be forgiven and/or authorized in advance by the shareholders provided that there is full disclosure by the directors. This can be done by way of permission granted in the Amended Memorandum and Articles, as amended and/or restated from time to time, or alternatively by shareholder approval at general meetings.
Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs. The functions and powers of our board of directors include, among others:
| ● | convening shareholders’ annual and extraordinary general meetings and reporting its work to shareholders at such meetings; |
| ● | declaring dividends and distributions; |
| ● | appointing officers and determining the term of office of the officers; |
| ● | exercising the borrowing powers of our company and mortgaging the property of our company; and |
| ● | approving the transfer of shares (including Class A Ordinary Shares) in our company, including the registration of such shares in our share register. |
Terms of Directors and Officers
Our directors may be elected by a resolution of our board of directors or by an ordinary resolution of our shareholders. Our directors are not subject to a term of office and hold office until such time as they are removed from office by ordinary resolution of our shareholders, unless the director is appointed on such express terms that he or she shall automatically retire from office (unless he has sooner vacated office) at the next or a subsequent annual general meeting or upon any specified event or after any specified period. A director will cease to be a director automatically if, among other things, the director (i) becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors generally, (ii) dies or is found by our company to be or becomes of unsound mind, (iii) resigns his or her office by notice in writing to our company, or (iv)is removed from office pursuant to our articles of association.
Our officers are selected by and serve at the discretion of our board of directors.
77
Employment Agreements with Executive Officers
We have entered into employment agreements with each of our executive officers. Under these agreements, each of our executive officers is employed for a specific time period. We may terminate employment for cause for certain acts of executive officers, such as commission of any serious or persistent breach or non-observance of the terms and conditions of the employment, conviction of a criminal offense, willful disobedience of a lawful and reasonable order, fraud or dishonesty, receipt of bribery, or severe neglect of his or her duties. We may also terminate an executive officer’s employment without cause upon a three-month advance written notice. An executive officer may resign anytime with a three-month advance written notice.
Each executive officer has agreed to hold, during his or her employment and after the termination or expiry of his or her employment agreement, in strict confidence and not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any of our confidential information or trade secrets, any confidential information or trade secrets of our customers or prospective customers, or the confidential or proprietary information of any third-party received by us and for which we have confidential obligations.
We entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we will agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such person in connection with claims made by reason of their being a director or officer of our company.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past 10 years, been involved in any legal proceedings described in subparagraph (f) of Item 401 of Regulation S-K.
Board diversity
We seek to achieve board diversity through the consideration of a number of factors when selecting the candidates to our Board, including but not limited to gender, skills, age, professional experience, knowledge, cultural, education background, ethnicity and length of service. The ultimate decision of the appointment will be based on merit and the contribution which the selected candidates will bring to our board.
Our directors have a balanced mix of knowledge and skills. We have three independent directors with different industry backgrounds, representing a majority of the members of our board. Our board is well balanced and diversified in alignment with the business development and strategy of the Company.
6.D. Employees
We have 73 employees as of March 31, 2026. The following table sets forth the numbers of our employees categorized by function as of March 31, 2026:
| As of March 31, 2026 | ||||||||
| Functions | Number | % of Total Employees | ||||||
| Management | 3 | 4.1 | % | |||||
| Project supervision | 3 | 4.1 | % | |||||
| Safety supervision | 4 | 5.5 | % | |||||
| Quantity surveyors | 10 | 13.7 | % | |||||
| Finance and administration | 12 | 16.4 | % | |||||
| Site workers | 41 | 56.2 | % | |||||
| Management | 73 | 100.0 | ||||||
We consider that we have maintained a good relationship with our employees and have not experienced any significant disputes with our employees or any disruption to our operations due to any labor disputes. In addition, we have not experienced any difficulties in the recruitment and retention of experienced core staff or skilled personnel.
Our remuneration package includes salary and discretionary bonuses. In general, we determine employees’ salaries based on their qualifications, position and seniority. In order to attract and retain valuable employees, we review the performance of our employees annually which will be taken into account in annual salary review and promotion appraisal. We provide a defined contribution to the Mandatory Provident Fund as required under the Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong) for our eligible employees in Hong Kong.
78
6.E. Share Ownership
The following table sets forth information regarding the beneficial ownership of our Shares as of the date of this report by our officers, Directors and 5% or greater beneficial owners of our Shares. There is no other person or group of affiliated persons known by us to beneficially own more than 5% of our Shares.
Our share capital is divided into Class A Ordinary Share, Class B Ordinary Share, Series A Preferred Shares and Series B Preferred Shares. Holders of Class A Ordinary Share and Class B Ordinary Share are entitled to receive notice of, attend, speak and vote at general meetings of the Company and vote together as a single class on all matters submitted to a vote of our shareholders. Each Class A Ordinary Share entitles its holder to one (1) vote, and each Class B Ordinary Share entitles its holder to twenty (20) votes, on all matters subject to a vote at general meetings of the Company. Series A Preferred Shares and Series B Preferred Shares do not carry voting rights with respect to matters subject to a vote at general meetings of the Company, except with respect to the matters specified in our Amended Memorandum and Articles.
Class A Ordinary Shares may not be converted into Class B Ordinary Shares, Series A preferred shares or Series B Preferred Shares. Class B Ordinary Shares may not be converted into Class A Ordinary Shares, Series A Preferred Shares or Series B Preferred Shares. Series A Preferred Shares may not be converted into Class B Ordinary Shares or Series B Preferred shares, and Series B preferred shares may not be converted into Class B Ordinary Shares or Series A Preferred Shares. Each Series A Preferred Share is convertible, at the option of its holder and without payment of any additional consideration, into a number of fully paid Class A Ordinary Shares determined in accordance with the applicable Series A conversion rate (as further described in the Amended Memorandum and Articles). Each Series B Preferred Share is convertible, at the option of its holder and without payment of any additional consideration, into a number of fully paid and non-assessable Class A Ordinary Shares determined by dividing its stated value by the applicable conversion price, which was initially US$2.40 per share and is subject to adjustment in accordance with our Amended Memorandum and Articles.
We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Unless otherwise indicated, the person identified in this table has sole voting and investment power with respect to all Ordinary Shares shown as beneficially owned by him, subject to applicable community property laws. Please also see “Item 10. Additional Information-B. Memorandum and Articles of Association” for a description of the rights of the holder of our Series A Preferred Shares and Series B Preferred Shares relative to the rights of holders of our Ordinary Shares.
| Class A Ordinary Shares Beneficially Owned(2) | Class B Ordinary Shares Beneficially Owned(3) | Approximate percentage of Voting rights | ||||||||||||||||||
| Name of Beneficial Owners(1) | Number | % | Number | % | % | |||||||||||||||
| Directors and Executive Officers: | ||||||||||||||||||||
| Paul E. Mann(4) | 13,706,056 | 8.6 | — | — | 24.5 | |||||||||||||||
| Ngo Chiu Lam(5) | 318,550 | 2.0 | — | — | — | |||||||||||||||
| Man Sze Chan | — | — | — | — | — | |||||||||||||||
| Chun Kit Yu | — | — | — | — | — | |||||||||||||||
| Vuk Jeremic | — | — | — | — | — | |||||||||||||||
| John M. Melkon | — | — | — | — | — | |||||||||||||||
| All directors and executive officers as a group | 14,024,606 | 8.8 | — | — | 25.1 | |||||||||||||||
| — | ||||||||||||||||||||
| 5% shareholders: | — | |||||||||||||||||||
| Quantum Leap Energy LLC(6) | 4,049,794 | 25.4 | — | — | 7.3 | |||||||||||||||
| Manaslu LLC(7) | 2,156,834 | 13.5 | — | — | 3.9 | |||||||||||||||
| Dablam LLP(8) | — | — | 1,995,000 | 100.0 | 71.4 | |||||||||||||||
| (1) | Except as indicated otherwise below, the business address of our directors and executive officers is Office A, 15/F, Tower A, Capital Tower, No. 38 Wai Yip Street, Kowloon Bay, Hong Kong. |
| (2) | Based on 15,947,094 Class A Ordinary Shares outstanding as of August 10, 2026, plus the Ordinary Shares that a person has the right to acquire within 60 days are deemed outstanding only for purposes of computing that holder’s percentage ownership. |
| (3) | Based on 1,995,000 Class B Ordinary Shares outstanding as of August 10, 2026. |
| (4) | Represents (i) 6,656,262 Class A Ordinary, which are directly held by Mr. Mann, (ii) 3,000,000 Class A Ordinary Shares issued to Mr. Mann as part of his employment agreement and (iii) 4,049,794 Class A Ordinary Shares held by Quantum Leap Energy LLC. |
| (5) | Represents 318,550 Class A Ordinary Shares held by Supreme Development (BVI) Holdings Limited, a British Virgin Island company wholly owned by Mr. Ngo Chiu Lam, our Chief Executive Officer. The registered office of Supreme Development (BVI) Holdings Limited is Aegis Chambers, 1st Floor, Ellen Skelton Building, 3076 Sir Francis Drake’s Highway, Road Town, Tortola Vg1110, British Virgin Islands. |
| (6) | Represents 4,049,794 Class A Ordinary Shares, consisting of (i) 2,449,794 Class A Ordinary Shares, and (ii) 1,600,000 Class A Ordinary Shares issuable upon the exercise of Prefunded Warrants issued a private placement on August 29, 2025. Quantum Leap Energy, LLC is a wholly-owned subsidiary of ASP Isotopes, Inc. (Nasdaq: ASPI). Mr. Paul E. Mann is the Executive Director of ASP Isotypes, Inc., the parent company of Quantum Leap Energy, LLC, and as such, is deemed to have voting and dispositive control over the securities held by Quantum Leap Energy, LLC and deemed to be the beneficial owner of the securities held by Quantum Leap Energy, LLC. The address of Quantum Leap Energy, LLC is 601 Pennsylvania Avenue, NW South Building, Suite 900, Washington DC 20004. |
| (7) | Represents 2,156,834 Class A Ordinary Shares held by Manaslu LLC. |
| (8) | Represents 1,995,000 Class B Ordinary Shares held by Dablam LLP. |
79
Item 7. Major Shareholders and Related Party Transactions
7.A. Major Shareholders
Please refer to “Item 6. Directors, Senior Management and Employees-6.E. Share Ownership.”
7.B. Related Party Transactions
The following is a summary of transactions for and the three years ended March 31, 2026 and up to the date of this report to which we have been a party and in which any members of our Board of Directors, any Executive Officers, or Controlling Shareholders had, has or will have a direct or indirect material interest, other than compensation arrangements which are described under Item 6.B. Compensation.
The following is a list of related parties which the Company has transactions with:
| (a) | Mr. Ngo Chiu Lam, a director of the Company. |
| (b) | Kin Chiu Development Company Limited, controlled by Mr. Ngo Chiu Lam* |
| (c) | KC-CRFG JV, a joint venture |
| (d) | KC-Glory JV, a joint venture |
| (e) | KC-Geotech JV, a joint venture |
| * | During the year ended March 31, 2026, Skyline Builders (BVI) Holding Limited entered into sale and purchase agreement with Mr. Ngo Chiu Lam, the sole shareholder of Kin Chiu Development, to acquired 100% equity interest of Kin Chiu Development at a cash consideration of HK$1. As a result, Kin Chiu Development Company Limited became an indirectly wholly-owned subsidiary and has been fully consolidated from the date control was obtained (Note 17). All intercompany balances and transactions with Kin Chiu Development Company Limited subsequent to the acquisition date have been eliminated in the consolidated financial statements. |
a. Due to related parties
As of March 31, 2026, 2025 and 2024, the balances of due to related parties were as follows:
| 2026 | 2025 | 2024 | ||||||||||||||
| Due to related parties | ||||||||||||||||
| Mr. Ngo Chiu Lam (a) | (1 | ) | $ | 3,546,480 | $ | 617,944 | $ | 203,990 | ||||||||
| KC-CRFG JV (c) | (2 | ) | 86,506 | 184,019 | 91,719 | |||||||||||
| KC-Glory JV (d) | (2 | ) | 317,867 | 320,278 | 318,436 | |||||||||||
| KC-Geotech JV (e) | (2 | ) | 235,993 | 237,783 | 242,870 | |||||||||||
| $ | 4,186,846 | $ | 1,360,024 | $ | 857,015 | |||||||||||
| (1) | The balance represented the advances from the director. The amount was unsecured, interest-free and repayable on demand. |
| (2) | The balances represented amounts due to joint ventures, which are for operation purpose. All amounts were unsecured, interest-free and repayable on demand. |
80
b. Accounts receivable, net
As of March 31, 2026, 2025 and 2024, the balances of accounts receivable, net from joint venture were as follows:
| 2026 | 2025 | 2024 | ||||||||||
| Accounts receivable, net | ||||||||||||
| KC-Glory JV (d) | $ | 1,261,818 | $ | 1,363,517 | $ | 1,493,591 | ||||||
c. Contract assets, net
As of March 31, 2026, 2025 and 2024, the balances of contract assets, net from joint ventures were as follows:
| 2026 | 2025 | 2024 | ||||||||||
| Contract assets, net | ||||||||||||
| KC-CRFG JV (c) | $ | 382,999 | $ | 303,585 | $ | 257,698 | ||||||
| KC-Glory JV (d) | 164,692 | 177,965 | 194,943 | |||||||||
| KC-Geotech JV (e) | 42,324 | 42,600 | 41,480 | |||||||||
| $ | 590,015 | $ | 524,150 | $ | 494,121 | |||||||
d. Contract liabilities
As of March 31, 2026, 2025 and 2024, the balances of contract liabilities from joint ventures were as follows:
| 2026 | 2025 | 2024 | ||||||||||
| Contract liabilities | ||||||||||||
| KC-CRFG JV (c) | $ | — | $ | 359,629 | $ | 536,341 | ||||||
e. Related party transactions
The Company’s related party transactions are measured at the exchange amount which is the amount of consideration established and agreed to by the related parties.
| 2026 | 2025 | 2024 | ||||||||||
| Provision of construction services | ||||||||||||
| KC-CRFG JV (c) | $ | 9,460,005 | $ | 4,695,289 | $ | 6,884,950 | ||||||
| KC-Glory JV (d) | — | — | 338,800 | |||||||||
| KC-Geotech JV (e) | — | 622 | 2,301,097 | |||||||||
| $ | 9,460,005 | $ | 4,695,911 | $ | 9,524,847 | |||||||
| 2026 | 2025 | 2024 | ||||||||||
| Consultancy fee income | ||||||||||||
| KC-CRFG JV (c) | $ | 96,380 | $ | 10 | $ | 35,736 | ||||||
| KC-Geotech JV (e) | — | 44,399 | 63,658 | |||||||||
| $ | 96,380 | $ | 44,409 | $ | 99,394 | |||||||
81
f. Financial guarantee
On February 23, 2023, the Company provided a financial guarantee to Kin Chiu Development Company Limited for an amount of US$1,137,380 in relation to the payment obligations under a bank loan issued to Kin Chiu Development Company Limited. On December 20, 2024, the Company was released from a financial guarantee to Kin Chiu Development Company Limited for US$1,137,380, related to payment obligations under a bank loan issued to Kin Chiu Development Company Limited. This release followed the transfer of the bank loan, with an outstanding balance of US$645,062 and US$812,442 as of March 31, 2026 and 2025, to Kin Chiu, respectively. No amounts were claimed under the guarantee for the years ended March 31, 2026, 2025 and 2024.
g. Assignment of borrowing and transfer of insurance plan
On December 20, 2024, HSBC issued banking facilities as working capital for Kin Chiu’s account in an aggregate amount not to exceed US$848,158 (HK$6,638,838). There was addition of bank borrowing $851,718 transferred to the Company with the respective transfer of life insurance policy.
Two life insurance policies were purchased by Kin Chiu Development Company Limited for Mr. Ngo Chiu Lam (position with a director and CEO of the Company) and Mrs. Po Lok Sze (Mr. Ngo Chiu Lam’s wife). On March 20, 2025, total life insurance policies of US$1,381,153, at cash surrender value, were transferred from Kin Chiu Development Company Limited to the Company.
As of March 31, 2026 and 2025, the outstanding of the loan, Universal Life Insurance (ULI) Loan (I) and Loan (II), is approximately US$645,062 and US$812,442, respectively, as stated in Note 11. There is no material covenant stated in this borrowing. The interest rate for the SME financing guarantee scheme is HIBOR + 1% per annum. The loan is secured by the entire life insurance policy from Mr. Ngo Chiu Lam and Mrs. Po Lok Sze. The loan contains a repayment on demand clause.
Policies and Procedures for Related Party Transactions
Our Board of Directors established an audit committee, which is tasked with review and approval of all related party transactions.
7.C. Interests of Experts and Counsel
Not applicable.
Item 8. Financial Information
8.A. Consolidated Statements and Other Financial Information
The financial statements as required under Item 17. “Financial Statements” are attached hereto and found immediately following the text of this report.
Legal Proceedings and Compliance
We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of our business. The Company is not and has not been a party to any litigation, arbitration or administrative proceedings that we believe would, individually or taken as a whole, have a material adverse effect on our business, financial condition or results of operations, and, insofar as we are aware, no such litigation, arbitration or administrative proceedings are pending, threatened, or contemplated.
82
Dividend Policy
We have no formal dividend policy. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and to repay indebtedness and, therefore, we do not anticipate paying any cash dividends in the foreseeable future. Additionally, our ability to pay dividends on our Class A Ordinary Shares is limited by various factors such as our future financial performance and bank covenants. Any future determination to pay dividends will be at the discretion of our Board of Directors, subject to compliance with covenants in current and future agreements governing our and our subsidiaries’ indebtedness, and will depend on our results of operations, financial condition, capital requirements and other factors that our Board of Directors may deem relevant.
8.A. Significant Changes
We have not experienced any significant changes since the date of our audited consolidated financial statements included in this report.
Item 9. The Offer and Listing
A. Offering and Listing Details
Our Class A Ordinary Shares are currently listed on The Nasdaq Capital Market under the symbol “KAZR.”
B. Plan of Distribution
Not applicable.
C. Markets
Please refer to Item 9.A. “Offer and Listing Details” above.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
83
Item 10. Additional Information
10.A. Share Capital
The share capital of the Company consists of Ordinary Shares, Series A Preferred Shares and Series B Preferred Shares. As of the date hereof, our authorized share capital is US$50,600 divided into (i) 4,000,000,000 Class A Ordinary Shares of par value US$0.00001 each, (ii) 50,000,000 Class B Ordinary Shares of par value US$0.00001 each, (iii) 950,000,000 Series A Preferred Shares of par value US$0.00001 each and (iv) 60,000,000 Series B Preferred Shares of par value US$0.00001 each. As of August 10, 2026, 15,947,094 Class A Ordinary Shares, 1,995,000 Class B Ordinary Shares, 47,326,026 Series A Preferred Shares and 6,442 Series B Preferred Shares were issued and outstanding.
10.B. Memorandum and Articles of Association
We are an exempted company with limited liability incorporated under the laws of the Cayman Islands and our affairs are governed by our amended and restated memorandum and articles of association, as amended from time to time, the Companies Act and the common law of the Cayman Islands.
Objects of our Company. Under our fourth amended and restated memorandum and articles of association, the objects of our Company are unrestricted and we have the full power and authority to carry out any object not prohibited by the laws of the Cayman Islands.
Ordinary Shares. Our authorized share capital is US$50,600 divided into (i) 4,000,000,000 Class A Ordinary Shares of par value US$0.00001 each, (ii) 50,000,000 Class B Ordinary Shares of par value US$0.00001 each, (iii) 950,000,000 Series A Preferred Shares of par value US$0.00001 each, and (iv) 60,000,000 Series B Preferred Shares of par value US$0.0001 each. All of our outstanding shares are fully paid and non-assessable. Certificates representing the shares are issued in registered form.
Conversion. Class A Ordinary Shares cannot be converted into Class B Ordinary Shares, Series A Preferred Shares or Series B Preferred Shares. Class B Ordinary Shares cannot be converted into Class A Ordinary Shares, Series A Preferred Shares or Series B Preferred Shares. Series A Preferred Shares cannot be converted into Class B Ordinary Shares or Series B Preferred Shares. Series B Preferred Shares cannot be converted into Class B Ordinary Shares or Series A Preferred Shares. Each Series A Preferred Share is convertible, at the option of its holder and without payment of any additional consideration, into a number of fully paid Class A Ordinary Shares determined in accordance with the applicable Series A conversion rate (as further described in the Amended Memorandum and Articles). Each Series B Preferred Share is convertible, at the option of its holder and without payment of any additional consideration, into a number of fully paid and non-assessable Class A Ordinary Shares determined by dividing its stated value by the applicable conversion price, which was initially US$2.40 per share and is subject to adjustment in accordance with our Amended Memorandum and Articles.
Dividends. The holders of our Shares are entitled to such dividends as may be declared by our board of directors out of our funds which are lawfully available for that purpose. In addition, our Shareholders may declare dividends by ordinary resolution (which requires a resolution of a general meeting passed by a simple majority of the votes by shareholders who (being entitled to do so) vote in person or by proxy or, in the case of corporations, by their duly authorized representatives, at that meeting (and includes a written resolution signed by the requisite majority in accordance with the Amended Memorandum and Articles)), but no dividend shall exceed the amount recommended by our directors. Under the laws of the Cayman Islands, our Company may pay a dividend out of either profit or the credit standing in our Company’s share premium account, provided that in no circumstances may a dividend be paid if this would result in our Company being unable to pay its debts as they fall due in the ordinary course of business immediately following the date on which the distribution or dividend is paid.
Voting Rights. Holders of Class A Ordinary Shares and Class B Ordinary Shares shall have the right to receive notice of, attend, speak and vote at general meetings. Holders of Class A Ordinary Shares and Class B Ordinary Shares shall, at all times, vote together as one class on all matters submitted to a vote by the members at any general meeting of the Company. Series A Preferred Shares and Series B Preferred Shares shall not be entitled to any votes on any matters subject to the vote at general meetings of the Company, except for matters which are set out in the Amended Memorandum and Articles.
Subject to any rights or restrictions as to voting attached to any shares, on a poll every shareholder present in person or by proxy (or, if a corporation or other non-natural person, by its duly authorized representative or proxy) shall have one vote for each Class A Ordinary Share and 20 votes for each Class B Ordinary Share of which he or the person represented by proxy is the holder. Where the Holders of Series A Preferred Shares and Series B Preferred Shares are entitled to vote (as set out in the Amended Memorandum and Articles), each such holder shall have one vote for each Series A Preferred Share and Series B Preferred Sare of which he or the person represented by proxy is the holder.
Voting at any meeting of shareholders is by a poll. A poll shall be taken in such manner as the chairman of the meeting directs. He may appoint scrutineers (who need not be shareholders) and fix a place and time for declaring the result of the poll. If, through the aid of technology, the meeting is held as a virtual meeting or in more than one place, the chairman may appoint scrutineers virtually and in more than one place; but if he considers that the poll cannot be effectively monitored at that meeting, the chairman shall adjourn the holding of the poll to a date, place and time when that can occur.
84
Any ordinary resolution is a resolution passed by a simple majority of the votes by the shareholders as, being entitled to do so, vote in person or by proxy or, in the case of corporations, by their duly authorized representatives, at a general meeting of our Company and includes a written resolution signed by the required majority of shareholders according to the Amended Memorandum and Articles. Any special resolution is a resolution of a general meeting or a resolution of a meeting of the holders of any class of Shares in a class meeting duly constituted in accordance with the Amended Memorandum and Articles in each case passed by a majority of not less than two-thirds of the votes by the shareholders as being entitled to do so vote in person or by proxy at that meeting. The expression includes a unanimous written resolution signed by all of the shareholders entitled to vote at such meeting.
A special resolution will be required for important matters such as amending our Amended Memorandum and Articles or changing the name of the Company.
There are no limitations on non-residents or foreign shareholders to hold or exercise voting rights on the Ordinary Shares imposed by foreign law or by the Amended Memorandum and Articles or other constituent document of our company. However, no person will be entitled to vote at any general meeting or at any separate meeting of the holders of the Shares unless the person is registered as of the record date for such meeting and unless all calls or other sums presently payable by the person in respect of Shares in the Company have been paid.
General Meetings of Shareholders. As a Cayman Islands exempted company, we are not obliged by the Companies Act to call shareholders’ annual general meetings. Our Amended Memorandum and Articles provide that we may (but are not obliged to, unless required by the Nasdaq Listing Rules), in each year hold a general meeting as an annual general meeting, which, if held, shall be convened by the board of directors, in accordance with the Amended Memorandum and Articles. Each general meeting, other than an annual general meeting, shall be an extraordinary general meeting.
Advance notice of at least five clear days is required for the convening of our annual general shareholders’ meeting (if any) and any other general meeting of our Shareholders. A quorum required for a meeting of shareholders consists of at least one holder of Shares holding not less than an aggregate of one-third of all votes attaching to all Shares in issue and entitled to vote in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative.
A majority of our directors may call general meetings and they shall on a shareholders’ requisition forthwith proceed to convene an extraordinary general meeting of our Company. A shareholders’ requisition is a request of one or more shareholders holding as at the date of deposit of the request in aggregate not less than ten percent of the rights to vote at such general meeting. The requisition must specify the purpose of the meeting, be signed by or on behalf of each requisitioner (and for this purpose each joint holder shall be obliged to sign), and be delivered in accordance with the notice provisions of the Amended Memorandum and Articles. If our directors do not within 21 clear days from the receipt of the requisition duly proceed to convene a general meeting, the requisitioners, or any of them may themselves convene a general meeting, but any meeting so convened must be called no later than three months after the expiration of the said 21 calendar day period.
Winding Up; Liquidation. If we are wound up the shareholders may, subject to the Amended Memorandum and Articles and any other sanction required by the Companies Act, pass a special resolution allowing the liquidator to do either or both of the following:
| (a) | to divide in specie among the shareholders the whole or any part of the assets of the Company and, for that purpose, to value any assets and to determine how the division shall be carried out as between the shareholders or different classes of shareholders; and/or |
| (b) | to vest the whole or any part of the assets in trustees for the benefit of shareholders and those liable to contribute to the winding up. |
Notwithstanding the above, if the Company is wound up, the entire remaining assets of the Company legally available for vesting, if any, shall be vested first, to the holders of the Series B Preferred Shares in proportion to the Series B Preferred Shares owned by them and, thereafter, any remainder shall then be vested to the holders of other Shares in proportion to the number of such shares then held by them.
85
Calls on Shares and Forfeiture of Shares. Subject to the terms of the allotment, our directors may from time to time make calls upon our shareholders in respect of any moneys unpaid on their shares in a notice served to such shareholders at least 14 clear days in advance specifying the time and place for payment. Any Shares that have been called upon and remain unpaid are subject to forfeiture.
Redemption, Repurchase and Surrender of Shares. Subject to the terms of the Companies Act and to any rights for the time being conferred on the shareholders holding a particular class of shares, we may by our directors: (i) issue shares that are to be redeemed or liable to be redeemed, at the option of us or the shareholders holding those redeemable shares, on the terms and in the manner our directors determine before the issue of those shares; (ii) with the consent by special resolution of the shareholders holding shares of a particular class, vary the rights attaching to that class of shares so as to provide that those shares are to be redeemed or are liable to be redeemed at the option of us on the terms and in the manner which the directors determine at the time of such variation; and (iii) purchase all or any of our own shares of any class including any redeemable shares on the terms and in the manner which the directors determine at the time of such purchase. . Under the Companies Act, the redemption or repurchase of any share may be paid out of our Company’s profits or out of the proceeds of a new issue of shares made for the purpose of such redemption or repurchase, or out of capital (including share premium account and capital redemption reserve) if our Company can, immediately following such payment, pay its debts as they fall due in the ordinary course of business. In addition, under the Companies Act no such share may be redeemed or repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in there being no shares issued and outstanding or (c) if the company has commenced liquidation. In addition, our Company may accept the surrender of any fully paid share for no consideration.
Transfer of Shares. Provided that such transfer complies with applicable Nasdaq Listing Rules, our shareholders may freely transfer shares to another person by completing an instrument of transfer in a common form or in a form prescribed by the Nasdaq Listing Rules or in any other form approved by our directors, executed where the shares are fully paid, by or on behalf of that shareholder; and where the shares are partly paid, by or on behalf of that shareholder and the transferee.
Where the shares of any class in question are not listed on any stock exchange or subject to the rules of any stock exchange, our directors may in their absolute discretion decline to register any transfer of such shares which are not fully paid up or on which our Company has a lien.
Our board of directors may also decline to register any transfer of any share unless:
| ● | the instrument of transfer is lodged with us, accompanied by the certificate for the shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; |
| ● | the instrument of transfer is in respect of only one class of shares; |
| ● | the instrument of transfer is properly stamped, if required; |
| ● | the shares transferred are fully paid up and free of any lien in favor of the Company; |
| ● | in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed four; and |
| ● | a fee of such maximum sum as the Nasdaq Capital Market may determine to be payable or such lesser sum as our directors may from time to time require is paid to us in respect thereof. |
If our directors refuse to register a transfer they shall, within one month after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal.
The registration of transfers may, after compliance with any notice required of Nasdaq and on 14 clear days’ notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine; provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 clear days in any year.
Variations of Rights of Shares. If at any time our share capital is divided into different classes of shares, unless the terms on which a class of shares was issued state otherwise, the rights attached to any such class may only be varied with: (a) the consent in writing of the holders of two-thirds of the issued shares of that class or (b) with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class issued shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation, allotment or issue of further shares ranking pari passu with them.
86
Inspection of Books and Records. Holders of our Shares have no general right under our Amended Memorandum and Articles to inspect or obtain copies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements.
Issuance of Additional Shares.
Our Amended Memorandum and Articles authorize our Board of Directors to issue additional Shares from time to time as our Board of Directors shall determine, to the extent of available authorized but unissued shares.
Issuance of additional Shares may dilute the voting power of holders of Shares.
Anti-Takeover Provisions. Some provisions of our Amended Memorandum and Articles may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable. Our authorized, but unissued Shares are available for future issuance without shareholders’ approval and could be utilized for a variety of corporate purposes, including future offerings to raise addition capital, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved Shares could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Exempted Company.
We are an exempted company with limited liability under the Companies Act. The Companies Act distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except that an exempted company:
| ● | does not have to file an annual return of its shareholders with the Registrar of Companies; |
| ● | is not required to open its register of members for inspection; |
| ● | does not have to hold an annual general meeting; |
| ● | may not issue negotiable or bearer shares, but may issue shares with no par value; |
| ● | may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance); |
| ● | may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands; |
| ● | may register as a limited duration company; and |
| ● | may register as a segregated portfolio company. |
“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company.
Nomination and Removal of Directors and Filling Vacancies on Board. At any time or from time to time, the Board shall have the power to appoint any person as a Director either to fill a casual vacancy on the Board or as an additional Director to the existing Board subject to any maximum number of Directors, if any, as may be determined by the members in general meeting.
Each Director shall hold office for the term, if any, fixed by the terms of his appointment or until his office is vacated pursuant to the Amended Memorandum and Articles.
A Director is not required to hold any shares in the company by way of qualification nor is there any specified upper or lower age limit for Directors either for accession to or retirement from the Board.
87
A Director may be removed by an ordinary resolution of the company before the expiration of his term of office (if any).
The office of a Director shall be vacated if he:
| (i) | is prohibited by the law of the Cayman Islands from acting as a director; or |
| (ii) | is made bankrupt or makes an arrangement or composition with his creditors generally; or |
| (iii) | resigns his office by notice to the Company; or |
| (iv) | only held office as a director for a fixed term and such term expires; or |
| (v) | in the opinion of a registered medical practitioner by whom he is being treated he becomes physically or mentally incapable of acting as a director; or |
| (vi) | is given notice by the majority of the other directors (not being less than two in number) to vacate office (without prejudice to any claim for damages for breach of any agreement relating to the provision of the services of such director); or |
| (vii) | is made subject to any law relating to mental health or incompetence, whether by court order or otherwise; or |
| (viii) | without the consent of the other directors, he is absent from meetings of directors for a continuous period of six months. |
From time to time the Board may appoint one or more of its body to be chairman of the Board, managing director, joint managing director or to hold any other executive office with the company for such period and upon such terms as the Board may determine, and the Board may revoke or terminate any of such appointments. The Board may also delegate any of its powers to committees consisting of such Director(s) or other person(s) as the Board thinks fit, and from time to time it may also revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes, but every committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may from time to time be imposed upon it by the Board.
10.C. Material Contracts
We have not entered into any material contracts other than (a) in the ordinary course of business, (b) those described in “Item 4. Information on the Company”, “Item 7. Major Shareholders and Related Party Transactions-7.B. Related Party Transactions,” or elsewhere in this annual report on Form 20-F, and (c) those filed as exhibits in the Registration Statement on Form F-1 filed by the Company with the SEC on February 26, 2025.
10.D. Exchange Controls
The Cayman Islands and Hong Kong currently have no exchange control restrictions.
10.E. Taxation
The following are certain material tax considerations relevant to an investment in our Class A Ordinary Shares. This discussion does not address all of the tax consequences that may be relevant in light of the investor’s particular circumstances. Potential investors should consult their tax advisers regarding Cayman Islands, Hong Kong, U.S. federal, state and local, and non-U.S. tax consequences of owning and disposing of our Ordinary Shares in their particular circumstances.
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains, or appreciation and there is no taxation in the nature of inheritance tax, gift tax or estate duty. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands. No stamp duty is payable in the Cayman Islands on the issue of shares by, or any transfers of shares of, Cayman Islands companies (except those which hold interests in land in the Cayman Islands). There are no exchange control regulations or currency restrictions in the Cayman Islands.
88
Payments of dividends and capital in respect of our Class A Ordinary Shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of our Class A Ordinary Shares, nor will gains derived from the disposal of our Class A Ordinary Shares be subject to Cayman Islands income or corporation tax.
No stamp duty is payable in the Cayman Islands in respect of the issue of our Class A Ordinary Shares or on an instrument of transfer in respect of our Class A Ordinary Shares so long as the instrument of transfer is not executed in, brought to, or produced before a court of the Cayman Islands.
Hong Kong Taxation Considerations
Profits Tax
No tax is imposed in Hong Kong in respect of capital gains from the sale of property, such as our Ordinary Shares. Generally, gains arising from disposal of the Class A Ordinary Shares which are held more than two years are considered capital in nature. However, trading gains from the sale of property by persons carrying on a trade, profession or business in Hong Kong where such gains are derived from or arise in Hong Kong from such trade, profession or business will be chargeable to Hong Kong profit tax. Liability for Hong Kong profits tax would therefore arise in respect of trading gains from the sale of Ordinary Shares realized by persons in the course of carrying on a business of trading or dealing in securities in Hong Kong where the purchase or sale contracts are effected (being negotiated, concluded and/or executed) in Hong Kong. Effective from April 1, 2018, profits tax is levied on a two-tiered profits tax rate basis, with the first HK$2 million of profits being taxed at 8.25% for corporations and 7.5% for unincorporated businesses, and profits exceeding the first HK$2 million being taxed at 16.5% for corporations and 15% for unincorporated businesses. In addition, Hong Kong does not impose withholding tax on gains derived from the sale of stock in Hong Kong companies and does not impose withholding tax on dividends paid outside of Hong Kong by Hong Kong companies. Accordingly, investors will not be subject to Hong Kong withholding tax with respect to a disposition of their Ordinary Shares or with respect to the receipt of dividends on their Ordinary Shares, if any. No income tax treaty relevant to the acquiring, withholding or dealing in the Class A Ordinary Shares exists between Hong Kong and the United States.
Stamp duty
Hong Kong stamp duty is generally payable on the transfer of “Hong Kong stocks”. The term “stocks” refers to shares in companies incorporated in Hong Kong, as widely defined under the Stamp Duty Ordinance (Cap. 117 of the laws of Hong Kong), or SDO, and includes shares. However, our Class A Ordinary Shares are not considered “Hong Kong stocks” under the SDO since the transfer of the Class A Ordinary Shares are not required to be registered in Hong Kong given that the books for the transfer of Class A Ordinary Shares are located in the United States. The transfer of Ordinary Shares is therefore not subject to stamp duty in Hong Kong. If Hong Kong stamp duty applies, both the purchaser and the seller are liable for the stamp duty charged on each of the sold note and bought note at the ad valorem rate of 0.1% on the higher of the consideration stated on the contract notes or the fair market value of the shares transferred. In addition, a fixed duty, currently of HK$5.00, is payable on an instrument of transfer.
Estate Duty
The Revenue (Abolition of Estate Duty) Ordinance 2005 came into effect on February 11, 2006 in Hong Kong. No Hong Kong estate duty is payable and no estate duty clearance papers are needed for an application for a grant of representation in respect of holders of Ordinary Shares whose death occurs on or after February 11, 2006.
89
Certain Mainland China Tax Laws and Regulations Consideration
The Arrangement between Mainland China and Hong Kong for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income (“Double Tax Avoidance Arrangement”)
The National People’s Congress of the PRC enacted the Enterprise Income Tax Law, which became effective on January 1, 2008 and last amended on December 29, 2018. According to Enterprise Income Tax Law and the Regulation on the Implementation of the Enterprise Income Tax Law, or the Implementing Rules, which became effective on January 1, 2008 and further amended on April 23, 2019, dividends generated after January 1, 2008 and payable by a foreign-invested enterprise in Mainland China to its foreign enterprise investors are subject to a 10% withholding tax, unless any such foreign enterprise investor’s jurisdiction of incorporation has a tax treaty with the PRC that provides for a preferential withholding arrangement. According to the Notice of the State Administration of Taxation (“SAT”) on Negotiated Reduction of Dividends and Interest Rates issued on January 29, 2008, revised on February 29, 2008, and the Arrangement between Mainland China and Hong Kong for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income, or Double Tax Avoidance Arrangement, the withholding tax rate in respect of the payment of dividends by a Mainland China enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the Mainland China enterprise and certain other conditions are met, including: (i) the Hong Kong enterprise must directly own the required percentage of equity interests and voting rights in the Mainland China resident enterprise; and (ii) the Hong Kong enterprise must have directly owned such required percentage in the Mainland China resident enterprise throughout the 12 months prior to receiving the dividends. However, based on the Circular on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties issued on February 20, 2009 by the SAT, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such Mainland China tax authorities may adjust the preferential tax treatment; and based on the Announcement on Certain Issues with Respect to the “Beneficial Owner” in Tax Treaties issued by the SAT on February 3, 2018 and effective from April 1, 2018, if an applicant’s business activities do not constitute substantive business activities, it could result in the negative determination of the applicant’s status as a “beneficial owner”, and consequently, the applicant could be precluded from enjoying the above-mentioned reduced income tax rate of 5% under the Double Tax Avoidance Arrangement.
We are a holding company incorporated in the Cayman Islands with all our operations conducted and all revenue generated by our Operating Subsidiaries in Hong Kong. We do not have, nor do we currently intend to establish, any subsidiary in Mainland China or set up any establishment in Mainland China. We do not plan to enter into any contractual arrangements to establish a VIE structure with any entity in Mainland China, and none of our subsidiaries directly or indirectly holds any interests in any enterprises in Mainland China. We believe neither the Company, nor its subsidiaries, are subject to Enterprise Income Tax Law, Double Tax Avoidance Arrangement or any Mainland Chinese taxation law and regulations, nor these law and regulations have any impact on our business or operations.
Enterprise Income Tax Law
The Enterprise Income Tax Law and the Implementing Rules impose a uniform 25% enterprise income tax rate to both foreign invested enterprises and domestic enterprises in Mainland China, except where tax incentives are granted to special industries and projects. Under the Enterprise Income Tax Law, an enterprise established outside PRC with “de facto management bodies” within Mainland China is considered a “resident enterprise” for Mainland China enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. The Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies promulgated by the SAT and last amended on December 29, 2017 and the Announcement of the State Administration of Taxation on Issues concerning the Determination of Resident Enterprises Based on the Standards of Actual Management Institutions promulgated by the SAT on January 29, 2014 set out the standards used to classify certain Chinese invested enterprises controlled by Mainland China enterprises or Mainland China enterprise groups and established outside of China as “resident enterprises”, which also clarified that dividends and other income paid by such Mainland China “resident enterprises” will be considered Mainland China source income and subject to Mainland China withholding tax, currently at a rate of 10%, when paid to non-Mainland China enterprise shareholders. This notice also subjects such Mainland China “resident enterprises” to various reporting requirements with the Mainland China tax authorities. Under the Implementing Rules, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise.
90
On October 17, 2017, the SAT issued the Bulletin on Issues Concerning the Withholding of Non-PRC Resident Enterprise Income Tax at Source, or Bulletin 37, which replaced the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, issued by the SAT, on December 10, 2009, and partially replaced and supplemented by the rules under the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises, or Bulletin 7, issued by the SAT, on February 3, 2015. Under Bulletin 7, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. In respect of an indirect offshore transfer of assets of a Mainland China establishment, the relevant gain is to be regarded as effectively connected with the Mainland China establishment and therefore included in its enterprise income tax filing, and would consequently be subject to enterprise income tax at a rate of 25%. Where the underlying transfer relates to the immoveable properties in China or to equity investments in a PRC resident enterprise, which is not effectively connected to a Mainland China establishment of a non-resident enterprise, a PRC enterprise income tax at 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements, and the party who is obligated to make the transfer payments bears the withholding obligation. Pursuant to Bulletin 37, the withholding party shall declare and pay the withheld tax to the competent tax authority in the place where such withholding party is located within 7 days from the date of occurrence of the withholding obligation. Both Bulletin 37 and Bulletin 7 do not apply to transactions of sale of shares by investors through a public stock exchange where such shares were acquired from a transaction through a public stock exchange.
We are a holding company incorporated in the Cayman Islands with all our operations conducted and all revenue generated by our Operating Subsidiaries in Hong Kong. We do not have, nor do we currently intend to establish, any subsidiary in Mainland China or set up any establishment in Mainland China. We do not plan to enter into any contractual arrangements to establish a VIE structure with any entity in Mainland China, and none of our subsidiaries directly or indirectly holds any interests in any enterprises in Mainland China. We believe neither the Company, nor its subsidiaries, are subject to Enterprise Income Tax Law, Double Tax Avoidance Arrangement or any Mainland Chinese taxation law and regulations, nor these law and regulations have any impact on our business or operations.
Certain United States Federal Income Tax Considerations
The following discussion is a summary of certain material U.S. federal income tax considerations generally applicable to U.S. Holders (as defined below) of the ownership and disposition of our Class A Ordinary Shares. This summary applies only to U.S. Holders that hold our Class A Ordinary Shares as capital assets (generally, property held for investment) and that have the U.S. dollar as their functional currency. This summary is based on U.S. federal tax laws in effect as of the date of this report, on U.S. Treasury regulations in effect or, in some cases, proposed as of the date of this report, and judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which could apply retroactively and could affect the tax consequences described below. No ruling has been sought from the Internal Revenue Service (“IRS”) with respect to any U.S. federal income tax considerations described below, and there can be no assurance that the IRS or a court will not take a contrary position. Moreover, this summary does not address the U.S. federal estate, gift, backup withholding, and alternative minimum tax considerations, or any state, local, and non-U.S. tax considerations, relating to the ownership and disposition of our Class A Ordinary Shares. The following summary does not address all aspects of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances or to persons in special tax situations such as:
| ● | financial institutions or financial services entities; |
| ● | underwriters; |
| ● | insurance companies; |
| ● | pension plans; |
| ● | cooperatives; |
91
| ● | regulated investment companies; |
| ● | real estate investment trusts; |
| ● | grantor trusts; | |
| ● | subchapter S corporations; | |
| ● | personal holding companies; |
| ● | broker-dealers; |
| ● | taxpayers that elect to use a mark-to-market method of accounting; |
| ● | governments or agencies or instrumentalities thereof; |
| ● | certain former U.S. citizens or long-term residents; |
| ● | tax-exempt entities (including private foundations); |
| ● | persons liable for alternative minimum tax; |
| ● | persons holding stock as part of a straddle, hedging, conversion or other integrated transaction; |
| ● | persons whose functional currency is not the U.S. dollar; |
| ● | passive foreign investment companies; |
| ● | controlled foreign corporations; |
| ● | the Company’s officers or directors; |
| ● | holders who are not U.S. Holders; |
| ● | persons that actually or constructively own 5% or more of all classes of our stock (by vote or value); or |
| ● | partnerships (including any entities or arrangement treated as partnerships) for U.S. federal income tax purposes, or persons holding Class A Ordinary Shares through such partnerships. |
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our Class A Ordinary Shares that is, for U.S. federal income tax purposes:
| ● | an individual who is a citizen or resident of the United States; |
| ● | a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia; |
| ● | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
| ● | a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions, or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
If a partnership (including any entity or arrangement treated as a partnership) for U.S. federal income tax purposes is a beneficial owner of our Class A Ordinary Shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding our Class A Ordinary Shares and their partners are urged to consult their tax advisors regarding an investment in our Class A Ordinary Shares.
PERSONS CONSIDERING AN INVESTMENT IN OUR CLASS A ORDINARY SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES APPLICABLE TO THEM RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR CLASS A ORDINARY SHARES INCLUDING THE APPLICABILITY OF U.S. FEDERAL, STATE AND LOCAL TAX LAWS AND NON-U.S. TAX LAWS.
92
Taxation of Dividends and Other Distributions on Our Class A Ordinary Shares
As discussed under “Dividend Policy” above, we do not anticipate that any dividends will be paid in the foreseeable future. Subject to the discussion below under “Passive Foreign Investment Company Rules,” any cash distributions (including the amount of any tax withheld) paid on our Class A Ordinary Shares out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, will generally be includible in the gross income of a U.S. Holder as dividend income on the day actually or constructively received by the U.S. Holder. Because we do not intend to determine our earnings and profits on the basis of U.S. federal income tax principles, any distribution we pay will generally be treated as a “dividend” for U.S. federal income tax purposes. A non-corporate U.S. Holder will be subject to tax on dividend income from a “qualified foreign corporation” at the preferential applicable capital gains rate rather than the marginal tax rates generally applicable to ordinary income provided that certain holding period and other requirements are met. A non-U.S. corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) will generally be considered to be a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive tax treaty with the United States that the U.S. Secretary of Treasury determines is satisfactory for purposes of this provision and includes an exchange of information program, or (ii) with respect to any dividend it pays on stock that is readily tradable on an established securities market in the United States, including Nasdaq. It is unclear whether dividends that we pay on our Class A Ordinary Shares will meet the conditions required for such preferential tax rate. If we are eligible for such benefits, dividends we pay on our Class A Ordinary Shares would be eligible for the preferential rates of taxation applicable to “qualified dividend income” described in this paragraph. You are urged to consult your tax advisor regarding the availability of the lower rate for dividends paid with respect to our Class A Ordinary Shares. Dividends received on our Class A Ordinary Shares will not be eligible for the dividends-received deduction allowed to corporations.
Dividends paid on our Class A Ordinary Shares will generally be treated as income from foreign sources for U.S. foreign tax credit purposes and will generally constitute passive category income. Depending on the U.S. Holder’s individual facts and circumstances, a U.S. Holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit not in excess of any applicable treaty rate in respect of any foreign withholding taxes imposed on dividends received on our Class A Ordinary Shares. A U.S. Holder who does not elect to claim a foreign tax credit for foreign tax withheld may instead claim a deduction, for U.S. federal income tax purposes, in respect of such withholding, but only for a year in which such U.S. Holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex and their application depends in large part on the U.S. Holder’s individual facts and circumstances. Accordingly, U.S. Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.
Taxation of Sale or Other Disposition of Class A Ordinary Shares
Subject to the discussion below under “Passive Foreign Investment Company Rules,” a U.S. Holder will generally recognize capital gain or loss upon the sale or other disposition of Class A Ordinary Shares in an amount equal to the difference between the amount realized upon the disposition and the U.S. Holder’s adjusted tax basis in such Class A Ordinary Shares. Any capital gain or loss will be long term if the Class A Ordinary Shares have been held for more than one year and will generally be U.S.-source gain or loss for U.S. foreign tax credit purposes. Long-term capital gains of non-corporate taxpayers are currently eligible for preferential rates of taxation. The deductibility of a capital loss may be subject to limitations. U.S. Holders are urged to consult their tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of our Class A Ordinary Shares, including the availability of the foreign tax credit under their particular circumstances.
93
Passive Foreign Investment Company Rules
A non-U.S. corporation, such as our company, will be classified as a PFIC, for U.S. federal income tax purposes for any taxable year, if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of its assets (determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income. For this purpose, cash and cash equivalents may be categorized as passive assets and the company’s goodwill and other unbooked intangibles may be taken into account as non-passive assets. Passive income generally includes, among other things, dividends, interest, rents, royalties, and gains from the disposition of passive assets. We will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25% (by value) of the stock.
No assurance can be given as to whether we may be or may become a PFIC, as this is a factual determination made annually that will depend, in part, upon the composition of our income and assets. Furthermore, the composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in offering securities. Under circumstances where our revenue from activities that produce passive income significantly increase relative to our revenue from activities that produce non-passive income, or where we determine not to deploy significant amounts of cash for active purposes, our risk of becoming classified as a PFIC may substantially increase. In addition, because there are uncertainties in the application of the relevant rules, it is possible that the Internal Revenue Service may challenge our classification of certain income and assets as non-passive or our valuation of our tangible and intangible assets, each of which may result in our becoming a PFIC for the current or subsequent taxable years. If we were classified as a PFIC for any year during which a U.S. Holder held our Class A Ordinary Shares, we generally would continue to be treated as a PFIC for all succeeding years during which such U.S. Holder held our Class A Ordinary Shares even if we cease to be a PFIC in subsequent years, unless certain elections are made. Our U.S. counsel expresses no opinion with respect to our PFIC status for any taxable year.
If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our Class A Ordinary Shares, and unless the U.S. Holder makes a mark-to-market election (as described below), the U.S. Holder will generally be subject to special tax rules that have a penalizing effect, regardless of whether we remain a PFIC, on (i) any excess distribution that we make to the U.S. Holder (which generally means any distribution paid during a taxable year to a U.S. Holder that is greater than 125 percent of the average annual distributions paid in the three preceding taxable years or, if shorter, the U.S. Holder’s holding period for the Class A Ordinary Shares), and (ii) any gain realized on the sale or other disposition of Class A Ordinary Shares. Under these rules,
| ● | the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the Class A Ordinary Shares; |
| ● | the amount allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the first taxable year in which we are classified as a PFIC (each, a “pre-PFIC year”), will be taxable as ordinary income; |
| ● | the amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect for individuals or corporations, as appropriate, for that year; and |
| ● | an additional tax equal to the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each prior taxable year, other than a pre-PFIC year, of the U.S. Holder. |
94
If we are treated as a PFIC for any taxable year during which a U.S. Holder holds our Class A Ordinary Shares, or if any of our subsidiaries is also a PFIC, such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of any lower-tier PFICs for purposes of the application of these rules. U.S. Holders are urged to consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries.
As an alternative to the foregoing rules, a U.S. Holder of “marketable stock” in a PFIC may make a mark-to-market election with respect to such stock, provided that such stock is “regularly traded” within the meaning of applicable U.S. Treasury regulations. If our Class A Ordinary Shares qualify as being regularly traded, and an election is made, the U.S. Holder will generally (i) include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market value of Class A Ordinary Shares held at the end of the taxable year over the adjusted tax basis of such Class A Ordinary Shares and (ii) deduct as an ordinary loss the excess, if any, of the adjusted tax basis of the Class A Ordinary Shares over the fair market value of such Class A Ordinary Shares held at the end of the taxable year, but such deduction will only be allowed to the extent of the amount previously included in income as a result of the mark-to-market election. The U.S. Holder’s adjusted tax basis in the Class A Ordinary Shares would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. Holder makes a mark-to-market election in respect of a corporation classified as a PFIC and such corporation ceases to be classified as a PFIC, the U.S. Holder will not be required to take into account the gain or loss described above during any period that such corporation is not classified as a PFIC. If a U.S. Holder makes a mark-to-market election, any gain such U.S. Holder recognizes upon the sale or other disposition of our Class A Ordinary Shares in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as ordinary loss, but such loss will only be treated as ordinary loss to the extent of the net amount previously included in income as a result of the mark-to-market election.
Because a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to be subject to the PFIC rules with respect to such U.S. Holder’s indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes. U.S. Holders are urged to consult their tax advisors regarding the tax issues raised by lower-tier PFICs.
Furthermore, as an alternative to the foregoing rules, a U.S. Holder that owns stock of a PFIC generally may make a “qualified electing fund” election regarding such corporation to elect out of the PFIC rules described above regarding excess distributions and recognized gains. However, we do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections which, if available, would result in tax treatment different from the general tax treatment for PFICs described above.
If a U.S. Holder owns our Class A Ordinary Shares during any taxable year that we are a PFIC, the U.S. Holder must generally file an annual Internal Revenue Service Form 8621 and provide such other information as may be required by the U.S. Treasury Department, whether or not a mark-to-market election is or has been made. If we are or become a PFIC, you should consult your tax advisor regarding any reporting requirements that may apply to you.
You should consult your tax advisors regarding how the PFIC rules could potentially apply to your investment in our Class A Ordinary Shares.
Information Reporting and Backup Withholding
Certain U.S. Holders are required to report information to the Internal Revenue Service relating to an interest in “specified foreign financial assets,” including shares issued by a non-United States corporation, for any year in which the aggregate value of all specified foreign financial assets exceeds US$50,000 (or a higher dollar amount prescribed by the Internal Revenue Service), subject to certain exceptions (including an exception for shares held in custodial accounts maintained with a U.S. financial institution). These rules also impose penalties if a U.S. Holder is required to submit such information to the Internal Revenue Service and fails to do so.
95
In addition, dividend payments with respect to our Class A Ordinary Shares and proceeds from the sale, exchange or redemption of our Class A Ordinary Shares may be subject to additional information reporting to the IRS and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification on IRS Form W-9 or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on IRS Form W-9. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.
Backup withholding is not an additional tax. Any amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, if any, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS and furnishing any required information. We do not intend to withhold taxes for individual Shareholders. However, transactions effected through certain brokers or other intermediaries may be subject to withholding taxes (including backup withholding), and such brokers or intermediaries may be required by law to withhold such taxes.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF OUR CLASS A ORDINARY SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.
10.F. Dividends and Paying Agents
Not applicable.
10.G. Statements by Experts
Not applicable.
10.H. Documents on Display
We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F no later than four months after the close of each fiscal year. The SEC maintains a web site at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
10.I. Subsidiary Information
Please see Item 4.C. “Information on the Company - Organizational structure” above.
10.J. Annual Report to Security Holders
Not applicable.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Concentration Risk
Financial instruments that potentially subject the Company to the concentration of credit risks consist of cash and cash equivalents, accounts receivable, and contract assets. The maximum exposures of such assets to credit risk are their carrying amounts as of the balance sheet dates. The Company deposits its cash and cash equivalents with financial institutions located in Hong Kong. As of March 31, 2026, 2025 and 2024, US$4,556,888, US$718,625, and US$323,595 were deposited with financial institutions located in Hong Kong. The Deposit Protection Scheme introduced by the Hong Kong Government insured each depositor at one bank for a maximum amount of US$102,054 (HK$800,000), US$102,828 (HK$800,000) and US$63,898 (HK$500,000) as of March 31, 2026, 2025 and 2024 respectively. Otherwise, these balances are not covered by insurance. The Company believes that no significant credit risk exists as these financial institutions have high credit quality and the Company has not incurred any losses related to such deposits.
96
For the year ended March 31, 2026, 100% of the Company’s total revenue contributed within Hong Kong, and 64%, 34% and 2% of the Company’s total assets contributed within Hong Kong, Kazakhstan and United States, respectively; for the years ended March 31, 2025 and 2024, revenue and assets within Hong Kong contributed 100% of the Company’s total revenue.The Company has a concentration of its revenue and accounts receivable with specific customers.
During the fiscal year ended March 31, 2026, (i) there were three customers that generated income which accounted for over 10% of the total revenue generated for that year; and (ii) there was four subcontractors that accounted for over 10% of the total purchases for that year.
During the fiscal year ended March 31, 2025, (i) there were five customers that generated income which accounted for over 10% of the total revenue generated for that year; and (ii) there was three subcontractors that accounted for over 10% of the total purchases for that year.
During the fiscal year ended March 31, 2024, (i) there were four customers that generated income which accounted for over 10% of the total revenue generated for that year, and (ii) there was one subcontractor that accounted for over 10% of the total purchases for that year.
As of March 31, 2026, (i) there were three customers which accounted for over 10% of our accounts receivable; and (ii) there were two suppliers which accounted for over 10% of the total consolidated accounts payable.
As of March 31, 2025, (i) there were five customers which accounted for over 10% of our accounts receivable; and (ii) there was two suppliers or subcontractors which accounted for over 10% of the total consolidated accounts payable.
As of March 31, 2024, (i) there were three customers which accounted for over 10% of the consolidated accounts receivable; and (ii) there was one supplier which accounted for over 10% of the total consolidated accounts payable.
Credit Risk
For the credit risk related to accounts receivable, our Group performs periodic credit evaluations of our customers’ financial condition and generally does not require collateral. Our Group establishes an allowance for credit losses based upon estimates, factors surrounding the credit risk of specific customers, and other information. The allowance amounts were immaterial for all periods presented. Our management believes that its contract acceptance, billing, and collection policies are adequate to minimize material credit risk. Application for progress payment of contract works is made on a regular basis. Our Company seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by the Directors.
Interest Rate Risk
Fluctuations in market interest rates may negatively affect our financial condition and results of operations. We are exposed to floating interest rate risk on cash deposits and floating rate bank borrowings. Our Group has not used any derivative financial instruments to manage the interest risk exposure. In respect of the exposure to cash flow interest rate risk arising from floating rate non-derivative instruments held by our Group at the end of the reporting period, the impact on our profit after tax is estimated as an annualized impact on interest expense or income of such a change in interest rates.
Liquidity Risk
Liquidity risk is the risk that our Company will encounter difficulty in meeting the obligations associated with our financial liabilities that are settled by delivering cash or another financial asset. We will make the maximum effort to maintain sufficient liquidity to meet our liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to our reputation.
97
Typically, we have sufficient cash on demand to meet expected operational expenses for a period of 30 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
Labor Price Risk
Our business requires a substantial number of personnel. Any failure to retain stable and dedicated labor by us may lead to disruption to our business operations. Although we have not experienced any labor shortage to date, we have observed an overall tightening and increasingly competitive labor market. We have experienced, and expect to continue to experience, increases in labor costs due to increases in salary, social benefits, and employee headcount. We compete with other companies in our industry and other labor-intensive industries for labor, and we may not be able to offer competitive remuneration and benefits compared to them. If we are unable to manage and control our labor costs, our business, financial condition, and results of operations may be materially and adversely affected.
Inflation Risk
Our Company monitors changes in price levels. Historically inflation has not materially affected our business or the results of our operations. However, significant increases in the price of raw materials and labor that cannot be passed to our customers could adversely impact our results of operations.
Currency Risk
Our Group’s operating activities are transacted in HK$. Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities. Our Group considers the foreign exchange risk in relation to transactions denominated in HK$ with respect to USD is not significant as HK$ is pegged to US$.
Item 12. Description of Securities Other than Equity Securities
12.A. Debt Securities
Not applicable.
12.B. Warrants and Rights
Not applicable.
12.C. Other Securities
Not applicable.
12.D. American Depositary Shares
Not applicable.
98
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
See “Item 10. Additional Information” for a description of the rights of shareholders.
14.E. Use of Proceeds
For the period from December 31, 2024, the date that the Company’s Registration Statement on Form F-1 (File Number: 333-282720) relating to the IPO was declared effective by the SEC, to the date of this report, out of the net proceeds of approximately US$5.5 million received from the IPO, we used (i) approximately US$1.1 million for hiring additional staff; (ii) approximately US$1.1 million for acquiring machinery; (iii) approximately US$1.1 million for enhancing our brand; and (iv) approximately US$2.2 million for working capital and other general corporate purposes. There is no material change in the use of proceeds as described in the Registration Statement. We have used all of the proceeds from the IPO as of the date of this annual report.
Item 15. Controls and Procedures
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this annual report, as required by Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our management has concluded that, as of March 31, 2026 and March 31, 2025, our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Internal Control over Financial Reporting
The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligation.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and interim Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2026 using the criteria set forth in the report “Internal Control-Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting as of March 31, 2026 was effective.
Attestation Report of the Registered Public Accounting Firm
Since we are an “emerging growth company” as defined under the JOBS Act, we are exempt from the requirement to comply with the auditor attestation requirements that our independent registered public accounting firm attest to and report on the effectiveness of our internal control structure and procedures for financial reporting.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
99
Item 16. [Reserved]
Item 16A. Audit committee financial expert
Our board of directors has determined that Mr. Chun Kit Yu, qualifies as an “audit committee financial expert” within the meaning of the SEC rules and possesses financial sophistication within the meaning of the Nasdaq rules. The audit committee will oversee our accounting and financial reporting processes and the audits of the financial statements of our company.
Item 16B. Code of Ethics
We have adopted a code of business conduct and ethics, which is applicable to all of our directors, executive officers and employees and is publicly available.
Item 16C. Principal Accountant Fees and Services
Auditor Fees
The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered SRCO, C.P.A., Professional Corporation, our independent registered public accounting firm, for the years indicated.
| 2025 | 2026 | |||||||
| USD | USD | |||||||
| Services | ||||||||
| Audit Fees(1) | 445,000 | 339,000 | ||||||
| Audit-Related Fees(2) | 10,000 | 10,000 | ||||||
| Other Fees(3) | 25,450 | - | ||||||
| Total | 480,450 | 349,000 | ||||||
| (1) | Audit Fees. Audit fees mean the aggregate fees billed or to be billed in each of the fiscal years listed for professional services rendered by our auditor for the audit of our annual consolidated financial statements, review of the interim financial information and review of documents filed with the SEC. |
| (2) | Audit-related Fees. Audit-related fees mean the aggregate fees billed or to be billed in each of the fiscal years listed for the assurance and related services rendered by our auditor, which were not included under Audit Fees above. |
| (3) | Other Fees. Other fees mean the aggregate fees incurred from professional services rendered by our auditor other than services included under Audit Fees, Audit-related Fees. |
The policy of our audit committee is to pre-approve all audit and non-audit services provided by our independent registered public accounting firm, including audit services, audit-related services, tax services and other services, as described above.
Item 16D. Exemptions from the Listing Standards for Audit Committees
None.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 16F. Change in Registrant’s Certifying Accountant
None.
100
Item 16G. Corporate Governance
We are listed on the Nasdaq Capital Market. As such, we are subject to corporate governance requirements imposed by Nasdaq. Under Nasdaq rules, listed non-US companies such as ourselves may, in general, follow their home country corporate governance practices in lieu of some of the Nasdaq corporate governance requirements. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. We endeavor to comply with the Nasdaq corporate governance practices and there is no significant difference between our corporate governance practices and what the Nasdaq requires of domestic U.S. companies. However, if we choose to follow other home country practice in the future, our shareholders may be afforded less protection than they otherwise would under the Nasdaq Capital Market corporate governance listing standards applicable to U.S. domestic issuers.
Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Item 16J. Insider trading policies
We have adopted an insider trading policy and procedures applicable to all directors, executive officers and employees of us and our subsidiaries, and certain of their family members and controlled entities, and have implemented processes for us that we believe are reasonably designed to promote compliance with insider trading laws, rules and regulations, and the Nasdaq Capital Market listing standards. Our insider trading policy prohibits insider trading when a person covered by the policy is aware of material nonpublic information and restricts trading in our securities during predetermined blackout periods, among other things. In addition, our insider trading policy requires pre-clearance of transactions in our securities. The foregoing summary of our insider trading policy and procedures does not purport to be complete and is qualified by reference insider trading policy which is filed as Exhibit 11.2 to this Annual Report.
Item 16K. Cybersecurity
Cybersecurity Governance
The Board of Directors has primary oversight responsibility for managing cybersecurity risks within the organization. At the management level, the Chief Executive Officer and the Chief Financial Officer are responsible for assessing and addressing material cybersecurity risks and incidents. They regularly engage with our IT service provider and business operations teams to review cybersecurity performance metrics, identify top risks, and evaluate the progress of cybersecurity programs and initiatives.
As of the date of this report, the Company has not encountered any cybersecurity incidents deemed material to the Company as a whole.
101
PART III
Item 17. Financial Statements
We have elected to provide financial statements pursuant to Item 18.
Item 18. Financial Statements
The consolidated financial statements are included at the end of the annual report.
Item 19. Exhibits
| Exhibit No. | Description of Exhibit | |
| 1.1 | Fourth Amended and Restated Memorandum and Articles of Association of the Company (incorporated by reference to Exhibit 3.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on February 13, 2026) | |
| 2.1 | Specimen Certificate for Class A Ordinary Shares (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form F-1 (Amendment No. 2) filed by the Registrant with the SEC on December 18, 2024) | |
| 2.2* | Description of Securities | |
| 2.3 | Form of Class A Ordinary Share Purchase Warrant A (incorporated by reference to Exhibit 4.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on September 2, 2025) | |
| 2.4 | Form of Class A Ordinary Share Purchase Warrant B (incorporated by reference to Exhibit 4.2 to the Current Report on Form 6-K filed by the Registrant with the SEC on September 2, 2025) | |
| 2.5 | Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.3 to the Current Report on Form 6-K filed by the Registrant with the SEC on September 2, 2025) | |
| 2.6 | Form of Class A Ordinary Share Purchase Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on October 29, 2025) | |
| 2.7 | Form of Prefunded Warrant (incorporated by reference to Exhibit 4.2 to the Current Report on Form 6-K filed by the Registrant with the SEC on October 29, 2025) | |
| 2.8 | Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.3 to the Current Report on Form 6-K filed by the Registrant with the SEC on November 3, 2025) | |
| 2.9 | Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on February 13, 2026) | |
| 2.10 | Form of Placement Agent Warrant dated March 25, 2026 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on March 26, 2026) | |
| 2.11 | Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on April 10, 2026) | |
| 2.12 | Form of Senior Unsecured Convertible Promissory Note (incorporated by reference to Exhibit 10.2 to the Current Report on Form 6-K filed by the Registrant with the SEC on April 10, 2026) | |
| 4.1 | Underwriting Agreement dated January 23, 2025 between the Registrant and Dominari Securities LLC, as representative of the underwriters named therein (incorporated by reference to Exhibit 10.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on January 24, 2025) | |
| 4.2 | Employment Agreement between the Registrant and Mr. Ngo Chiu, LAM, Registrant’s director, Chief Executive Officer and Chair of the Board (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form F-1 (Amendment No. 2) filed by the Registrant with the SEC on December 18, 2024) | |
| 4.3 | Employment Agreement between the Registrant and Ms. Sze Man Chan, Registrant’s Interim Chief Financial Officer (incorporated by reference to Exhibit 10.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on August 11, 2026) | |
| 4.4 | Form of Independent Director Agreement by and between the registrant and its Independent Director (incorporated by reference to Exhibit 10.3 to the Registration Statement on Form F-1 (Amendment No. 2) filed by the Registrant with the SEC on December 18, 2024) | |
| 4.5 | Tenancy Agreement of Office A, 15/F, Tower A, Capital Tower, No. 38 Wai Yip Street, Kowloon Bay, Hong Kong (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form F-1 (Amendment No. 2) filed by the Registrant with the SEC on December 18, 2024) | |
| 4.6 | Tenancy Agreement of Private Car Parking Space No. P156 & P157 on Lower G/F, Unit 7 & 8 on 15th Floor of Tower One, Ever Gain Plaza, No. 88 Container Port Road, Kwai Chung, New Territories (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form F-1 (Amendment No. 2) filed by the Registrant with the SEC on December 18, 2024) | |
| 4.7* | Share Purchase Agreement dated November 17, 2025 | |
| 4.8 | Transaction Agreement dated April 30, 2026 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on April 30, 2026) | |
| 4.9 | Support Agreements dated April 30, 2026 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on April 30, 2026) | |
| 4.10 | Kaz Loan Agreement dated April 22, 2026 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 6-K filed by the Registrant with the SEC on April 30, 2026) | |
| 4.11 | Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on September 2, 2025) | |
| 4.12 | Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to the Current Report on Form 6-K filed by the Registrant with the SEC on September 2, 2025) | |
| 4.13 | Placement Agency Agreement (incorporated by reference to Exhibit 10.3 to the Current Report on Form 6-K filed by the Registrant with the SEC on September 2, 2025) |
102
| 4.14 | Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.4 to the Current Report on Form 6-K filed by the Registrant with the SEC on September 2, 2025) | |
| 4.15 | Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on October 29, 2025) | |
| 4.16 | Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to the Current Report on Form 6-K filed by the Registrant with the SEC on October 29, 2025) | |
| 4.17 | Placement Agency Agreement (incorporated by reference to Exhibit 10.3 to the Current Report on Form 6-K filed by the Registrant with the SEC on October 29, 2025) | |
| 4.18 | Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.4 to the Current Report on Form 6-K filed by the Registrant with the SEC on October 29, 2025) | |
| 4.19 | Subscription and Unit Purchase Agreement dated October 31, 2025 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on November 6, 2025) | |
| 4.20 | Executive Employment Agreement with Mr. Paul E. Mann, as Executive Chairman, dated November 5, 2025 and effective January 1, 2026 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 6-K filed by the Registrant with the SEC on November 6, 2025) | |
| 4.21 | Regulation D Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on February 13, 2026) | |
| 4.22 | Regulation S Securities Purchase Agreement (incorporated by reference to Exhibit 10.2 to the Current Report on Form 6-K filed by the Registrant with the SEC on February 13, 2026) | |
| 4.23 | Registration Rights Agreement (incorporated by reference to Exhibit 10.3 to the Current Report on Form 6-K filed by the Registrant with the SEC on February 13, 2026) | |
| 4.24 | Introducer Agreement (incorporated by reference to Exhibit 10.4 to the Current Report on Form 6-K filed by the Registrant with the SEC on February 13, 2026) | |
| 4.25 | Placement Agency Agreement (incorporated by reference to Exhibit 10.5 to the Current Report on Form 6-K filed by the Registrant with the SEC on February 13, 2026) | |
| 4.26 | Regulation D Purchase Agreement dated March 20, 2026 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on March 26, 2026) | |
| 4.27 | Regulation S Purchase Agreement dated March 20, 2026 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 6-K filed by the Registrant with the SEC on March 26, 2026) | |
| 4.28 | Registration Rights Agreement dated March 25, 2026 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 6-K filed by the Registrant with the SEC on March 26, 2026) | |
| 4.29 | Placement Agency Agreement dated March 20, 2026 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 6-K filed by the Registrant with the SEC on March 26, 2026) | |
| 4.30 | Form of Senior Unsecured Convertible Note Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on April 10, 2026) | |
| 4.31 | Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.3 to the Current Report on Form 6-K filed by the Registrant with the SEC on April 10, 2026) | |
| 4.32 | Placement Agency Agreement by and between the Company and Dominari Securities LLC dated March 31, 2026 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 6-K filed by the Registrant with the SEC on April 10, 2026) | |
| 4.33 | Form of Assignment and Assumption Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on May 18, 2026) | |
| 4.34 | Convertible Loan Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 6-K filed by the Registrant with the SEC on June 17, 2026) | |
| 4.35 | Amendment No. 1 to the Transaction Agreement (incorporated by reference to Exhibit 10.2 to the Current Report on Form 6-K filed by the Registrant with the SEC on June 17, 2026) | |
| 8.1* | List of Subsidiaries | |
| 11.1 | Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 to the Registration Statement on Form F-1 (Amendment No. 2) filed by the Registrant with the SEC on December 18, 2024) | |
| 11.2 | Insider Trading Policy (incorporated herein by reference to Exhibit 11.2 to the annual report on Form 20-F filed by the Registrant with the SEC on August 7, 2025) | |
| 12.1* | CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 12.2* | CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 13.1* | CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 13.2* | CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 15.1* | Consent of David Fong & Co. | |
| 97 | Clawback Policy (incorporated herein by reference to Exhibit 97 to the annual report on Form 20-F filed by the Registrant with the SEC on August 7, 2025) | |
| 101.INS* | Inline XBRL Instance Document. | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| * | Filed with this annual report on Form 20-F |
103
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on Form 20-F on its behalf.
| Skyline Builders Group Holding Limited | |
| /s/ Ngo Chiu Lam | |
| Ngo Chiu Lam | |
| Chief Executive Officer |
Date: August 17, 2026
104
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | ||
| Report of Independent Registered Public Accounting Firm (PCAOB 6722) | F-2 | |
| Consolidated Balance Sheets as of March 31, 2026 and 2025 | F-3 | |
| Consolidated Statements of Operations and Comprehensive Income for the Years Ended March 31, 2026, 2025 and 2024 | F-5 | |
| Consolidated Statements of Shareholders’ Equity for the Years Ended March 31, 2026, 2025 and 2024 | F-6 | |
| Consolidated Statements of Cash Flows for the Years Ended March 31, 2026, 2025 and 2024 | F-7 | |
| Notes to Consolidated Financial Statements | F-8 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Skyline Builders Group Holding Limited
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Skyline Builders Group Holding Limited and its subsidiaries (the “Company”) as of March 31, 2026 and 2025, and the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended March 31, 2026, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at March 31, 2026 and 2025, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2026, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
| We have served as the Company’s auditor since 2024. | /s/ SRCO, C.P.A., Professional Corporation | |
| Amherst, NY | SRCO, C.P.A., Professional Corporation | |
| August 17, 2026 | CERTIFIED PUBLIC ACCOUNTANTS |
F-2
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Consolidated Balance Sheets
As of March 31, 2026 and March 31, 2025
(Expressed in United States Dollars (“US$”))
| As of March 31, | ||||||||
| 2026 | 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | 4,627,050 | 718,625 | ||||||
| Accounts receivable, net (Note 3) | 7,465,036 | 10,032,305 | ||||||
| Contract assets, current portion (Note 4) | 434,603 | 4,636,670 | ||||||
| Prepayments and other current assets (Note 5) | 8,630,554 | 7,020,687 | ||||||
| Restricted cash (Note 2) | 46,267,912 | — | ||||||
| Total current assets | 67,354,993 | 22,408,287 | ||||||
| Non-current assets: | ||||||||
| Equity method investments (Note 6) | 1,318,195 | 1,324,129 | ||||||
| Property, plant and equipment, net (Note 7) | 325,658 | 241,809 | ||||||
| Finance lease right-of-use assets, net (Note 8) | 6,769 | 87,385 | ||||||
| Operating lease right-of-use assets, net (Note 8) | 135,708 | 162,886 | ||||||
| Life insurance policy, cash surrender value (Note 9) | 1,448,925 | 1,390,388 | ||||||
| Contract assets, net of current portion (Note 4) | 1,825,986 | 1,029,078 | ||||||
| Deposits for acquisition of plant and equipment (Note 5) | 1,770,959 | 1,784,389 | ||||||
| Other investment (Note 6) | 46,161,262 | — | ||||||
| Deferred tax assets (Note 12) | 1,412,011 | 65,241 | ||||||
| Total non-current assets | 54,405,473 | 6,085,305 | ||||||
| TOTAL ASSETS | $ | 121,760,466 | 28,493,592 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Bank overdrafts (Note 11) | 201,671 | — | ||||||
| Accounts payable | 1,935,086 | 1,797,735 | ||||||
| Contract liabilities (Note 4) | 752,186 | 2,322,911 | ||||||
| Bank and other borrowings (Note 11) | 11,982,316 | 12,044,435 | ||||||
| Finance lease liabilities (Note 8) | — | 56,795 | ||||||
| Operating lease liabilities, current portion (Note 8) | 76,271 | 115,372 | ||||||
| Due to related parties (Note 13) | 4,186,846 | 1,360,024 | ||||||
| Accrued expenses and other current liabilities (Note 10) | 2,962,366 | 1,770,319 | ||||||
| Income tax payable (Note 12) | 413,940 | 372,816 | ||||||
| Total current liabilities | 22,510,682 | 19,840,407 | ||||||
| Non-current liabilities: | ||||||||
| Convertible notes (Note 16) | 19,567,461 | — | ||||||
| Operating lease liabilities, net of current portion (Note 8) | 52,411 | 26,700 | ||||||
| Other long-term liabilities, net of current portion (Note 15) | 11,055 | 34,362 | ||||||
| Total non-current liabilities | 19,630,927 | 61,062 | ||||||
| TOTAL LIABILITIES | 42,141,609 | 19,901,469 | ||||||
F-3
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Consolidated Balance Sheets — (continued)
As of March 31, 2026 and March 31, 2025
(Expressed in United States Dollars (“US$”))
| As of March 31, | ||||||||
| 2026 | 2025 | |||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Preferred Shares - series A, $0.00001 par value, 950,000,000 shares authorized; 47,326,026 and 0 shares issued and outstanding as of March 31, 2026 and 2025, respectively; no stated liquidation preference as of March 31, 2026 (Note 14) | 473 | — | ||||||
| Preferred Shares - series B, $0.00001 par value, 60,000,000 and 0 shares authorized; 6,442 and 0 shares issued and outstanding as of March 31, 2026 and 2025, respectively; no stated liquidation preference as of March 31, 2026 (Note 14) | — | — | ||||||
| Class
A Ordinary shares, 4,000,000,000 shares (March 31, 2025: 4,950,000,000 shares) authorized, par value US$0.00001 each, 15,486,491 and 28,230,000 Class A ordinary shares issued and outstanding as of March 31, 2026 and 2025, respectively (Note 14) |
155 | 282 | ||||||
| Class B Ordinary shares, 50,000,000 shares authorized, par value US$0.00001 each, 1,995,000 Class B ordinary shares issued and outstanding as of March 31, 2026 and 2025 (Note 14) | 20 | 20 | ||||||
| Class A Ordinary Shares to be issued (Note 14) | 2,235,000 | — | ||||||
| Additional paid-in capital (Note 14) | 82,343,289 | 5,764,699 | ||||||
| (Accumulated losses) retained earnings | (4,708,368 | ) | 2,821,784 | |||||
| Accumulated other comprehensive (loss) income | (251,239 | ) | 5,338 | |||||
| Total shareholders’ equity | 79,618,857 | 8,592,123 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 121,760,466 | 28,493,592 | |||||
| Commitments (Note 18) | ||||||||
| Contingencies (Note 18) | ||||||||
| Subsequent Events (Note 20) | ||||||||
See accompanying notes to consolidated financial statements.
F-4
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
| Years Ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| Revenues (Note 13(e)) | $ | 50,111,828 | $ | 46,009,519 | $ | 48,821,619 | ||||||
| Cost of revenue | (46,817,877 | ) | (43,090,207 | ) | (45,928,093 | ) | ||||||
| Gross profit | 3,293,951 | 2,919,312 | 2,893,526 | |||||||||
| Operating expenses: | ||||||||||||
| General and administrative expenses | (7,181,105 | ) | (1,360,051 | ) | (1,040,245 | ) | ||||||
| Allowance for expected credit losses | (8,196,074 | ) | (5,315 | ) | (197,527 | ) | ||||||
| Total operating expenses | (15,377,179 | ) | (1,365,366 | ) | (1,237,772 | ) | ||||||
| (Loss)/Income from operations | (12,083,228 | ) | 1,553,946 | 1,655,754 | ||||||||
| Other (expense)/income | ||||||||||||
| Interest expense | (771,946 | ) | (891,379 | ) | (733,220 | ) | ||||||
| Change in fair value of derivative liabilities (Note 16) | (3,648,265 | ) | - | - | ||||||||
| Change in fair value of other investments (Note 6) | 23,437,041 | - | - | |||||||||
| Other income, net (Note 13(e)) | 949,592 | 238,677 | 191,892 | |||||||||
| Total other income/(expense), net | 19,966,422 | (652,702 | ) | (541,328 | ) | |||||||
| Income before income taxes and equity in net income of affiliates | 7,883,194 | 901,244 | 1,114,426 | |||||||||
| Income tax credit (expense) (Note 12) | 1,176,560 | (179,325 | ) | (150,734 | ) | |||||||
| Income before equity in net income of affiliates | 9,059,754 | 721,919 | 963,692 | |||||||||
| Equity in net income/(losses) of affiliates (Note 6) | 4,048 | 5,528 | (33,780 | ) | ||||||||
| Net income | $ | 9,063,802 | $ | 727,447 | $ | 929,912 | ||||||
| Other comprehensive (loss) / income | ||||||||||||
| Foreign currency translation adjustment | (256,577 | ) | 15,599 | 9,138 | ||||||||
| Comprehensive (loss) / income | $ | (7,786,729 | ) | $ | 743,046 | $ | 939,050 | |||||
| Net income | $ | 9,063,802 | $ | 727,447 | $ | 929,912 | ||||||
| Deemed dividend distribution on Series A preferred shares through additional paid-in capital | (16,593,954 | ) | - | - | ||||||||
| Net (loss)/income attributable to common stockholders | $ | (7,530,152 | ) | $ | 727,447 | $ | 929,912 | |||||
| Earnings per share – Basic | $ | (0.184 | ) | 0.025 | 0.033 | |||||||
| Earnings per share – Diluted | $ | (0.184 | ) | $ | 0.025 | $ | 0.033 | |||||
| Weighted average shares outstanding – Basic | 40,935,899 | 28,812,740 | 28,500,000 | |||||||||
| Weighted average shares outstanding – Diluted | 40,935,899 | 28,812,740 | 28,500,000 | |||||||||
See accompanying notes to consolidated financial statements.
F-5
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
| Class A Ordinary Shares | Class B Ordinary Shares | Series A Preferred Shares | Series B Preferred Shares | Class
A Shares to be issued | Additional paid-in | Accumulated other comprehensive (loss) | (Accumulated losses) retained | |||||||||||||||||||||||||||||||||||||||||||||||||
| No. of shares | $ | No. of shares | $ | No. of shares | $ | No. of shares | $ | No. of shares | $ | capital $ | income $ | earnings $ | Total $ | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2023 | 26,505,000 | 265 | 1,995,000 | 20 | — | — | — | — | — | — | 957,394 | (19,399 | ) | 1,713,946 | 2,652,226 | |||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | — | — | — | — | 929,912 | 929,912 | ||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | — | 9,138 | — | 9,138 | ||||||||||||||||||||||||||||||||||||||||||
| Dividend declared (Note 14) | — | — | — | — | — | — | — | — | — | — | — | — | (549,521 | ) | (549,521 | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | 26,505,000 | 265 | 1,995,000 | 20 | — | — | — | — | — | — | 957,394 | $ | (10,261 | ) | 2,094,337 | 3,041,755 | ||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | — | — | — | — | 727,447 | 727,447 | ||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | — | 15,599 | — | 15,599 | ||||||||||||||||||||||||||||||||||||||||||
| Issue of shares pursuant to IPO, net of offering costs (Note 14) | 1,725,000 | 17 | — | — | — | — | — | — | — | — | 4,807,305 | — | — | 4,807,322 | ||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | 28,230,000 | 282 | 1,995,000 | 20 | — | — | — | — | — | — | 5,764,699 | 5,338 | 2,821,784 | 8,592,123 | ||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | — | — | — | — | 9,063,802 | 9,063,802 | ||||||||||||||||||||||||||||||||||||||||||
| Share retirement | (18,500,000 | ) | (185 | ) | — | — | — | — | — | — | — | — | (6,999,815 | ) | — | — | (7,000,000 | ) | ||||||||||||||||||||||||||||||||||||||
| Issue of ordinary shares through private placement, net of issuance costs | 2,086,586 | 21 | — | — | — | — | — | — | — | — | 36,827,179 | — | — | 36,827,200 | ||||||||||||||||||||||||||||||||||||||||||
| Issue of Series A preferred shares through warrants exchange, net of issuance cost | — | — | — | — | 47,326,026 | 473 | — | — | — | — | 16,593,481 | — | (16,593,954 | ) | — | |||||||||||||||||||||||||||||||||||||||||
| Issue of Series B preferred shares through private placement, net of issuance costs | — | — | — | — | — | — | 6,442 | — | — | — | 28,733,650 | — | — | 28,733,650 | ||||||||||||||||||||||||||||||||||||||||||
| Issue of warrants pursuant to convertible notes financing | — | — | — | — | — | — | — | — | — | — | 1,423,654 | — | — | 1,423,654 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for service | — | — | — | — | — | — | 750,000 | 2,235,000 | — | — | — | 2,235,000 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares pursuant to warrant exercise | 3,669,905 | 37 | — | — | — | — | — | — | — | — | (32 | ) | — | — | 5 | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | — | (256,577 | ) | — | (256,577 | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2026 | 15,486,491 | 155 | 1,995,000 | 20 | 47,326,026 | 473 | 6,442 | — | 750,000 | 2,235,000 | 82,343,289 | (251,239 | ) | (4,708,368 | ) | 79,618,857 | ||||||||||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
F-6
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Year Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
| Years Ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income | 9,063,802 | 727,447 | 929,912 | |||||||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||||||
| Depreciation | 370,001 | 802,930 | 1,122,490 | |||||||||
| (Gain)/loss on disposal of property, plant and equipment | — | (9,950 | ) | 2,555 | ||||||||
| Allowance for/(reversal) of expected credit losses | 8,196,074 | 5,315 | 197,527 | |||||||||
| Change in cash surrender of life insurance policy | (69,272 | ) | (8,186 | ) | (13,626 | ) | ||||||
| Equity in net (profit) of affiliates | (4,048 | ) | (5,528 | ) | 33,780 | |||||||
| Deferred income taxes | (1,352,524 | ) | (51,267 | ) | (116,475 | ) | ||||||
| Change in fair value of investments | (23,437,041 | ) | — | — | ||||||||
| Loss and fair value change related to derivative liabilities | 3,648,265 | — | — | |||||||||
| Share-based compensation expenses | 2,243,730 | — | — | |||||||||
| Gain on acquisition of subsidiary | (2,223 | ) | — | — | ||||||||
| Change in operating assets and liabilities: | ||||||||||||
| Accounts receivable | (5,728,964 | ) | (2,220,351 | ) | (1,794,055 | ) | ||||||
| Contract assets | 3,410,033 | 485,554 | (5,048,269 | ) | ||||||||
| Prepayments and other current assets | (1,668,171 | ) | (3,736,545 | ) | 467,095 | |||||||
| Income tax payable | 41,124 | 53,494 | 404,508 | |||||||||
| Accounts payable | 151,471 | (245,877 | ) | 324,198 | ||||||||
| Contract liabilities | (1,559,309 | ) | 1,170,396 | 217,410 | ||||||||
| Accrued expenses and other current liabilities | 1,199,961 | 311,462 | (417,736 | ) | ||||||||
| Operating lease liabilities | (159,388 | ) | (283,956 | ) | (387,848 | ) | ||||||
| Due to related parties | 2,848,139 | 85,143 | (2,446,978 | ) | ||||||||
| Other long-term liabilities | (27,996 | ) | (86,072 | ) | 17,680 | |||||||
| Net cash used in operating activities | (2,845,336 | ) | (3,005,991 | ) | (6,507,832 | ) | ||||||
| Cash flows from investing activities: | ||||||||||||
| Proceeds on disposal of life insurance policy | — | 159,251 | — | |||||||||
| Sales proceeds from disposal of property, plant and equipment | 1,643 | 10,164 | — | |||||||||
| Deposits paid for acquisition of plant and equipment | — | (1,781,573 | ) | — | ||||||||
| Purchase of other investment | (23,000,000 | ) | — | — | ||||||||
| Cash received for acquisition of businesses, net of cash paid | 1,763 | — | — | |||||||||
| Purchase of property, plant and equipment | (205,878 | ) | — | (59,717 | ) | |||||||
| Net cash used in investing activities | (23,202,472 | ) | (1,612,158 | ) | (59,717 | ) | ||||||
| Cash flows from financing activities: | ||||||||||||
| Advanced to a director | — | (115,359 | ) | — | ||||||||
| Repayment of bank and other borrowings | (42,077,767 | ) | (41,641,140 | ) | (37,281,541 | ) | ||||||
| Proceeds from bank and other borrowings | 42,106,410 | 42,102,242 | 42,901,267 | |||||||||
| Proceeds from bank overdrafts | 202,459 | — | — | |||||||||
| Repayment of bank overdrafts | — | — | (74,639 | ) | ||||||||
| Repayment of finance lease liabilities | (58,322 | ) | (141,913 | ) | (221,255 | ) | ||||||
| Proceeds from issuance of Class A ordinary shares through private placement | 41,660,000 | — | — | |||||||||
| Issuance cost paid pursuant to issuance of Class A ordinary shares | (4,832,800 | ) | — | — | ||||||||
| Payment pursuant to Class A shares retirement | (7,000,000 | ) | — | — | ||||||||
| Proceeds from issuance of Series B preferred shares | 32,190,000 | — | — | |||||||||
| Issuance cost paid pursuant to issuance of Series B preferred shares | (3,456,350 | ) | — | — | ||||||||
| Proceeds from issuance of convertible notes | 19,575,000 | — | — | |||||||||
| Issuance cost paid pursuant to issuance of convertible notes | (2,232,150 | ) | — | — | ||||||||
| Proceeds from issuance of shares pursuant to IPO | — | 6,900,017 | — | |||||||||
| Payment for offering costs related to IPO | — | (2,092,695 | ) | — | ||||||||
| Net cash provided by financing activities | 76,076,480 | 5,011,152 | 5,323,832 | |||||||||
| Effect of exchange rate changes | 68,503 | 2,027 | 5,083 | |||||||||
| Net change in cash, cash equivalents and restricted cash | 50,106,175 | 395,030 | (1,238,634 | ) | ||||||||
| CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR | 718,625 | 323,595 | 1,562,229 | |||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT THE END OF THE YEAR | 50,824,800 | 718,625 | 323,595 | |||||||||
| Supplemental disclosure of cash flow information: | ||||||||||||
| Interest paid | (771,946 | ) | (891,379 | ) | (733,220 | ) | ||||||
| Income taxes (paid)/refund | (143,336 | ) | (177,098 | ) | 135,417 | |||||||
| Non-Cash Transactions: | ||||||||||||
| Proceeds on disposal of life insurance policy in exchange for repayment of bank borrowings | — | 271,586 | — | |||||||||
| Bank loans assumed on behalf of a related company (Note 13g) | — | 851,718 | — | |||||||||
| Right of use assets obtained in exchange for new operating lease liabilities | 119,007 | — | — | |||||||||
| Deemed dividends distribution on Series A preferred shares through additional paid-in capital | 16,593,954 | — | — | |||||||||
| Reconciliation of cash, cash equivalents, and restricted cash | ||||||||||||
| Cash and cash equivalents | 4,627,050 | 718,625 | 323,595 | |||||||||
| Restricted cash | 46,267,912 | — | — | |||||||||
See accompanying notes to consolidated financial statements.
F-7
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
1. Organization and Business Description
Organization and Nature of Operations
Skyline Builders Group Holding Limited (“Skyline Group”) was incorporated under the laws of the Cayman Islands as an exempted company with limited liability on June 25, 2024. It is a holding company with no business operation.
The Company conducts its primary operations through its indirectly wholly-owned subsidiary, Kin Chiu Engineering Limited (“Kin Chiu”) and Kin Chiu Development Company Limited (“Kin Chiu Development”) which is incorporated and domiciled in Hong Kong SAR; Kin Chiu and Kin Chiu Development principally engage in public civil engineering works, such as road and drainage works, in Hong Kong. It is the wholly-owned subsidiary of Skyline Builders (BVI) Holding Limited which was incorporated and is domiciled in British Virgin Islands (collectively, the “Company”).
Global Critical Minerals LLC (“GCM LLC”) was incorporated in the Delaware, United States of America with limited liability on March 13, 2026, as a wholly-owned subsidiary of the Company. GCM LLC is an investment holding company with no business operation.
The accompanying consolidated financial statements reflect the activities of the Company and the following entities:
| Parent and subsidiaries | Date of Incorporation | Jurisdiction of Formation | Percentage of direct/indirect Economic Ownership | Principal Activities | ||||||||
| Skyline Group | June 25, 2024 | Cayman Islands | Parent | Investment holding | ||||||||
| Skyline Builders (BVI) Holding Limited | June 27, 2024 | British Virgin Islands | 100% | Investment holding | ||||||||
| Kin Chiu | April 24, 2012 | Hong Kong | 100% | Undertaking civil engineering works | ||||||||
| Kin Chiu Development* | April 10, 2021 | Hong Kong | 100% | Undertaking civil engineering works | ||||||||
| GCM LLC | March 13, 2026 | United States of America | 100% | Investment holding | ||||||||
| * | Acquired on November 17, 2025 (Note 17) |
Reorganization and Share Issuance
Skyline Group was an exempted company with limited liability incorporated under the laws of the Cayman Islands on June 25, 2024. The authorized share capital of Skyline Group is US$50,000 divided into 5,000,000,000 ordinary shares with a par value of US$0.00001. Upon inception, the sole shareholder of Skyline Group, Supreme Development (BVI) Holdings Limited, held 5,000,000,000 ordinary shares of Skyline Group.
Skyline Builders (BVI) Holding Limited was incorporated on June 27, 2024 under the laws of the British Virgin Islands, as an intermediate holding company. The sole shareholder of Skyline Builders (BVI) Holding Limited, Skyline Builders Group Holding Limited, holds 50,000 ordinary shares.
On July 24, 2024, Skyline Builders (BVI) Holding Limited acquired 7,450,000 shares, being the entire issued share capital, of Kin Chiu from Mr. Ngo Chiu Lam at the consideration of HK$1. Subsequent to the transfer, Kin Chiu became an indirect wholly-owned subsidiary of Skyline Group.
On July 24, 2024, Supreme Development (BVI) Holdings Limited proposed to surrender 4,973,495,000 ordinary shares to Skyline Group for cancellation, and Skyline Group approved the surrender and cancellation of such shares on the same day. Subsequent to the surrender, Skyline Group was wholly owned as to 26,505,000 ordinary shares by Supreme Development (BVI) Holdings Limited.
On July 24, 2024, Skyline Group passed board resolutions and shareholder resolutions to re-designate (a) 4,923,495,000 authorized but unissued ordinary shares of par value of US$0.00001 each into 4,923,495,000 Class A Ordinary Shares of par value of US$0.00001 each; and (b) 50,000,000 authorized but unissued ordinary shares of par value of US$0.00001 each into 50,000,000 Class B Ordinary Shares of par value of US$0.00001 each, and re-designated a total of 26,505,000 issued ordinary shares of par value of US$0.00001 owned by Supreme Development (BVI) Holdings Limited) each into 26,505,000 Class A ordinary shares of par value of US$0.00001 each. Subsequent to the re-designation, Skyline Group was owned as to 26,505,000 Class A Ordinary Shares by Supreme Development (BVI) Holdings Limited. Simultaneously, Skyline Group issued 1,995,000 Class B ordinary shares of par value of US$0.00001 each to Supreme Development (BVI) Holdings Limited. On the same day, Skyline Group also adopted an amended and restated memorandum and articles of association.
F-8
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
1. Organization and Business Description (cont.)
On July 30, 2024, Supreme Development (BVI) Holdings Limited entered into Sale and Purchase Agreements with Greet Harmony Global Limited, Ever Glory (BVI) Holdings Limited, Tight Core Limited, Mitsui Holding Co. Limited, Great Sage International Limited and Omen Wealth Limited, respectively. Pursuant to the Sales and Purchase Agreements, Supreme Development (BVI) Holdings Limited was to sell, and Greet Harmony Global Limited, Ever Glory (BVI) Holdings Limited, Tight Core Limited, Mitsui Holding Co. Limited, Great Sage International Limited and Omen Wealth Limited were to acquire, 4.90%, 4.90%, 4.90%, 4.80%, 4.80% and 4.70% of the issued Class A equity interests in Skyline Builders Group Holding Limited, at the consideration of US$292,456, US$292,456, US$292,456, US$286,488, US$286,488 and US$280,519, respectively. On the same date, Supreme Development (BVI) Holdings Limited executed the instrument of transfers whereby Supreme Development (BVI) Holdings Limited had transferred 1,298,745, 1,298,745, 1,298,745, 1,272,240, 1,272,240 and 1,245,735 Class A Ordinary Shares, out of its 26,505,000 Class A Ordinary Shares, to Greet Harmony Global Limited, Ever Glory (BVI) Holdings Limited, Tight Core Limited, Mitsui Holding Co. Limited, Great Sage International Limited and Omen Wealth Limited, respectively. Subsequent to the transfers, Skyline Builders Group Holding Limited is owned as to (i) 18,818,550 Class A Ordinary Shares and 1,995,000 Class B Ordinary Shares by Supreme Development (BVI) Holdings Limited; and (ii) 1,298,745, 1,298,745, 1,298,745, 1,272,240, 1,272,240 and 1,245,735 Class A Ordinary Shares by Greet Harmony Global Limited, Ever Glory (BVI) Holdings Limited, Tight Core Limited, Mitsui Holding Co. Limited, Great Sage International Limited and Omen Wealth Limited, respectively.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).
Skyline Group and its subsidiaries resulting from Reorganization has always been under the common control of the same controlling shareholder before and after the Reorganization. The consolidation of Skyline Group and its subsidiaries has been accounted for at historical cost and prepared on the basis as if the transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements. Results of operations for the periods presented comprise those of the previously separate entities combined from the beginning of the period to the end of the period, eliminating the effects of intra-entity transactions.
The consolidated financial statements include the financial statements of Skyline Group and its wholly owned subsidiaries. All intercompany transactions and balances among Skyline Group and its subsidiaries have been eliminated upon consolidation.
Use of Estimates and Assumptions
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Significant estimates required to be made by management, include, but are not limited to, the expected credit loss provision, the determination of the useful lives of property, plant and equipment, impairment of long-lived assets, allowance for deferred tax assets, uncertain tax position, revenue recognition and contingencies. Actual results could differ from those estimates. The Company evaluates these estimates on an ongoing basis and revises estimates as circumstances change. The Company bases its estimates on historical experience, anticipated results, trends, and other various assumptions that it believes are reasonable.
F-9
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
2. Summary of Significant Accounting Policies (cont.)
Foreign Currency Translation and transaction
The Company’s principal country of operations is Hong Kong. The consolidated financial position and results of its operations are determined using Hong Kong Dollars (“HK$”), the local currency, as the functional currency of Skyline Group, Skyline Builders (BVI) Holding Limited, Kin Chiu and Kin Chiu Development. The Company’s consolidated financial statements are reported using the U.S. Dollars (“US$” or “$”). The results of operations and the consolidated statements of cash flows denominated in foreign currency are translated at the average rate of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the consolidated balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive (loss) income included in consolidated statements of shareholders’ equity. Gains and losses from foreign currency transactions are included in the Company’s consolidated statements of operations and comprehensive income.
The following table outlines the currency exchange rates that were used in preparing the consolidated financial statements:
| 2026 | 2025 | |||||||
| Year-end spot rate | $1 = HK$7.8390 | $1 = HK$7.7800 | ||||||
| Average rate | $1 = HK$7.8085 | $1 = HK$7.7923 |
Fair Value of Financial Instruments
The fair value of a financial instrument is defined as the exchange price that would be received from an asset or paid to transfer a liability (as exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, restricted cash, accounts receivable - net, other current assets, accounts payable, bank and other borrowings, convertible notes, finance lease liabilities, current portion, operating lease liabilities, current portion, due to related parties and accrued expenses and other current liabilities, approximate their fair values because of the short maturity of these instruments and market rates of interest.
ASC 825-10 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
| Level 1 | — | Quoted prices in active markets for identical assets and liabilities. | |
| Level 2 | — | Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |
| Level 3 | — | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The carrying amounts of the Company’s cash and cash equivalents, restricted cash, accounts receivable, other current assets, accounts payable, bank and other borrowings, convertible notes, due to related parties and accrued expenses and other current liabilities approximated their fair values as of March 31, 2026, 2025 and 2024 due to their short-term nature.
Cash surrender value of life insurance policies are classified as Level 2. The fair value of the life insurance policies was determined by the underwriting insurance company’s valuation models and represents the guaranteed value the Company would receive upon surrender of these policies as of the reporting date.
F-10
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
2. Summary of Significant Accounting Policies (cont.)
Other investments are classified as Level 3. The Company holds equity investments in limited liability companies. The Company initially measured the investments at cost in October 2025 and November 2025. During the period from December 2025 to March 2026, the investee, Kaz Resources LLC, completed financings with unrelated third-party investors. The transaction represented an observable price change for an identical or other similar equity security held by The Company. Accordingly, The Company remeasured the investment to fair value and recorded an unrealized gain of $23.6 million within other income (expense). The resulting carrying value of these investments are $43.4 million and $3 million as of March 31, 2026, respectively. Because the valuation incorporates significant unobservable inputs, the investments are classified as a Level 3 fair value measurement.
The Company’s convertible notes are measured as a Level 3 fair value and was $19.5 million as at March 31, 2026.
The following table presents assets and liabilities measured at fair value on a recurring basis, by level within the fair value hierarchy:
| As of March 31, 2026 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Life insurance policy, CSV | $ | — | $ | 1,448,925 | $ | — | $ | 1,448,925 | ||||||||
| Convertible notes (liability) | — | — | (19,567,461 | ) | (19,567,461 | ) | ||||||||||
| As of March 31, 2025 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Life insurance policy, CSV | $ | — | $ | 1,390,388 | $ | — | $ | 1,390,388 | ||||||||
The following table presents assets and liabilities measured at fair value on a non-recurring basis, by level within the fair value hierarchy:
| As of March 31, 2026 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Other investments | — | — | $ | 46,161,262 | $ | 46,161,262 | ||||||||||
Other investments are accounted for under the measurement alternative in ASC 321 and are not remeasured to fair value on a recurring basis. The carrying value is adjusted only when the Company identifies an observable price change in an orderly transaction for an identical or similar investment of the same issuer, or when an impairment indicator exists. Accordingly, these investments are classified as a nonrecurring fair value measurement for purposes of the disclosure.
No transfers between levels occurred during the years ended March 31, 2026 and 2025.
The following table presents a reconciliation of the Company's Level 3 assets and liabilities:
| Other investments | Convertible notes | |||||||
| Beginning balance | $ | — | $ | — | ||||
| Additions / issuances | 23,000,000 | (19,575,000 | ) | |||||
| Gains (losses) included in earnings | 23,437,041 | 7,539 | ||||||
| Foreign currency translation | (275,779 | ) | — | |||||
| Ending balance | $ | 46,161,262 | $ | (19,567,461 | ) | |||
Transaction costs and the fair value of the Placement Agent Warrants issued in connection with the Convertible Notes, totaling $3,655,804, are not included in the reconciliation above, as these amounts were recognized in the statement of operations rather than capitalized into the carrying value of the liability.
The following table presents the valuation technique and significant unobservable inputs used for Level 3 measurements:
| Instrument | Valuation technique | Significant unobservable inputs | |||||
| Other investments | Observable transaction price | Transaction price of recent third-party financing round | |||||
| Convertible notes | Binomial lattice model | Discount rate of 13.4% (CCC-rated yield index); volatility of 40.0%; calibration discount of 30.9% | |||||
F-11
SKYLINE BUILDERS GROUP HOLDING LIMITED AND
ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
2. Summary of Significant Accounting Policies (cont.)
Other investments
The Group’s other investments include equity securities without readily determinable fair values.
The Group elects measurement alternative to the fair value measurement for the equity securities without readily determinable fair values, under which these investments are measured at cost, less impairment, plus or minus observable price changes of an identical or similar investment of the same issuer with the fair value change recorded in the consolidated statements of operations.
The Group reviews its equity securities without readily determinable fair value for impairment at each reporting period. If a qualitative assessment indicates that the investment is impaired, the Group estimates the investment’s fair value in accordance with the principles of ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). If the fair value is less than the investment’s carrying value, the Group recognizes an impairment loss equal to the difference between the carrying value and the fair value in the consolidated statements of operations.
Investment Under the Equity Method
A joint venture is a contractual arrangement whereby the Company and other parties undertake an economic activity through a jointly controlled entity. Joint control exists when strategic, financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control. Joint ventures are accounted for using the equity method.
Under the equity method of accounting, the investment is initially recorded at cost, including transaction costs incurred to acquire the investment, and thereafter adjusted for additional investments, distributions, and the proportionate share of earnings or losses of the affiliates. The Company’s equity method investment is reviewed for impairment whenever events or changes in circumstances indicate that an other-than-temporary decline in value may have occurred. If it is determined that a loss in value of the equity method investment is other than temporary, an impairment loss is measured based on the excess of the carrying amount of an investment over its estimated fair value. Impairment analyses are based on current plans, intended holding periods, and available information at the time the analysis is prepared.
The Company also holds investments in equity securities without readily determinable fair values. These investments are accounted for under the measurement alternative in accordance with ASC 321, Investments - Equity Securities (“ASC 321”), which allows the Company to record the investments at cost, less impairments, plus or minus observable price changes in orderly transactions for the identical or similar investment. The Company’s investments recorded at cost include investment in Reemag LLC (“Reemag”) and Kaz Resources, LLC (“Kaz”), a company in the critical minerals space.
If the Company determines that an impairment is other-than-temporary, it recognizes a loss equal to the difference between the investment’s carrying amount and its fair value. Equity method investments and investments at cost are included in “Equity method investments” and “Other investments,” respectively, on the consolidated balance sheet.
Business Combinations and asset acquisition
The Company accounts for business combinations under ASC 805, Business Combinations, applying the acquisition method when the assets acquired and liabilities assumed meet the definition of a business. When a transaction results in the acquisition of a set of assets and activities that does not meet the definition of a business, the Company accounts for the transaction as an asset acquisition or, where the acquiree is a variable interest entity (“VIE”) for which the Company is the primary beneficiary, in accordance with ASC 810-10-30-3. In such cases, the acquired assets and assumed liabilities are recognized and measured at fair value using the guidance in ASC 805-20 (excluding goodwill), with any difference between the fair value of consideration transferred and the fair value of net assets acquired recognized as a gain or loss in the consolidated statement of operations. The Company consolidates entities in which it holds a controlling financial interest, including VIEs for which it is determined to be the primary beneficiary based on the power to direct the entity’s most significant activities and the obligation to absorb losses or right to receive benefits that could be significant to the VIE.
F-12
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
2. Summary of Significant Accounting Policies (cont.)
Cash and cash equivalents
All highly liquid instruments with original maturities of three months or less are prepared on the consolidated financial statements as cash equivalents. The Company maintains a centralized cash management system whereby our excess cash balances are invested in high quality short-term money market instruments, which are considered cash equivalents. The cash balances are maintained in certain Hong Kong based domestic bank accounts that exceed federally insured limits. As of March 31, 2026 and 2025, the cash equivalents amounted to US$4,627,050 and US$718,625, respectively.
Restricted Cash
The Company maintains escrow accounts in connection with private placements of its securities. Investor proceeds held in these accounts are unavailable for general corporate purposes and may not be released unilaterally by the Company; disbursement requires joint written instructions from the Company and the applicable placement agent confirming that closing conditions have been satisfied. If an offering is terminated or a subscription is rejected, the related proceeds are returned to investors without interest.
The escrow arrangements comprise an August 2025 agreement (offering of up to US$18,775,000); an October 2025 agreement; and a February 2026 agreement (offering of up to US$75,000,000), as amended to extend the escrow period through April 13, 2026 and add convertible note offerings of up to US$20,175,000 and US$23,100,000. None specify a minimum offering amount or financial maintenance covenants. Disbursement from escrow requires joint written instructions from the Company and the applicable placement agent, and the escrowed proceeds are returned to the applicable investors if the underlying offering does not close. As of report date, the restricted cash balance remains subject to the escrow arrangements pending satisfaction of the applicable closing conditions.
As of March 31, 2026 and 2025, restricted cash was US$46,197,750 and US$nil, respectively, classified as current based on the expected timing of release or refund.
Accounts Receivable, net
Accounts receivable is recognized and carried at original invoiced amount net of expected losses.
The Company established the provision at differing rates and are based upon the age of the trade receivable, the Company’s historical collection experience in each customer and management’s best estimate of specific losses on individual exposures, where appropriate. Specific customer provisions are made when a review of significant outstanding amounts, utilizing information about customer creditworthiness and current economic trends, indicates that collection is doubtful. As of March 31, 2026 and 2025, there were US$456,077 and US$303,925 allowances for expected losses recognized related to accounts receivable, respectively.
Prepayments
Prepayments represent advance payments made to the service providers for future services. Prepayments are short-term in nature and are reviewed periodically to determine whether their carrying value has become impaired. The Company considers the assets to be impaired if the realizability of the prepayments becomes doubtful. As of March 31, 2026 and 2025, there was nil allowance recorded as the Company considers all of the prepayments recoverable.
Investment in key management insurance policy
The Company invests in a key management insurance policy which is a life insurance policy. The key management insurance policy is initially recognized at the amount of premium paid, and subsequently measured at the end of each reporting period at the cash surrender value that could be realized under the insurance policy, which is primarily based on the guaranteed cash value stated on the annual statement from the insurance company. Changes to the cash surrender value at the end of each reporting period will be recognized in other income or other expenses in the consolidated statements of operations and comprehensive income. Any gain or loss on the derecognition of the investment in the event of death of the insured person, the surrender of the policy, or upon the maturity of the policy, will be recognized in other income or other expenses in the consolidated statements of operations and comprehensive income.
F-13
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
2. Summary of Significant Accounting Policies (cont.)
Property, plant and Equipment, net
Property, plant and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are provided for on a straight-line basis over the estimated useful lives of the related assets as follows:
| Furniture and fixtures | 4 – 5 years | |
| Machineries | 4 – 10 years | |
| Motor vehicles | 5 years | |
| Leasehold improvements | Shorter of the lease terms or useful life |
Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of operations and comprehensive income in other income or expenses.
The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.
Impairment of Long-Lived Assets
The Company reviews the recoverability of its long-lived assets, such as property, plant and equipment and right-of-use assets, whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Company would recognize an impairment loss, which is the excess of carrying amount over the fair value of the assets, using the expected future discounted cash flows. There were no impairment losses on long-lived assets for the years ended March 31, 2026, 2025 and 2024.
Lease
The Company applies the provisions of ASC Topic 842, Leases which requires lessees to recognize lease assets and lease liabilities on the consolidated balance sheet. The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. The Company determines whether an arrangement is or contain a lease at inception. A lease for which substantially all the benefits and risks incidental to ownership remain with the lessor is classified by the lessee as an operating lease. A lease is classified as a finance lease when the lease meets any of the following criteria at lease commencement:
(a) The lease transfers ownership of the underlying asset to the lessee by the end of the lease term.
(b) The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
(c) The lease term is for the major part of the remaining economic life of the underlying asset. However, if the commencement date falls at or near the end of the economic life of the underlying asset, this criterion shall not be used for purposes of classifying the lease.
(d) The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset.
(e) The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.
When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company must discount lease payments based on an estimate of its incremental borrowing rate of 5.88% (2025: 5.88%).
F-14
SKYLINE BUILDERS GROUP HOLDING LIMITED AND
ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
2. Summary of Significant Accounting Policies (cont.)
Right-of-use Assets
The Company’s right-of-use assets consist of leased assets recognized in accordance with ASC 842, Leases, which requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liability represents the Company’s obligation to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on the consolidated balance sheet and are expensed on a straight-line basis over the lease term in the consolidated statements of operations and comprehensive income. The Company determines the lease term by agreement with lessor. In cases where the lease does not provide an implicit interest rate, the Company uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.
Revenue Recognition
Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the company satisfies a performance obligation.
The Company enters into agreements with clients that create enforceable rights and obligations and for which it is probable that the Company will collect the consideration to which it will be entitled as services transfer to the customer. It is customary practice for the Company to have the agreements with its customers in writing, orally, or in accordance with other customary business practices. The Company recognizes revenue when (or as) a performance obligation is satisfied, i.e. when “control” of the goods or services underlying the particular performance obligation is transferred to customers.
Control of the good or service may be transferred over time or at a point in time. Control of the good or service is transferred over time if one of the following criteria is met:
| ● | the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the Company performs; |
| ● | the Company’s performance creates and enhances an asset that the customer controls as the Company performs; or |
| ● | the Company’s performance does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed to date. |
F-15
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
2. Summary of Significant Accounting Policies (cont.)
If the control of the good or service transfers over time, revenue is recognized over the period of the contract by reference to the progress towards complete satisfaction of the relevant performance obligation. Otherwise, revenue is recognized at a point in time when customer obtains control of the distinct good or service.
Revenue is measured based on the consideration specified in a contract with a customer. The Company recognizes revenue when it transfers control of service to a customer.
The Company performs public civil engineering works, including road and drainage works, under master construction agreements and other contracts with customer-specified requirements. These construction services are provided solely for the benefit of our customers, as the assets being created or maintained are controlled by them, and the services we provide have no alternative use to us. The performance obligation is satisfied when control of the promised goods or services is transferred to the customer over time, aligning with the ongoing services provided, with customers simultaneously receiving and benefiting from the Company’s work.
Contracts which include construction services are generally accounted for as a single deliverable (a single performance obligation) and are no longer segmented between types of services. The Company has not bundled any goods or services that are not considered distinct.
Revenue from public civil engineering works is recognized over time, using the output method based on surveys of completed work. These surveys are certified by architects, surveyors, or other customer-appointed representatives, or are estimated with reference to the progress payment applications submitted by the Company to the customer.
The certification formalizes the progress of work transferred to the customer, based on the transfer of control during construction, as the customer continuously receives and controls the work-in-progress. Management believes the output method accurately reflects the Company’s performance in fulfilling these obligations.
For contracts that contain variable consideration (variation order of construction work), the Company estimates the amount of consideration to which it will be entitled using the expected value method, which better predicts the amount of consideration to which the Company will be entitled. The estimated amount of variable consideration is included in the transaction price only to the extent that it is highly probable that such an inclusion will not result in a significant revenue reversal in the future when the uncertainty associated with the variable consideration is subsequently resolved.
Based on the Company’s historical warranty experience and the limited warranty period offered, management concluded that the warranty obligation is not significant. The typical contract length of the Company entered from the date of original contract ranges from 21 months to 96 months (2025: 3 months to 73 months).
Contracted but not yet recognized revenue was approximately US$47,487,628 and US$56,361,136 as of March 31, 2026 and 2025, respectively.
The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at March 31, 2026 and 2025 and the expected timing of recognizing revenue are as follows:
| 2026 | 2025 | |||||||
| Within one year | $ | 40,959,513 | $ | 37,935,694 | ||||
| More than one year but not more than two years | 5,161,135 | 15,308,438 | ||||||
| More than two years | 1,366,980 | 3,117,004 | ||||||
| $ | 47,487,628 | $ | 56,361,136 | |||||
At the end of each reporting period, the Company updates the estimated transaction price (including updating its assessment of whether an estimate of variable consideration is constrained) to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period.
The Company recognizes claims against vendors, sub-consultants, subcontractors and others as a reduction in costs when the contract establishes enforceability, and the amounts of recovery are reasonably estimable and probable. Reduction in costs are recognized at the lesser of the amount management expects to recover or costs incurred.
F-16
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
2. Summary of Significant Accounting Policies (cont.)
Contract Assets and Contract Liabilities
The Company has enforceable rights to consideration from customers for the provision of roads and drainage services. Contract assets arise when the Company completed the public civil engineering works under relevant contracts but yet to be certified by independent surveyors appointed by customers.
The Company’s contract assets are converted to account receivables on an ongoing basis, upon being certified by independent surveyor’s appointed by customers.
Retention receivables, included in contract assets, represent the amounts withheld from billings pursuant to provisions in the contracts and may not be paid until the completion of specific tasks or the completion of the project. Retention receivables may also be subject to restrictive conditions such as performance guarantees.
A contract liability represents the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer.
Cost of Revenue
The Company’s cost of revenue is primarily comprised of the subcontracting costs, materials costs and staff costs. These costs are expensed as incurred.
Employee Benefit Plan
Employees of the Company located in Hong Kong participate in a compulsory saving scheme (pension fund) for the retirement of residents in Hong Kong. Employees are required to contribute monthly to mandatory provident fund schemes provided by approved private organizations, according to their salaries and the period of employment.
Net periodic pension cost includes service cost, interest cost, expected return on plan assets, amortization of prior service cost, and actuarial gains or losses. Service cost is presented in operating expenses, while other components are included in other income (expense) (Note 15).
Assumptions used in the measurement of pension obligations include discount rates, expected return on plan assets, and rate of compensation increases. These assumptions are reviewed annually and updated as appropriate. Changes in estimates are accounted for prospectively in accordance with ASC 250. The present value of the defined benefit obligation, the related current service cost, and past service cost are determined annually by an independent qualified actuary.
The principal employee’s retirement scheme is under the Hong Kong Mandatory Provident Fund Schemes Ordinance. Contributions are made by both the employer and the employee at the rate of 5% on the employee’s relevant salary income, subject to a cap of monthly relevant income of HK$30,000 (US$3,844). The Company is required to contribute to the plan based on certain percentages of the employees’ salaries, up to a maximum amount specified by the local government. Total expenses for the plan were US$156,112, US$279,926 and US$415,011 for the years ended March 31, 2026, 2025 and 2024, respectively.
Income Taxes
The Company accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company believes there were no uncertain tax positions at March 31, 2026 and March 31, 2025, respectively. The Company does not expect that its assessment regarding unrecognized tax positions will materially change over the next 12 months. The Company is not currently under examination by an income tax authority, nor has been notified that an examination is contemplated.
F-17
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
2. Summary of Significant Accounting Policies (cont.)
Earnings Per Share
The Company has two classes of ordinary shares authorized: Class A Ordinary Shares and Class B Ordinary Shares. The rights of the holders of Class A and Class B Ordinary Shares are identical, except with respect to voting rights. Each share of Class A Ordinary Shares is entitled to one vote per share and each share of Class B Ordinary Shares is entitled to twenty votes per share. Because Class A Ordinary Shares and Class B Ordinary Shares have the same rights to dividends and undistributed earnings, the Company allocates undistributed earnings attributable to ordinary shares between the ordinary stock classes on a one-to-one basis when computing earnings per share. As a result, basic and diluted earnings per share of Class A Ordinary Shares and per share of Class B Ordinary Share are equivalent.
The Company applies the guidance in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share of common stock is calculated by dividing net income dividing net income or loss attributable to ordinary shareholders by the weighted average number of shares of ordinary shares outstanding during the period. Net income or loss attributable to ordinary shareholders reflects adjustments for deemed dividends, when applicable. During the year ended March 31, 2026, the Company recognized a deemed dividend of $16,593,954 related to the issuance of Series A Preferred Shares in exchange for certain warrants (see Note 14).(see Note 14). Pre-funded warrants are included in the weighted-average number of shares outstanding used to calculate basic and diluted earnings per share because their exercise price is nominal and there are no substantive conditions that must be satisfied prior to their exercise.
Diluted earnings or earnings per share of ordinary shares is computed similarly to basic earnings per share except that the numerator and denominator are adjusted to reflect the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised, converted, or settled in ordinary shares. The Company's potentially dilutive securities include warrants, convertible promissory notes, convertible preferred stock and shares issuable under outstanding arrangements. Warrants and shares issuable are evaluated using the treasury stock method, while convertible promissory notes and convertible preferred shares are evaluated using the if-converted method. Under the if-converted method, the calculation assumes the conversion of the instruments at the beginning of the period (or issuance date, if later), with corresponding adjustments made to the numerator for any resulting changes to income (loss) attributable to ordinary shareholders. For the periods presented, the assumed exercise, conversion, or issuance of the Company's potentially dilutive securities, including the related numerator adjustments, would have been anti-dilutive. Accordingly, such securities were excluded from the calculation of diluted earnings per share.
Comprehensive Income
Comprehensive income consists of two components, net income and other comprehensive (loss) income. Other comprehensive (loss) income refers to revenue, expenses, gains and losses that under U.S. GAAP are recorded as an element of shareholders’ equity but are excluded from net income. Other comprehensive (loss) income consists of foreign currency translation adjustment resulting from the Company translating its consolidated financial statements from functional currency into reporting currency.
Commitments and Contingencies
In the normal course of business, the Company is subject to contingencies, such as legal proceedings and claims arising out of its business, which cover a wide range of matters. Liabilities for contingencies are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
If the assessment of a contingency indicates that it is probable that a material loss is incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
F-18
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
2. Summary of Significant Accounting Policies (cont.)
Related parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence, such as a family member or relative, shareholder, or a related corporation.
Financial Instruments Risks
Currency Risk
The Group’s operating activities are transacted in HK$. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. The Group considers the foreign exchange risk in relation to transactions denominated in HK$ with respect to US$ is not significant as HK$ is pegged to US$.
Concentration and Credit Risk
Financial instruments that potentially subject the Company to the concentration of credit risks consist of cash and cash equivalents and accounts receivable. The maximum exposures of such assets to credit risk are their carrying amounts as of the balance sheet dates. The Company deposits its cash and cash equivalents with financial institutions located in Hong Kong. The Deposit Protection Scheme introduced by the Hong Kong Government insured each depositor at one bank for a maximum amount of US$102,054 (HK$800,000), US$102,828 (HK$800,000) and US$63,898 (HK$500,000) as of March 31, 2026, 2025 and 2024 respectively. In contrast, balances of US$4,380,654, US$615,797 and US$257,219 as of March 31, 2026, 2025 and 2024, respectively, were not covered by insurance. The Company believes that no significant credit risk exists as these financial institutions have high credit quality and the Company has not incurred any losses related to such deposits.
For the credit risk related to accounts receivable and contract assets, the Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. The Company establishes an allowance for credit losses based upon estimates, factors surrounding the credit risk of specific customers and other information. The management believes that its contract acceptance, billing, and collection policies are adequate to minimize material credit risk. Application for progress payment of contract works is made on a regular basis. The Company seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by management.
For the year ended March 31, 2026 100% of the Company’s total revenue contributed within Hong Kong , and 64%, 34% and 2% of the Company’s total assets contributed within Hong Kong , Kazakhstan and United States, respectively; for the years ended March 31, 2025 and 2024, revenue and assets within Hong Kong contributed 100% of the Company’s total revenue. The Company has a concentration of its revenue and accounts receivable with specific customers.
For the year ended March 31, 2026, three customers accounted for approximately 36.8%, 18.9% and 16.3% of the Company’s total revenue. For the year ended March 31, 2025, five customers accounted for approximately 31.1%, 18.6%, 12.0%, 10.8% and 10.2% of the Company’s total revenue. For the year ended March 31, 2024, four customers accounted for approximately 33.4%, 14.7%, 14.1% and 13.9% of the Company’s total revenue.
As of March 31, 2026, three customers’ accounts receivable accounted for 31.8%, 28.8% and 15.5% of the total accounts receivable, net. As of March 31, 2025, five customers’ accounts receivable accounted for 27.7%, 19.9%, 17.0%, 13.6% and 12.8% of the total accounts receivable, net.
As of March 31, 2026, two customers’ contract assets accounted for 62.1% and 16.7% of the total contract assets, net. As of March 31, 2025, five customers’ contract assets accounted for 21.3%, 18.5%, 14.9%, 12.5% and 10.1% of the total contract assets, net.
F-19
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
2. Summary of Significant Accounting Policies (cont.)
For the year ended March 31, 2026, four suppliers accounted for approximately 45.6%, 13.9%, 11.8% and 11.1% of the Company’s total cost of revenue. For the year ended March 31, 2025, three suppliers accounted for approximately 31.8%, 16.8% and 11.1% of the Company’s total cost of revenue. For the year ended March 31, 2024, two suppliers accounted for approximately 38.1% and 12.6% of the Company’s total cost of revenue.
As of March 31, 2026, two suppliers’ accounts payable accounted for approximately 42.3% and 13.4% of the total accounts payable. As of March 31, 2025, two supplier’s accounts payable accounted for approximately 31.7% and 14.3% of the total accounts payable.
Interest rate risk
The following table details the interest rate profile of the Company’s borrowings of March 31, 2026 and 2025:
| 2026 | 2025 | |||||||
| Fixed rate borrowings: | ||||||||
| Bank and other borrowings | $ | 892,972 | $ | 514,138 | ||||
| Finance lease liabilities, current | — | 56,795 | ||||||
| Convertible notes | 19,567,461 | — | ||||||
| Floating rate borrowings: | ||||||||
| Bank overdrafts | 201,671 | — | ||||||
| Bank and other borrowings | 11,089,344 | 11,530,297 | ||||||
Fluctuations in market interest rates may negatively affect the Company’s financial condition and results of operations. The Company is exposed to floating interest rate on floating rate bank borrowings and bank overdrafts. The Company has not used any derivative financial instruments to manage the interest rate exposure.
At March 31, 2026 and 2025, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would have decreased/increased the Company’s profit after tax by US$94,280 and US$96,278 respectively.
The sensitivity analysis above indicates the instantaneous change in the Company’s profit after tax that would arise assuming that the change in interest rates had occurred at the end of the reporting period and had been applied to re-measure those financial instruments held by the Company which expose the Company to fair value interest rate risk at the end of the reporting period. In respect of the exposure to cash flow interest rate risk arising from floating rate non-derivative instruments held by the Company at the end of the reporting period, the impact on the group’s profit after tax is estimated as an annualized impact on interest expense or income of such a change in interest rates.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
F-20
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
2. Summary of Significant Accounting Policies (cont.)
Typically, the Company ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 90 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
Labor price risk
Our business requires a substantial number of personnel. Any failure to retain stable and dedicated labor by us may lead to disruption to our business operations. Although we have not experienced any labor shortage to date, we have observed an overall tightening and increasingly competitive labor market. We have experienced, and expect to continue to experience, increases in labor costs due to increases in salary, social benefits and employee headcount. We compete with other companies in our industry and other labor-intensive industries for labor, and we may not be able to offer competitive remuneration and benefits compared to them. If we are unable to manage and control our labor costs, our business, financial condition and results of operations may be materially and adversely affected.
Convertible notes
The Company accounts for its convertible notes under ASC 480, Distinguishing Liabilities from Equity. Where the Company elects the fair value option under ASC 825-10, Financial Instruments, convertible notes are recognized at fair value on the date of issuance and are not separately assessed for bifurcation of embedded features, consistent with ASC 815-15-25. Transaction costs and other costs directly attributable to issuance, including the grant-date fair value of any warrants issued to placement agents in connection with the notes, are expensed immediately in the consolidated statement of operations rather than deferred, consistent with ASC 825-10-25. The notes are remeasured to fair value at each reporting date, with changes in fair value recognized in earnings, using a binomial lattice or other appropriate option-pricing model and significant unobservable inputs, classified within Level 3 of the fair value hierarchy established by ASC 820, Fair Value Measurement.
Equity Instruments — Common and Preferred Shares, and Warrants
The Company classifies its Class A Ordinary Shares, Series A Ordinary Shares, and Series B Preferred Shares as permanent equity when such instruments do not contain features requiring or permitting redemption at the option of the holder, upon an event outside the Company’s control, or otherwise, in accordance with ASC 480. Conversion features embedded within preferred shares are evaluated under ASC 815-15; features that are indexed to the Company’s own stock and would qualify for equity classification if freestanding are not bifurcated as separate embedded derivatives, pursuant to the scope exception in ASC 815.
Warrants issued by the Company, including pre-funded warrants, investor warrants, and placement agent warrants, are evaluated under ASC 480 and ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity, to determine liability or equity classification. Warrants that are not mandatorily redeemable, do not obligate the Company to repurchase its own shares, and are indexed to the Company’s own stock are classified as equity, and are not subsequently remeasured. The Company has concluded that a standard exercise price reset (down-round protection) feature, by itself, does not preclude equity classification, consistent with ASC 815-40.
When multiple equity-classified instruments are issued together for a single, non-allocated purchase price, the Company allocates gross proceeds among the individual components on a relative fair value basis, with the fair value of each component estimated as of the issuance date using an option-pricing model (e.g., Black-Scholes), classified as a Level 3 fair value measurement under ASC 820 due to the use of significant unobservable inputs, including expected volatility. Issuance costs, including cash costs and the grant-date fair value of placement agent warrants, are charged against gross proceeds as a reduction of equity and allocated to the individual equity components on the same relative fair value basis, with no net effect on total shareholders’ equity from the issuance of placement agent warrants. Issuance costs allocated to liability-classified instruments (e.g., convertible notes measured under the fair value option) are expensed as incurred rather than netted against the related instrument.
F-21
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
2. Summary of Significant Accounting Policies (cont.)
Warrant Exchanges
The Company evaluates exchanges or modifications of its warrants under ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity. Where warrants that are equity-classified both immediately before and immediately after an exchange are exchanged for new equity instruments, the Company measures the accounting effect as the excess, if any, of the fair value of the instruments received over the fair value of the instruments surrendered, both estimated using an appropriate option-pricing model. Where the exchange does not involve the receipt of goods or services from the holder, is not undertaken in connection with a new financing, and does not involve a modification of an employee or director award, any such excess is recognized as a deemed dividend, recorded as a reduction of retained earnings (or additional paid-in capital, if retained earnings is insufficient) with a corresponding increase to additional paid-in capital.
Shares Retirement
The Company accounts for the retirement of its own shares under ASC 505-30, Treasury Stock. Pursuant to its elected accounting policy, the excess of the repurchase price over the par value of retired shares is recorded entirely as a reduction of additional paid-in capital, to the extent additional paid-in capital does not become negative; any remaining excess would be charged to retained earnings.
Share-Based Compensation
The Company accounts for share-based awards granted to employees and directors under ASC 718, Compensation — Stock Compensation. Awards are measured at fair value on the grant date, generally based on the market price of the Company’s Class A Ordinary Shares, and compensation cost is recognized over the requisite service period, typically on a straight-line basis over the vesting term. For awards that vest based solely on service conditions, compensation cost for each tranche is recognized as the shares vest.
Recently Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, “Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses”. The amendments in this ASU are intended to improve financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. For interim and annual reporting periods, an entity shall disaggregate, in a tabular format disclosure in the notes to financial statements, all relevant expense captions presented on the face of the income statement in continuing operations into the purchases of inventory, employee compensation, depreciation, amortization, and depletion. This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this Update should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this Update or (2) retrospectively to any or all prior periods presented in the financial statements We are currently evaluating the impact the adoption of ASU 2024-03 will have on its consolidated financial statements and related disclosures.
In December 2024, the FASB issued ASU 2024-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures (“ASU 2024-09”) to provide disaggregated income tax disclosures on rate reconciliation and income taxes paid. The Company is required to adopt the guidance in the fourth quarter of fiscal 2026, though early adoption is permitted. The Company is currently evaluating the impact of this amendment on its consolidated financial statements.
In January 2025, the Financial Accounting Standards Board (“FASB”) updated 2025-01: Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. Public business entities must adopt the guidance in Update 2024-03 for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The update clarifies that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company is evaluating the impact the updated guidance will have on its combined financial statements and disclosures.
In March 2025, the FASB issued ASU 2025-03, “Business Combinations (Topic 805) and Consolidation (Topic 810)” (“ASU 2025-03”). The amendments in this Update require an entity involved in an acquisition transaction effected primarily by exchanging equity interests when the legal acquiree is a variable interest entity (VIE) that meets the definition of a business to consider the factors in paragraphs 805-10-55-12 through 55-15 to determine which entity is the accounting acquirer. The amendments in this Update differ from current GAAP because, for certain transactions, they replace the requirement that the primary beneficiary always is the acquirer with an assessment that requires an entity to consider the factors to determine which entity is the accounting acquirer. The amendments in this Update enhance the comparability of financial statements across entities engaging in acquisition transactions effected primarily by exchanging equity interests when the legal acquiree meets the definition of a business. Specifically, under the amendments, acquisition transactions in which the legal acquiree is a VIE will, in more instances, result in the same accounting outcomes as economically similar transactions in which the legal acquiree is a voting interest entity. The amendments in this Update do not change the accounting for a transaction determined to be a reverse acquisition or a transaction in which the legal acquirer is not a business and is determined to be the accounting acquiree. Management is currently evaluating the standard to determine the impact of adoption on its consolidated financial statements and disclosures.
F-22
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
2. Summary of Significant Accounting Policies (cont.)
In July 2025, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets. This standard introduces a practical expedient that companies can choose to apply when determining allowances for credit losses. Specifically, it permits companies to assume that the current conditions as of the balance sheet remain unchanged throughout the remaining life of the asset. The amendment is effective for annual reporting periods beginning after December 15, 2025, and requires prospective application. The Group is assessing the impact of adoption of the ASU on the consolidated financial statements. The Group does not expect the adoption of the ASU to have a material impact on the consolidated financial statements.
In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. This update improves U.S. GAAP by establishing authoritative guidance on the accounting for government grants received by business entities. For public business entities, the amendments are effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. The Company is currently in the process of evaluating the impact this amended guidance may have on its consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”), which clarifies the application of interim reporting guidance and improves the organization’s required interim disclosures. The standard is effective for interim reporting periods beginning after December 15, 2027 for public business entities. Early adoption is permitted. The Company is evaluating the effect of adopting ASU 2025-11.
Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the consolidated balance sheets, statements of operations and comprehensive income and cash flows.
3. Accounts Receivable, net
Our accounts receivable balance primarily includes balances from construction customers. The allowance for credit losses is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance for credit losses based primarily on current trends and estimates. The Company provided for a percentage of trade receivable balance based on collection history and current economic trends that the Company expects will impact the level of credit losses over the life of the receivables. These reserves are re-evaluated on a regular basis and adjusted as needed. Once a receivable is deemed to be uncollectable, such balance is charged against the provision. The Company assesses expected credit losses for two portfolio segments: (i) receivables individually assessed for counterparties with identified credit risk indicators, and (ii) receivables collectively assessed based on historical loss experience adjusted for current conditions and reasonable and supportable forecasts. The increase in the allowance for credit losses during the year ended March 31, 2026 was primarily attributable to the individual assessment of specific customer balances with identified credit deterioration during the year.
Accounts receivable, net consisted of the following:
| 2026 | 2025 | |||||||
| Accounts receivable (note a) | $ | 15,965,110 | $ | 10,336,230 | ||||
| Less: allowance for credit losses (note b) | (8,500,074 | ) | (303,925 | ) | ||||
| Accounts receivable, net | $ | 7,465,036 | $ | 10,032,305 | ||||
Activity in the allowance for credit losses consists of the following for the years ended March 31:
| 2026 | 2025 | |||||||
| Balance at beginning of the year | $ | 303,925 | $ | 116,567 | ||||
| Net provision for allowance for credit losses | 8,533,275 | 303,362 | ||||||
| Recoveries | (302,818 | ) | (116,972 | ) | ||||
| Exchange difference | (34,308 | ) | 968 | |||||
| Balance at end of the year | $ | 8,500,074 | $ | 303,925 | ||||
Note:
| (a) | Accounts receivable, net from joint ventures was approximately US$1,261,818 and US$1,363,517 as of March 31, 2026 and 2025, respectively. |
| (b) | Allowance for credit losses recognized for accounts receivable from joint ventures was approximately US$280,326 and US$190,322 as of March 31, 2026 and 2025, respectively. |
As of March 31, 2026 and 2025, accounts receivable, net amounted to US$3,220,058 and US$1,586,814 were past due for more than 90 days, respectively.
F-23
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
4. Contract Assets and Liabilities
Contract assets consisted of the following at March 31:
| 2026 | 2025 | |||||||
| Retention receivables of construction contracts (note a) | $ | 2,322,369 | $ | 1,605,163 | ||||
| Unbilled revenue of construction contracts (note b) | - | 4,157,343 | ||||||
| 2,322,369 | 5,762,506 | |||||||
| Less: Allowance for credit losses | (61,780 | ) | (96,758 | ) | ||||
| Total | $ | 2,260,589 | $ | 5,665,748 | ||||
| Less: Portion classified as non-current | (1,825,986 | ) | (1,029,078 | ) | ||||
| Current portion | $ | 434,603 | $ | 4,636,670 | ||||
| Notes: |
| (a) | Retention receivables included in contract assets represent the Company’s right to receive consideration for work performed and not yet billed because the rights are conditional on the satisfaction of the service quality by the customers over a certain period as stipulated in the contracts. Retention receivables, net from joint ventures was approximately US$590,015 and US$524,150 as of March 31, 2026 and 2025, respectively. The Company will be entitled to receive after 12 months, upon satisfaction of the service quality by the customers, retention receivables amounted to US$1,825,986 and US$1,029,078 as of March 31, 2026 and 2025, respectively. These amounts are classified as non-current. |
| (b) | Unbilled revenue included in contract assets represents the Company’s right to receive consideration for work completed but not yet billed because the rights are conditional upon the satisfaction by the customers on the construction work completed by the Company and the work is pending for the certification by the customers. The contract assets are transferred to the accounts receivable when the rights become unconditional, which is typically at the time the Company obtains the certification of the completed construction work from the customers. Unbilled revenue, net from joint ventures was both US$nil as of March 31, 2026 and 2025, respectively. |
Activity in the allowance for credit losses consists of the following for the year ended March 31:
| 2026 | 2025 | |||||||
| Balance at beginning of the year | $ | 96,758 | $ | 276,518 | ||||
| Net provision for allowance for credit losses | 20,808 | 60,732 | ||||||
| Recoveries | (55,191 | ) | (241,807 | ) | ||||
| Exchange difference | (595 | ) | 1,315 | |||||
| Balance at end of the year | $ | 61,780 | $ | 96,758 | ||||
Contract liabilities consisted of the following:
| 2026 | 2025 | |||||||
| Billings in advance of performance obligation under contracts (note a) | $ | 752,186 | $ | 2,322,911 | ||||
Note:
| (a) | Contract liabilities, net from joint ventures were US$nil and US$359,629 as of March 31, 2026 and 2025, respectively. |
F-24
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
4. Contract Assets and Liabilities (cont.)
Contract liabilities represent when the Company receives advances from customers before the construction commences, this will give rise to contract liabilities. Advances from customers of construction contracts are normally recognized as revenue according to the schedules of construction contracts.
The movement in contract liabilities for the years ended March 31 is as follows:
| 2026 | 2025 | |||||||
| Balance at beginning of the year | $ | 2,322,911 | $ | 1,144,047 | ||||
| Decrease in contract liabilities as a result of recognizing revenue during the year which was included in the contract liabilities at the beginning of the year | (2,591,075 | ) | (1,148,848 | ) | ||||
| Increase in contract liabilities as a result of billings in advance of performance obligation under contracts | 1,031,767 | 2,319,244 | ||||||
| Exchange difference | (11,417 | ) | 8,468 | |||||
| Balance at end of the year | $ | 752,186 | $ | 2,322,911 | ||||
5. Prepayments and Other Current Assets
Prepayments and other current assets consisted of the following at March 31:
| 2026 | 2025 | |||||||
| Deposit for acquisition of property and equipment (note a) | $ | 1,770,959 | $ | 1,784,389 | ||||
| Advance to sub-contractors | 8,219,798 | 5,749,229 | ||||||
| Prepayments | 341,343 | 1,186,567 | ||||||
| Other deposits | 69,413 | 84,891 | ||||||
| $ | 10,401,513 | $ | 8,805,076 | |||||
| Less: amount classified as non-current assets | (1,770,959 | ) | (1,784,389 | ) | ||||
| Amount classified as current assets (note b) | $ | 8,630,554 | $ | 7,020,687 | ||||
Note:
| (a) | A deposit was made to acquire the machineries for project use. |
| (b) | Prepayments and deposits expected to be utilized or recovered within 12 months after the balance sheet date are classified as current. |
6. Equity Method Investments and other investment
On November 13, 2019, the Company entered into a Joint Venture Agreement with Glory E&C Limited, a Hong Kong company, and formed a joint venture, Kin Chiu-Glory Joint Venture (“KC-Glory JV”) to execute the construction project (Contract No. ND/2019/06). On November 25, 2020, the Company entered into a Joint Venture Agreement with Geotech Engineering Limited, a Hong Kong company, and formed a joint venture, Kin Chiu-Geotech Joint Venture (“KC-Geotech JV”) to execute the construction project (Contract No. TW/2019/01). On August 29, 2020, the Company entered into a Joint Venture Agreement with China Railway First Group Co., Ltd, a Hong Kong company, and formed a joint venture, Kin Chiu-China Railway First Group Joint Venture (“KC-CRFG JV”) to execute several government construction projects.
The Company’s exposure to loss is limited to its investment in each joint venture. As of March 31, 2026 and 2025, the Company has no additional capital commitments or guarantees related to these ventures.
No dividends or capital contributions were made or received during the years ended March 31, 2026, 2025 and 2024.
Equity Method Accounting Treatment
The Company’s 51% ownership of KC-Glory JV, 51% ownership of KC-Geotech JV and 35% ownership of KC-CRFG JV allowed the Company to have joint control over the operations and decision-making at joint ventures. Accordingly, the Company accounted for the transaction under the equity method and recorded the carrying value of the Company’s investment in joint ventures’ common shares at cost, including the transaction costs incurred to obtain the equity method investment, in the consolidated balance sheets.
F-25
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
6. Equity Method Investments and other investments (cont.)
The following table provides summarized balance sheet and income statement information for Joint Ventures:
| KC-Glory JV | KC-Geotech JV | KC-CRFG JV | Total | |||||||||||||
| As of March 31, 2026 | ||||||||||||||||
| Current assets | $ | 1,735,185 | 245,772 | 1,162,731 | 3,143,688 | |||||||||||
| Non-current assets | — | — | — | — | ||||||||||||
| Current liabilities | 1,426,194 | 269,945 | 339,130 | 2,035,269 | ||||||||||||
| Non-current liabilities | — | — | — | — | ||||||||||||
| Equity (Deficit) | $ | 308,991 | (24,173 | ) | 823,601 | 1,108,419 | ||||||||||
| KC-Glory JV | KC-Geotech JV | KC-CRFG JV | Total | |||||||||||||
| As of March 31, 2025 | ||||||||||||||||
| Current assets | $ | 1,748,391 | $ | 247,932 | $ | 1,188,208 | $ | 3,184,531 | ||||||||
| Non-current assets | — | — | — | — | ||||||||||||
| Current liabilities | 1,436,946 | 271,864 | 370,751 | 2,079,561 | ||||||||||||
| Non-current liabilities | — | — | — | — | ||||||||||||
| Equity (Deficit) | $ | 311,445 | $ | (23,932 | ) | $ | 817,457 | $ | 1,104,970 | |||||||
| Year ended March 31, 2026 | ||||||||||||||||
| Total revenues | $ | — | — | 9,748,960 | 9,748,960 | |||||||||||
| Net (loss)/profit | $ | (111 | ) | (424 | ) | 12,345 | 11,810 | |||||||||
| Year ended March 31, 2025 | ||||||||||||||||
| Total revenues | $ | — | 641 | $ | 4,828,815 | $ | 4,829,456 | |||||||||
| Net loss | $ | (64 | ) | 7,168 | $ | 5,443 | $ | 12,547 | ||||||||
The following table summarizes the activity of the Company’s equity method investment in joint ventures:
| Total | ||||
| Balance at April 1, 2024 | $ | 1,311,010 | ||
| Company’s share in net profit recognized during the year | 5,528 | |||
| Exchange difference | 7,591 | |||
| Balance at March 31, 2025 | 1,324,129 | |||
| Company’s share in net profit recognized during the period | 4,048 | |||
| Exchange difference | (9,982 | ) | ||
| Balance at March 31, 2026 | $ | 1,318,195 | ||
Critical Minerals Investment
On October 31, 2025, the Group entered into a subscription and unit purchase agreement with a limited liability company engaged in the critical minerals space, pursuant to which the Group subscribed for an approximately 20% membership interest in such company, subject to regulatory approval, for a subscription price of $20.0 million.
F-26
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
6. Equity Method Investments and other investments (cont.)
This investment does not have a readily determinable fair value and is therefore measured at cost, adjusted for observable price changes and impairments, in accordance with ASC 321. As of March 31, 2026, the carrying value of the investment was $43,180,014. This investment is included in “Other investments” on the consolidated balance sheet.
The Company monitors the investment for indicators of impairment and observable price changes on a quarterly basis. If indicators of impairment exist, the Company performs a qualitative assessment to determine whether the investment is impaired and adjusts the carrying value accordingly. During the year ended March 31, 2026, the Company identified an observable price change related to this investment and recorded a change in fair value of this investment accordingly. Therefore, the Company has included this investment in the fair value hierarchy disclosure in Note 2.
The following table provides a reconciliation of the other investment at fair value on a non-recurring basis using significant unobservable inputs:
| 2026 | 2025 | |||||||
| Balance as of March 31, 2025 | $ | — | $ | — | ||||
| Addition | 20,000,000 | — | ||||||
| Fair value adjustment | 23,437,041 | — | ||||||
| Exchange difference | (257,027 | ) | ||||||
| Balance as of March 31, 2026 | $ | 43,180,014 | $ | — | ||||
Reemag Investment
In November 2025, Skyline acquired a 13.09% ownership of Reemag LLC (“Reemag”) for a cash purchase price of $3.0 million. Skyline will subscribe for additional membership interests of Reemag in tranches, resulting in ownership percentages of 13.09%, 20.06%, 33.42% and 50.10% at the initial, second, third and fourth closing respectively for an aggregate purchase price of $20.0 million. The second, third and fourth closings were scheduled on or before January 31, 2026, March 31, 2026 and by the earlier of a $200.0 million capital raise or July 31, 2026, respectively. However, in March 2026, Skyline entered into the first amendment to the subscription agreement with Reemag that amended the dates of the second, third and fourth closings to May 31, 2026, July 31, 2026 and September 30, 2026, respectively.
The investment in Reemag does not have a readily determinable fair value and is therefore measured at cost, adjusted for observable price changes and impairments, in accordance with ASC 321. The Company has not identified any observable price changes in orderly transactions for identical or similar investments and did not recognize any impairment losses. As of March 31, 2026, the carrying value of the investment was $3.0 million as there was no observable price change related to this investment since acquisition. This investment is included in “Other investments” on the consolidated balance sheet.
The Company monitors the investment for indicators of impairment and observable price changes on a quarterly basis. If indicators of impairment exist, the Company performs a qualitative assessment to determine whether the investment is impaired and adjusts the carrying value accordingly. During the year ended March 31, 2026, the Company did not identify any indicators of impairment or observable price changes.
The following table provides a reconciliation of the other investment at equity method investments:
| 2026 | 2025 | |||||||
| Balance as of March 31, 2025 | $ | — | $ | — | ||||
| Addition | 3,000,000 | — | ||||||
| Exchange difference | (18,752 | ) | ||||||
| Balance as of March 31, 2026 | $ | 2,981,248 | $ | — | ||||
On May 14, 2026, the Company has disposed full 13.09% LLC membership interest in Reemag to American Ventures LLC, Series XLVIII Reemag, an independent third party (the “Assignee”) for consideration in a cash payment of $3,000,000. No fair value gain or loss was recognized from the assignment. (Note 20).
F-27
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
7. Property, Plant and Equipment, net
Property, plant and equipment, stated at cost less accumulated depreciation and amortization, consisted of the following:
| 2026 | 2025 | |||||||
| Furniture and fixtures | $ | 885,626 | $ | 891,366 | ||||
| Machineries | 970,068 | 771,769 | ||||||
| Motor vehicles* | 335,964 | 246,311 | ||||||
| Leasehold improvements | 183,350 | 184,740 | ||||||
| Less: accumulated depreciation | (2,049,350 | ) | (1,852,377 | ) | ||||
| Property, plant and equipment, net | $ | 325,658 | $ | 241,809 | ||||
Depreciation expenses of property, plant and equipment totaled US$144,669, US$356,025 and US$448,986 for the years ended March 31, 2026, 2025 and 2024, respectively and included in cost of revenue and general and administrative expenses.
8. Leases
Operating leases as lessee
As of March 31, 2026 and 2025, the Company had property operating leases recorded on its consolidated balance sheets. The Company does not have options to extend or cancel the existing lease agreements for its existing facilities prior to their respective expiration dates. When determining the lease term, at lease commence date, the Company considers options to extend or terminate the lease when it is reasonably certain that it will exercise or not exercise that option. The Company’s lease arrangements may contain both lease and non-lease components. The Company has separately accounted for lease and non-lease components based on their nature. Payments under the Company’s lease arrangement are fixed.
| 2026 | 2025 | |||||||
| Weighted average remaining lease term (in years) | 1.49 | 1.13 | ||||||
| Weighted average discount rate (%) | 5.88 | % | 5.88 | % | ||||
During the year ended March 31, 2026, 2025 and 2024, the addition to operating lease right-of-use assets was US$119,007, US$nil and US$nil respectively. The operating lease expense was US$130,350, US$262,304 and US$409,866 for the years ended March 31, 2026, 2025 and 2024, respectively, and included in the cost of revenue and general and administrative expenses. Cash paid for operating leases was US$159,388, US$283,956 and US$387,848 for the years ended March 31, 2026, 2025 and 2024, respectively.
F-28
SKYLINE BUILDERS GROUP HOLDING LIMITED AND
ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
8. Leases (cont.)
Maturities of lease liabilities were as follows:
| For the year ending March 31, | ||||
| 2027 | $ | 88,766 | ||
| 2028 | 56,714 | |||
| Total lease payments | $ | 145,480 | ||
| Less: imputed interest | (16,798 | ) | ||
| Operating lease obligation, net | $ | 128,682 | ||
Finance leases
The Company leases certain equipment under lease contracts that are accounted for as finance leases. If the contracts meet the criteria for a finance lease, the related equipment underlying the lease contract is capitalized and amortized over its estimated useful life.
Information relating to finance lease activities during the years ended March 31, 2026 and 2025 are as follows:
| 2026 | 2025 | |||||||
| Finance lease right-of-use assets | $ | 6,769 | $ | 87,385 | ||||
| Finance lease liabilities | $ | — | $ | 56,795 | ||||
| Amortization of finance lease right-of-use assets | $ | (80,721 | ) | $ | (184,601 | ) | ||
| Repayment and interest accretion of finance lease liabilities | $ | (56,588 | ) | $ | (185,053 | ) | ||
| Weighted average remaining lease term (in years) | — | 0.73 | ||||||
| Weighted average discount rate (%) | — | 5.36 | % | |||||
During the year ended March 31, 2026 and 2025, there was no addition to finance lease right-of-use assets. The amortization of finance lease right-of-use assets was US$80,721 and US$184,601 for the years ended March 31, 2026 and 2025, respectively, and included in the cost of revenue. Cash paid for finance lease was US$58,322 US$141,913 and US$221,255 for the years ended March 31, 2026, 2025 and 2024, respectively.
The interest of finance lease liabilities was US$1,734, US$11,433 and US$24,133 for the years ended March 31, 2026, 2025 and 2024, respectively, and included in the interest expense.
9. Life insurance policy, cash surrender value
| 2026 | 2025 | |||||||
| Life insurance policy, cash surrender value | $ | 1,448,925 | $ | 1,390,388 | ||||
On March 20, 2025, a life insurance policy of US$1,381,153, at cash surrender value, was transferred from Kin Chiu Development Company Limited to Kin Chiu. The respective related party transactions have been disclosed in Note 13g.
10. Accrued Expenses and Other Current Liabilities
Components of accrued expenses and other current liabilities are as follows:
| 2026 | 2025 | |||||||
| Accruals for operating expenses | $ | 2,901,575 | $ | 1,704,763 | ||||
| Provision for reinstatement cost | 39,362 | 39,089 | ||||||
| Provision for long service payment (Note 15) | 32,484 | 60,829 | ||||||
| 2,973,421 | 1,804,681 | |||||||
| Less: amount classified as non-current liabilities (Note 15) | (11,055 | ) | (34,362 | ) | ||||
| Amount classified as current liabilities | $ | 2,962,366 | $ | 1,770,319 | ||||
F-29
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
11. Bank and Other Borrowings and Bank Overdrafts
| Interest rate (per annum) 2026/2025 | 2026 | 2025 | |||||||||||
| The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) – Guarantee loan 1 | 2.75%/3.00 | % (1) | $ | 137,759 | $ | 138,733 | |||||||
| HSBC – Guarantee loan 2 | 2.75%/3.00 | % (2) | 93,477 | 94,420 | |||||||||
| HSBC – Guarantee loan 3 | 2.75%/3.00 | % (3) | 106,321 | 107,489 | |||||||||
| HSBC – Guarantee loan 4 | 2.75%/3.00 | % (4) | 348,797 | 351,763 | |||||||||
| HSBC – Post-Shipment Buyer loans | 5.653%/6.77 | % (5) | 3,374,462 | 3,623,136 | |||||||||
| HSBC – Post-Shipment MA loan 1 | 5.404%/6.513 | % (5) | 642,939 | 1,517,995 | |||||||||
| HSBC – Funds from factoring | 4.235%/5.728 | % (6) | 3,827,019 | 2,570,694 | |||||||||
| HSBC – MA Loan 2 and CIL Loan | 5.404%/6.394 | % (7) | 1,913,509 | 2,313,625 | |||||||||
| AR Horizon Limited – Export Invoice Finance Facility | —/12.00 | % (8) | — | 514,138 | |||||||||
| Universal Life Insurance (ULI) Loan (I) and Loan (II) | 3.283%/4.737 | % (9) | 645,062 | 812,442 | |||||||||
| Riverchain One Limited – Export Invoice Finance Facility | 12.00%/— | (10) | 892,971 | — | |||||||||
| $ | 11,982,316 | $ | 12,044,435 | ||||||||||
| (1) | On May 26, 2020, the Company borrowed HK$4,000,000 (equivalently to US$510,269 as at March 31, 2026) as working capital for 3 years (the 2020 Loan Agreement — HK$4 million) at an annual interest rate of HSBC Prime Lending Rate (“BLR”) minus 2.25% under the loan agreement with HSBC. The loan is secured by The Hong Kong Mortgage Corporation Limited. On November 1, 2022, the Company and HSBC amended and restated the 2020 Loan Agreement — HK$4 million (the First Amended and Restated Loan Agreement), the payment schedule of the outstanding of the loan was modified to 91 equal payments of principal, plus accrued and unpaid interest. On June 1, 2024, the Company and HSBC amended and restated the 2020 Loan Agreement — HK$4 million (the Second Amended and Restated Loan Agreement), the payment schedule of the outstanding loan was modified to 83 payments of principal, plus accrued and unpaid interest. |
| (2) | On November 14, 2020, the Company borrowed HK$1,000,000 (equivalently to US$127,567 as at March 31, 2026) as working capital for 5 years (the 2020 Loan agreement — HK$1 million) at an annual interest rate of BLR minus 2.25% under the loan agreement with HSBC. The loan is secured by The Hong Kong Mortgage Corporation Limited. On October 18, 2022, the Company and HSBC amended and restated the 2020 Loan Agreement — HK$1 million (the First Amended and Restated Loan Agreement), the payment schedule of the outstanding of the loan was modified to 98 equal payments of principal, plus accrued and unpaid interest. On May 22, 2024, the Company and HSBC amended and restated the 2020 Loan Agreement — HK$1 million (the Second Amended and Restated Loan Agreement), the payment schedule of the outstanding of the loan was modified to 90 payments of principal, plus accrued and unpaid interest. |
| (3) | On May 6, 2021, the Company borrowed HK$1,000,000 (equivalently to US$127,567 as at March 31, 2026) as working capital for 8 years (the 2021 Loan agreement) at an annual interest rate of BLR minus 2.25% under the loan agreement with HSBC. The loan is secured by The Hong Kong Mortgage Corporation Limited. On October 18, 2022, the Company and HSBC amended and restated the 2021 Loan Agreement (the First Amended and Restated Loan Agreement), the payment schedule of the outstanding of the loan was modified to 103 equal payments of principal, plus accrued and unpaid interest. On June 1, 2024, the Company and HSBC amended and restated the 2021 Loan Agreement (the Second Amended and Restated Loan Agreement), the payment schedule of the outstanding of the loan was modified to 95 payments of principal, plus accrued and unpaid interest. |
| (4) | On July 27, 2022, the Company borrowed HK$3,000,000 (equivalently to US$382,702 as at March 31, 2026) as working capital for 10 years at an annual interest rate of BLR minus 2.25% under the loan agreement with HSBC. The loan is secured by The Hong Kong Mortgage Corporation Limited. On June 12, 2024, the Company and HSBC amended and restated the 2022 Loan Agreement (the First Amended and Restated Loan Agreement), the payment schedule of the outstanding of the loan was modified to 109 payments of principal, plus accrued and unpaid interest. |
F-30
SKYLINE BUILDERS GROUP HOLDING LIMITED AND
ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
11. Bank and Other Borrowings and Bank Overdrafts (cont.)
| (5) | On February 23, 2023, HSBC issued banking facilities for Kin Chiu’s account in an aggregate amount not to exceed HK$40,000,000 (equivalently to US$5,102,692 as at March 31, 2026), which may include working capital identified in HSBC’s various agreements. The interest rate for the banking facilities is 2.5% per annum over 1-month HIBOR on such day. The loan is secured by personal guarantees from Mr. Ngo Chiu Lam and Mr. Wong Chak Lam. |
| (6) | On February 23, 2023, HSBC issued discounting/factoring agreement for Kin Chiu’s account in an aggregate amount not to exceed HK$20,000,000 (equivalently to US$2,551,346 as at March 31, 2026), which may include working capital identified in HSBC’s various agreements. On November 3, 2023, the Company renewed the discounting/factoring agreement with the same terms. The interest rate for the discounting/factoring agreement is 2% per annum over 1-month HIBOR on such day. The loan is repayable 90 days from the date of drawdown and secured by personal guarantees from Mr. Ngo Chiu Lam and Mr. Wong Chak Lam. |
| On February 4, 2026, the Company renewed the discounting/factoring agreement and increased Kin Chiu’s fund-in-use limit by HK$6,000,000 to HK$26,000,000 (equivalent to US$3,316,750 as at March 31, 2026). | |
| On March 24, 2026, the Company renewed the discounting/factoring agreement and increased Kin Chiu’s fund-in-use limit by HK$4,000,000 to HK$30,000,000 (equivalent to US$3,827,019 as at March 31, 2026). |
| (7) | On November 3, 2023, HSBC issued banking facilities for Kin Chiu’s account in an aggregate amount not to exceed HK$18,000,000 (equivalently to US$2,296,211 as at March 31, 2026), which may include working capital identified in HSBC’s various agreements. The interest rate for the bank facilities is 2.5% per annum over 1-day HIBOR. The loan is secured by personal guarantee from Mr. Ngo Chiu Lam. |
| (8) | On September 12, 2024, AR Horizon Limited issued Export Invoice Finance Facility for the granting of export loan with respect to commercial invoices issued by the borrowers to the employers in an aggregate amount not to exceed US$514,138 (HK$4,000,000). The loan is secured by an assignment of receivables. The interest rate for the Export Invoice Finance Facility is 12% per annum. The loan is repayable 9 months from the date of drawdown. |
On August 21, 2025, AR Horizon Limited issued Export Invoice Finance Facility for the granting of export loan with respect to commercial invoices issued by the borrowers to the employers in an aggregate amount not to exceed US$514,007 (HK$4,000,000). The loan is secured by an assignment of receivables. The interest rate for the Export Invoice Finance Facility is 12% per annum. The loan is repayable 9 months from the date of drawdown and is fully repaid during the year ended March 31, 2026. | |
| (9) | On December 20, 2024, HSBC issued banking facilities as working capital for Kin Chiu’s account in an aggregate amount not to exceed HK$6,638,838 (equivalently to US$846,644 as at March 31, 2026). The interest rate for the SME financing guarantee scheme is HIBOR + 1% per annum. The loan is secured by the entire life insurance policy from Mr. Ngo Chiu Lam and Mrs. Po Lok Sze (Note 13g). The loan contains a repayment on demand clause. The cash surrender value is US$1,381,153 as of date of transfer. Should the realized market value of this collateral upon enforcement be insufficient to cover the full outstanding loan balance of US$645,062 as of March 31, 2026, Mr. Ngo Chiu Lam has undertaken to personally settle any resulting shortfall. The loan contains a repayable on demand clause, therefore, the loan was classified under current liabilities. |
| (10) | On February 9, 2026, Riverchain One Limited issued Export Invoice Finance Facility for the granting of export loan with respect to commercial invoices issued by the borrowers to the employers in an aggregate amount not to exceed US$892,971 (HK$7,000,000). The loan is secured by an assignment of receivables. The interest rate for the Export Invoice Finance Facility is 12% per annum. The loan is repayable 60 days from the date of drawdown. |
Interest expense pertaining to the above bank and other borrowings for the years ended March 31, 2026, 2025 and 2024 amounted to US$723,536, US$835,015 and US$640,576, respectively.
F-31
SKYLINE BUILDERS GROUP HOLDING LIMITED AND
ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
11. Bank and Other Borrowings and Bank Overdrafts (cont.)
Maturities of the principal and interest payments of bank and other borrowings based on scheduled repayments were as follows:
| 2026 | 2025 | |||||||
| 2026 | — | 10,791,869 | ||||||
| 2027 | 10,930,332 | 269,101 | ||||||
| 2028 | 267,235 | 274,277 | ||||||
| 2029 | 267,235 | 274,277 | ||||||
| 2030 | 257,034 | 271,014 | ||||||
| 2031 | 105,970 | 111,788 | ||||||
| 2032 | 105,970 | 88,322 | ||||||
| 2033 | 72,369 | 63,797 | ||||||
| 2034 | 49,537 | 16,324 | ||||||
| 2035 | 12,032 | — | ||||||
| Total bank and other borrowings repayments | $ | 12,067,714 | $ | 12,160,769 | ||||
| Less: future interest payment | (85,398 | ) | (116,334 | ) | ||||
| Total bank and other borrowings recognized in the consolidated balance sheet | $ | 11,982,316 | $ | 12,044,435 | ||||
As of the date of this report, a total of US$9,858,477 of the bank and other borrowings as of March 31, 2026 has been repaid.
| 2026 | 2025 | |||||||
| Bank overdrafts | $ | 201,671 | — | |||||
As of the date of this report, a total of US$201,671 of the bank overdrafts as of March 31, 2026 has been repaid.
12. Income Taxes
Cayman Islands and British Virgin Islands
The Company is incorporated in Cayman Islands and Skyline Builders (BVI) Holding Limited is incorporated in the British Virgin Islands and are not subject to tax on income or capital gains under current Cayman Islands law and British Virgin Islands law, respectively. In addition, upon payments of dividends by these entities to their shareholders, no withholding tax will be imposed.
United States (Delaware)
The Company established Global Critical Minerals LLC (“GCM LLC”), a wholly-owned subsidiary incorporated as a limited liability company in the State of Delaware, United States of America. GCM LLC is treated as a disregarded entity for U.S. federal income tax purposes, and its results (if any) are included in the Company’s consolidated U.S. tax filings as a branch of the foreign parent.
Hong Kong
In accordance with the relevant tax laws and regulations of Hong Kong, a company registered in Hong Kong is subject to income taxes within Hong Kong at the applicable tax rate on taxable income. Hong Kong profit tax rates are 8.25% on assessable profits up to US$256,131 (HK$2,000,000), and 16.5% on any part of assessable profits over US$256,131 (HK$2,000,000).
The components of the income tax expense are as follows:
| Year Ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| Current | ||||||||||||
| Hong Kong | $ | 175,964 | $ | 230,592 | $ | 267,209 | ||||||
| Deferred | ||||||||||||
| Hong Kong | (1,352,524 | ) | (51,267 | ) | (116,475 | ) | ||||||
| Provision for income taxes | $ | (1,176,560 | ) | $ | 179,325 | $ | 150,734 | |||||
F-32
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
12. Income Taxes (cont.)
The following table reconciles Hong Kong statutory rates to the Company’s effective tax:
2026 | 2025 | 2024 | ||||||||||||||||||||||
| Amount | Rate | Amount | Rate | Amount | Rate | |||||||||||||||||||
| Profit before income taxes*** | $ | 7,887,242 | $ | 906,772 | $ | 1,080,646 | ||||||||||||||||||
| Hong Kong Profits Tax rate | 16.5 | % | 16.5 | % | 16.5 | % | ||||||||||||||||||
| Income taxes computed at Hong Kong Profits Tax rate | 1,301,395 | 16.5 | % | 149,617 | 16.5 | % | 178,307 | 16.5 | % | |||||||||||||||
| Reconciling items: | ||||||||||||||||||||||||
| Tax allowance at the statutory tax rates## | — | 0.0 | % | 48,709 | 5.4 | % | — | |||||||||||||||||
| Tax effect of income that is not taxable* | (3,776,428 | ) | (47.9 | )% | (4,493 | ) | (0.5 | )% | (2,753 | ) | (0.3 | )% | ||||||||||||
| Tax effect of expenses that are not deductible** | 1,543,220 | 19.6 | % | 7,763 | 0.9 | % | 5,866 | 0.5 | % | |||||||||||||||
| Temporary difference | 58,956 | 0.7 | % | (903 | ) | (0.1 | )% | (9,220 | ) | (0.9 | )% | |||||||||||||
| Statutory tax deduction# | (768 | ) | 0.0 | % | (193 | ) | 0.0 | % | (383 | ) | 0.0 | % | ||||||||||||
| Overprovsion in prior years | (281,805 | ) | (3.6 | )% | — | — | ||||||||||||||||||
| Effect of two-tier tax rate | (21,130 | ) | (0.3 | )% | (21,175 | ) | (2.3 | )% | (21,083 | ) | (2.0 | )% | ||||||||||||
| Income tax (credit) expense | $ | (1,176,560 | ) | (14.9 | )% | $ | 179,325 | 19.8 | % | $ | 150,734 | 13.9 | % | |||||||||||
| * | Income that is not taxable mainly consisted of gain on acquisition of subsidiary, fair value gain of other investments, equity in net income of a affiliates, bank interest income and change in cash value of life insurance policy, which are non-taxable under Hong Kong income tax law. |
| ** | Expenses that are not deductible mainly consisted of share-based compensation expense, fair value loss of convertible debt, interest on bank overdrafts, stamp duty and equity in net losses of affiliates, which are non-deductible under Hong Kong income tax law. |
| *** | Profit before income taxes included equity in net income/(losses) of affiliates. |
| # | It represents a reduction granted by the Hong Kong SAR Government of 100% of the tax payable subject to a maximum reduction of HK$3,000, HK$1,500 and HK$3,000 for each business during the years ended March 31,2026, 2025 and 2024, respectively. |
| ## | It represents tax allowance at the statutory tax rates for companies incorporated in Cayman Islands and British Virgin Islands. |
The Company measures deferred tax assets and liabilities based on the difference between carrying amount of assets and liabilities and their respective tax bases at the applicable tax rates. Components of the Company’s deferred tax assets and liability are as follows:
| As of March 31, | ||||||||
| 2026 | 2025 | |||||||
| Deferred tax assets (liabilities): | ||||||||
| Property, plant and equipment, net | $ | (3,778 | ) | $ | 3,554 | |||
| Finance lease right-of-use assets, net | (1,116 | ) | (11,734 | ) | ||||
| Operating lease right-of-use assets, net | (22,392 | ) | (26,170 | ) | ||||
| Operating lease liabilities | 21,232 | 23,442 | ||||||
| Provision for allowance of credit losses | 1,412,705 | 66,112 | ||||||
| Other liabilities | 5,360 | 10,037 | ||||||
| Deferred tax assets (liabilities), gross | 1,412,011 | 65,241 | ||||||
| Less: valuation allowance | — | — | ||||||
| Deferred tax assets (liabilities), net | $ | 1,412,011 | $ | 65,241 | ||||
The Company evaluates both positive and negative evidence in assessing the realizability of deferred tax assets, including the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carryforward periods, the historical expiration of tax attributes and feasible tax planning alternatives. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences become deductible for tax purposes. The Company did not recognize any valuation allowance as of March 31, 2026 and 2025.
F-33
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
12. Income Taxes (cont.)
The Company evaluates both positive and negative evidence in assessing the realizability of deferred tax assets, including the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carryforward periods, the historical expiration of tax attributes and feasible tax planning alternatives. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences become deductible for tax purposes. The Company did not recognize any valuation allowance as of March 31, 2026 and 2025.
Income tax payable consist of the following as of March 31:
| 2026 | 2025 | |||||||
| Income tax payable | $ | (413,940 | ) | $ | (372,816 | ) | ||
Uncertain tax positions
The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of March 31, 2026 and 2025, the Company did not have any significant unrecognized uncertain tax positions. The Company did not incur any interest and penalties related to potential underpaid income taxes for the years ended March 31, 2026, 2025 and 2024. The Company also does not anticipate any significant increases or decreases in unrecognized tax benefits in the next 12 months from March 31, 2026.
13. Related Party Balance and Transactions
The following is a list of related parties which the Company has transactions with:
| (a) | Mr. Ngo Chiu Lam, a director of the Company. | |
| (b) | Kin Chiu Development Company Limited, controlled by Mr. Ngo Chiu Lam* | |
| (c) | KC-CRFG JV, a joint venture | |
| (d) | KC-Glory JV, a joint venture | |
| (e) | KC-Geotech JV, a joint venture |
| * | During the year ended March 31, 2026, Skyline Builders (BVI) Holding Limited entered into sale and purchase agreement with Mr. Ngo Chiu Lam, the sole shareholder of Kin Chiu Development, to acquired 100% equity interest of Kin Chiu Development at a cash consideration of HK$1. As a result, Kin Chiu Development Company Limited became an indirectly wholly-owned subsidiary and has been fully consolidated from the date control was obtained (Note 17). All intercompany balances and transactions with Kin Chiu Development Company Limited subsequent to the acquisition date have been eliminated in the consolidated financial statements. |
a. Due to related parties
As of March 31, 2026 and 2025, the balances of due to related parties were as follows:
| 2026 | 2025 | ||||||||||
| Due to related parties | |||||||||||
| Mr. Ngo Chiu Lam (a) | (1) | $ | 3,546,480 | $ | 617,944 | ||||||
| KC-CRFG JV (c) | (2) | 86,506 | 184,019 | ||||||||
| KC-Glory JV (d) | (2) | 317,867 | 320,278 | ||||||||
| KC-Geotech JV (e) | (2) | 235,993 | 237,783 | ||||||||
| $ | 4,186,846 | $ | 1,360,024 | ||||||||
| (1) | The balance represented the advances from the director. The amount was unsecured, interest-free and repayable on demand. |
| (2) | The balances represented amounts due to joint ventures, which are for operation purpose. All amounts were unsecured, interest-free and repayable on demand. |
F-34
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
13. Related Party Balance and Transactions (cont.)
b. Accounts receivable, net
As of March 31, 2026 and 2025, the balances of accounts receivable, net from joint venture were as follows:
| 2026 | 2025 | |||||||
| Accounts receivable, net | ||||||||
| KC-Glory JV (d) | $ | 1,542,144 | $ | 1,553,839 | ||||
| Less : Expected credit losses | 280,326 | 190,322 | ||||||
| $ | 1,261,818 | $ | 1,363,517 | |||||
c. Contract assets, net
As of March 31, 2026 and 2025, the balances of contract assets, net from joint ventures were as follows:
| 2026 | 2025 | |||||||
| Contract assets, net | ||||||||
| KC-CRFG JV (c) | $ | 382,999 | $ | 303,585 | ||||
| KC-Glory JV (d) | 164,692 | 177,965 | ||||||
| KC-Geotech JV (e) | 42,324 | 42,600 | ||||||
| $ | 590,015 | $ | 524,150 | |||||
d. Contract liabilities
As of March 31, 2026 and 2025, the balances of contract liabilities from joint ventures were as follows:
| 2026 | 2025 | |||||||
| Contract liabilities | ||||||||
| KC-CRFG JV (c) | $ | — | $ | 359,629 | ||||
e. Related party transactions
The Company’s related party transactions are measured at the exchange amount which is the amount of consideration established and agreed to by the related parties.
| 2026 | 2025 | 2024 | ||||||||||
| Provision of construction services | ||||||||||||
| KC-CRFG JV (c) | $ | 9,460,005 | $ | 4,695,289 | $ | 6,884,950 | ||||||
| KC-Glory JV (d) | — | — | 338,800 | |||||||||
| KC-Geotech JV (e) | — | 622 | 2,301,097 | |||||||||
| $ | 9,460,005 | $ | 4,695,911 | $ | 9,524,847 | |||||||
| 2026 | 2025 | 2024 | ||||||||||
| Consultancy fee income | ||||||||||||
| KC-CRFG JV (c) | $ | 96,380 | $ | 10 | $ | 35,736 | ||||||
| KC-Geotech JV (e) | — | 44,399 | 63,658 | |||||||||
| $ | 96,380 | $ | 44,409 | $ | 99,394 | |||||||
F-35
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
13. Related Party Balance and Transactions (cont.)
f. Financial guarantee
On February 23, 2023, the Company provided a financial guarantee to Kin Chiu Development Company Limited for an amount of US$1,137,380 in relation to the payment obligations under a bank loan issued to Kin Chiu Development Company Limited. On December 20, 2024, the Company was released from a financial guarantee to Kin Chiu Development Company Limited for US$1,137,380, related to payment obligations under a bank loan issued to Kin Chiu Development Company Limited. This release followed the transfer of the bank loan, with an outstanding balance of US$645,062 and US$812,442 as of March 31, 2026 and 2025, to Kin Chiu, respectively. No amounts were claimed under the guarantee for the years ended March 31, 2026, 2025 and 2024.
g. Assignment of borrowing and transfer of insurance plan
On December 20, 2024, HSBC issued banking facilities as working capital for Kin Chiu’s account in an aggregate amount not to exceed US$848,158 (HK$6,638,838). There was addition of bank borrowing $851,718 transferred to the Company with the respective transfer of life insurance policy.
Two life insurance policies were purchased by Kin Chiu Development Company Limited for Mr. Ngo Chiu Lam (position with a director and CEO of the Company) and Mrs. Po Lok Sze (Mr. Ngo Chiu Lam’s wife). On March 20, 2025, total life insurance policies of US$1,381,153, at cash surrender value, were transferred from Kin Chiu Development Company Limited to the Company.
As of March 31, 2026 and 2025, the outstanding of the loan, Universal Life Insurance (ULI) Loan (I) and Loan (II), is approximately US$645,062 and US$812,442, respectively, as stated in Note 11. There is no material covenant stated in this borrowing. The interest rate for the SME financing guarantee scheme is HIBOR + 1% per annum. The loan is secured by the entire life insurance policy from Mr. Ngo Chiu Lam and Mrs. Po Lok Sze. The loan contains a repayment on demand clause.
14. Shareholders’ Equity
Ordinary shares
As discussed in the Note 1 to the consolidated financial statements regarding reorganization, the ordinary shares issuance and outstanding are summarized below.
a. Ordinary shares before re-designation
| Date | Events | Number of shares | Par value | Amount | ||||||||||
| June 27, 2024 | Share issued upon incorporation | 5,000,000,000 | 0.00001 | 50,000 | ||||||||||
| July 24, 2024 | Share surrender and cancellation by sole shareholder | (4,973,495,000 | ) | 0.00001 | (49,735 | ) | ||||||||
| July 24, 2024 | Re-designate shares into Class A Ordinary Shares | (26,505,000 | ) | 0.00001 | (265 | ) | ||||||||
| July 24, 2024 | Re-designate shares into Class B Ordinary Shares | (1,995,000 | ) | 0.00001 | (20 | ) | ||||||||
| Ordinary shares before re-designation issued and outstanding after reorganization | — | 0.00001 | — | |||||||||||
F-36
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
14. Shareholders’ Equity (cont.)
b. Class A Ordinary Shares
| Date | Events | Number of shares | Par value | Amount | ||||||||||
| July 24, 2024 | Re-designate shares into Class A Ordinary Shares | 26,505,000 | 0.00001 | 265 | ||||||||||
| January 23, 2025 | Issue of shares pursuant to IPO* | 1,500,000 | 0.00001 | 15 | ||||||||||
| February 6, 2025 | Issue of shares pursuant to IPO* | 225,000 | 0.00001 | 2 | ||||||||||
| August 27, 2025 | Share Retirement # | (18,500,000 | ) | 0.00001 | (185 | ) | ||||||||
| August 29, 2025 | Private Placement ## | 1,359,314 | 0.00001 | 14 | ||||||||||
| November 3, 2025 | Issue of shares pursuant to Private Placement ### | 727,272 | 0.00001 | 7 | ||||||||||
| December 16, 2025 | Issuance of shares pursuant to warrant exercise | 500,000 | 0.00001 | 5 | ||||||||||
| March 9, 2026 | Issuance of shares pursuant to warrant exercise | 2,969,905 | 0.00001 | 30 | ||||||||||
| March 26, 2026 | Issuance of shares pursuant to warrant exercise | 200,000 | 0.00001 | 2 | ||||||||||
| Class A Ordinary Shares issued and outstanding as of March 31, 2026 | 15,486,491 | 0.00001 | 155 | |||||||||||
| * | On January 23, 2025, the Company completed its initial public offering on NASDAQ, under the ticker symbol “SKBL”. Under this offering, 1,500,000 ordinary shares were issued at a price of $4.00 per share. In addition, the Company granted a 45-day option to the underwriter to purchase up to an additional 225,000 ordinary shares at the public offering price, less underwriting discounts, to cover over-allotment, if any. On February 6, 2025, the underwriter exercised the over-allotment option in full to purchase an additional 225,000 ordinary shares. On January 23, 2025, the Company closed its initial public offering and the exercise of the over-allotment option, received net proceeds of US$4,807,322 from the offering after deducting underwriting discounts and offering expenses of US$2,092,678 from the gross proceeds of US$6,900,000. |
| # | On August 27, 2025, Supreme Development (BVI) Holdings Limited (“SD”), the Company’s previous controlling shareholder and a company beneficially owned by Mr. Ngo Chiu Lam, our Chief Executive Officer, entered into a definitive securities purchase agreement with Quantum Leap Energy LLC (“QLE”) pursuant to which SD transferred and sold to QLE all 1,995,000 issued and outstanding Class B Ordinary Shares of the Company. Each Class B Ordinary Share entitles the holder to 20 votes per share and votes together with the Class A Ordinary Shares on all matters submitted to shareholders. On March 29, 2026, QLE entered into a securities exchange agreement with Dablam LP to assign and transfer its 1,995,000 Class B Ordinary Shares held by QLE to Dablam LP, in exchange for and against Dablam LP’s concurrent assignment and transfer to QLE of 1,995,000 Class A Ordinary Shares held by Dablam LP. The Company also used approximately $7,000,000 of the gross proceeds from the Private Placement to retire 18,500,000 Class A Ordinary Shares owned by SD (the “Share Retirement”). |
| ## | On August 29, 2025, the Company closed its private placement (the “Offering (AUG)”) pursuant to a Securities Purchase Agreement dated August 27, 2025, among the Company and certain accredited investors. Pursuant to the Offering (AUG), the Company issued and sold (i) 1,359,314 Class A Ordinary Shares, par value $0.00001 per share, (ii) 22,990,000 prefunded warrants to purchase Class A Ordinary Shares, (iii) Class A Ordinary Share Purchase Warrant A (“Investor Warrants”) to purchase up to 24,349,314 Class A Ordinary Shares, (iv) Class A Ordinary Share Purchase Warrant B (“Investor Warrants”) to purchase up to 24,349,314 Class A Ordinary Shares, and (v) 1,947,945 Placement Agent Warrants to purchase Class A Ordinary Shares issued to the Placement Agents as compensation. |
| ### | On November 3, 2025, the Company closed its private placement (the “Offering (OCT)”) pursuant to a Securities Purchase Agreement dated October 28, 2025, among the Company and certain accredited investors. Pursuant to the Offering (OCT), the Company issued and sold (i) 727,272 Class A Ordinary Shares, par value $0.00001 per share, (ii) 16,643,636 prefunded warrants in lieu of Class A Ordinary Shares (the “Pre-funded Warrants”)), and (iii) 17,370,909 Class A Ordinary Share Purchase Warrants to purchase Class A Ordinary Shares (the “Ordinary Warrants, Investor Warrants”), and (iv) 1,389,673 Placement Agent Warrants to purchase Class A Ordinary Shares issued to the Placement Agents as compensation. |
F-37
SKYLINE BUILDERS GROUP HOLDING LIMITED AND
ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
14. Shareholders’ Equity (cont.)
c. Class B Ordinary Shares
| Date | Events | Number of shares | Par value | Amount | ||||||||||
| July 24, 2024 | Re-designate shares into Class B Ordinary Shares | 1,995,000 | 0.00001 | 20 | ||||||||||
| Class B Ordinary Shares issued and outstanding as of March 31, 2026 | 1,995,000 | 0.00001 | 20 | |||||||||||
Dividends
The holders of our Ordinary Shares are entitled to such dividends as may be declared by our board of directors out of our funds which are lawfully available for that purpose. In addition, our Shareholders may declare dividends by ordinary resolution, but no dividend shall exceed the amount recommended by our directors. Under the laws of the Cayman Islands, our Company may pay a dividend out of either profit or the credit standing in the Company’s share premium account, provided that in no circumstances may a dividend be paid if this would result in our Company being unable to pay its debts as they fall due in the ordinary course of business immediately following the date on which the distribution or dividend is paid.
Voting rights
Holders of Class A Ordinary Shares and Class B Ordinary Shares shall, at all times, vote together as one class on all matters submitted to a vote by the members at any general meeting of the Company.
Holders of our Ordinary Shares may vote on all matters submitted to a vote of our shareholders, except as may otherwise be required by law. Subject to any rights or restrictions as to voting attached to any shares, (i) on a show of hands every shareholder present in person or by proxy (or, if a corporation or other non-natural person, by its duly authorized representative or proxy) shall, at a general meeting of our Company, have one vote for each Class A Ordinary Share and 20 votes for each Class B Ordinary Share in each case of which he is the holder; and (ii) on a poll every shareholder present in person or by proxy (or, if a corporation or other non-natural person, by its duly authorized representative or proxy) shall have one vote for each Class A Ordinary Share and 20 votes for each Class B Ordinary Share of which he or the person represented by proxy is the holder.
Voting at any meeting of shareholders is by show of hands unless a poll (before or on the declaration of the result of the show of hands) is demanded. A poll may be demanded by the chairperson of such meeting or any one or more shareholders who together hold not less than 10% of the votes attaching to the total shares that are present in person or by proxy.
At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless voting by poll is demanded by the chairman of the meeting or any one or more shareholders who together hold not less than 10 percent of the votes attaching to the total shares that are present in person or by proxy.
Any ordinary resolution is a resolution passed by a simple majority of the shareholders as, being entitled to do so, vote in person or by proxy at a general meeting of our Company and includes a unanimous written resolution.
A special resolution will be required for important matters such as amending our memorandum and articles of association or changing the name of the Company.
There are no limitations on non-residents or foreign shareholders to hold or exercise voting rights on the Ordinary Shares imposed by foreign law or by the amended and restated memorandum and articles of association or other constituent document of our company. However, no person will be entitled to vote at any general meeting or at any separate meeting of the holders of the Ordinary Shares unless the person is registered as of the record date for such meeting and unless all calls or other sums presently payable by the person in respect of Ordinary Shares in the Company have been paid.
F-38
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
14. Shareholders’ Equity (cont.)
Preferred Shares
The Company is authorized to issue up to 950,000,000 Preferred Shares – Series A (“Series A Preferred Shares”) and 60,000,000 Preferred Shares – Series B (“Series B Preferred Shares”), each with a par value of US$0.00001 (together, the “Preferred Shares”).
As of March 31, 2026, the following Preferred Shares were issued and outstanding:
| Date | Authorized | Issued & Outstanding | Par value | Amount | ||||||||||
| January 23, 2026 | Series A Preferred Shares | 47,326,026 | 0.00001 | 473 | ||||||||||
| February 13, 2026 | Series B Preferred Shares | 6,442 | 0.00001 | - | ||||||||||
The rights and preferences of Preferred Shares are as follows:
Dividends
Dividends may be declared or paid, and other distribution (whether in cash or otherwise) of the Company’s assets (including any distribution of assets to Members on a winding up) may be made to a holder of a Class A Ordinary Share, Series A Preferred Share, Class B Ordinary Share and Series B Preferred Share. So long as any Series B Preferred Shares are outstanding, in the event that dividends are consented to by the holders of Series B Preferred Shares, then the holders of the Series B Preferred Shares shall be entitled to receive, and the Company shall pay, dividends on Series B Preferred Shares equal (on an as-if-converted-to-Class-A-Ordinary-Share basis) to and in the same form as dividends actually paid on Class A Ordinary Shares and Series A Preferred Shares, when, as and if such dividends are paid on Class A Ordinary Shares and Series A Preferred Shares. No other dividends shall be paid on Series B Preferred Shares.
Voting Rights
The holders of Series A Preferred Shares and Series B Preferred Shares are not entitled to any votes on any matters subject to the vote at general meetings of the Company, except for votes to change the rights of the Series A Preferred Shares and the Series B Preferred Shares. Under the Company’s Fourth Amended and Restated Memorandum and Articles of Association (the “Memorandum and Articles”), the rights attached to any class of shares may be varied only with the written consent of the holders of not less than two-thirds of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of that class. The Series B Preferred Shares also include a consent right with respect to the Company’s ability to redeem, declare or pay any cash dividend or distribution on any securities of the Company while any Series B Preferred Shares remain outstanding. Other than these class-right protections and the Series B dividend/distribution consent right, the preferred shares do not provide holders with general voting rights on ordinary corporate matters.
Liquidation Preference
The holders of Series B Preferred Shares are entitled to receive distributions of the Company’s remaining assets before any distributions are made to holders of other classes of shares. Any residual assets remaining after payment to holders of Series B Preferred Shares are distributed among the remaining shareholders based on share ownership. The holders of Series A Preferred Shares are not entitled to preferential liquidation terms.
Optional Conversion
The Series A Preferred Shares are convertible into Class A ordinary shares on a one-for-one basis at the holder's option, subject to customary anti-dilution adjustments. The Series B Preferred Shares are convertible into Class A ordinary shares at the holder's option at a conversion price of $2.40 per share, subject to anti-dilution adjustments, including certain down-round protection provisions, with a floor conversion price of $1.50 per share. Conversions of both series are subject to a 4.99% beneficial ownership limitation. The Preferred Shares are not mandatorily redeemable.
F-39
SKYLINE BUILDERS GROUP
HOLDING LIMITED AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
14. Shareholders’ Equity (cont.)
August 2025 Offering
On August 29, 2025, the Company completed a private placement (the “Offering”) of its Class A Ordinary Shares, together with pre-funded warrants in lieu of shares, and warrants to purchase Class A Ordinary Shares, for aggregate gross proceeds of $17,775,000, before deducting the issuance costs.
The Offering consisted of the sale of units, each unit comprised of one Class A Ordinary Share (or, at the purchaser’s election, one pre-funded warrant in lieu of one share) and warrants to purchase two Class A Ordinary Shares (one Investor Warrant A and one Investor Warrant B, together, the “Investor Warrants”), at a combined offering price of approximately $0.73 per unit. In connection with the Offering, the Company also issued warrants to its placement agent, on the same date, as partial compensation for services rendered (the “Placement Agent Warrants,” and together with the Pre-Funded Warrants and the Investor Warrants, the “Warrants”).
In total, the Company issued 1,359,314 Class A Ordinary Shares and 22,990,000 pre-funded warrants exercisable for Class A Ordinary Shares (the “Pre-Funded Warrants”), together with 24,349,314 Investor Warrant A, 24,349,314 Investor Warrant B, and 1,947,945 Placement Agent Warrants. All of the Warrants — the Pre-Funded Warrants, the Investor Warrants, and the Placement Agent Warrants — were issued on August 29, 2025 and have a term of five years from the date of issuance.
The Pre-Funded Warrants are exercisable at any time after issuance at a nominal exercise price equal to the par value of the Class A Ordinary Shares and do not require cashless exercise. The Investor Warrant A is exercisable at $0.60 per share, and the Investor Warrant B is exercisable at $0.65 per share; both permit cashless (net share settlement) exercise at the holder’s election and are subject to an exercise price reset feature, described below. The Placement Agent Warrants are exercisable at $0.73 per share, also permit cashless exercise, and are likewise subject to the reset feature.
Each of the Investor Warrants and the Placement Agent Warrants contains an exercise price reset feature, pursuant to which the exercise price is subject to downward adjustment (but not above the original exercise price) if the Company subsequently issues Class A Ordinary Shares or Ordinary Share equivalents at an effective price per share below the then-current exercise price, subject to a floor price of $1.50. The Pre-Funded Warrants do not contain a reset feature.
The Company evaluated the Warrants under ASC 480, Distinguishing Liabilities from Equity, and ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity, to determine whether the Warrants should be classified as liabilities or as equity.
The Company concluded that the Warrants do not fall within the scope of ASC 480, as they are not mandatorily redeemable, do not obligate the Company to repurchase its own shares, and are not indexed to an obligation to issue a variable number of shares based on a fixed monetary amount known at inception. The Company further concluded that the Warrants are indexed to the Company’s own stock and satisfy the equity classification criteria of ASC 815-40-25.
In reaching this conclusion, the Company specifically considered the exercise price reset (down round protection) feature contained in the Investor Warrants and the Placement Agent Warrants. Under ASC 815-40, a down round feature, by itself, does not preclude a freestanding financial instrument that is indexed to and potentially settled in an entity’s own stock from qualifying for equity classification. Accordingly, the presence of the reset feature did not affect the Company’s equity classification conclusion. All other terms of the Warrants were also assessed against the fixed-for-fixed criteria and other conditions in ASC 815-40-25 and were determined to be consistent with equity classification. As equity-classified instruments, the Warrants are not subject to remeasurement in subsequent periods.
F-40
SKYLINE BUILDERS GROUP
HOLDING LIMITED AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
14. Shareholders’ Equity (cont.)
Allocation of Proceeds
The Offering involved the issuance of multiple equity-classified instruments — Class A Ordinary Shares, Pre-Funded Warrants, and Investor Warrants — for a single, non-allocated aggregate purchase price. The Company allocated the gross proceeds among the individual components on a relative fair value basis. The fair value of each component was estimated as of the date of issuance using option-pricing model for the Pre-Funded Warrants, the Investor Warrants and Placement Agent Warrants.
The fair value of the Class A Ordinary Shares issued was $1,427,280, representing approximately 2% of the aggregate fair value of the components subject to allocation. The fair value of the Pre-Funded Warrants was $24,137,587, or approximately 39% of the aggregate estimated fair value, and the fair value of the Investor Warrants (Investor Warrant A and Investor Warrant B combined) was $35,953,467, or approximately 58% of the aggregate estimated fair value, together totaling approximately $61,518,334. Applying these relative fair value percentages to the $17,775,000 of gross proceeds resulted in allocated gross proceeds of $412,396 to the Class A Ordinary Shares, $6,974,272 to the Pre-Funded Warrants, and $10,388,332 to the Investor Warrants.
The issuance costs
The Company incurred cash offering costs of approximately $1,747,000, consisting of placement agent cash fees, legal, and other direct incremental costs of the Offering. In addition, the Company issued the Placement Agent Warrants, described above, as partial compensation for placement agent services. Those specific incremental costs directly attributable to the Offering — including the estimated grant-date fair value of the Placement Agent Warrants of $1,377,034 — were charged against the gross proceeds as a reduction of equity. Total issuance costs recognized as a reduction of equity were in the amount of $3,124,034, consisting of the $1,747,000 of cash costs and the $1,377,034 fair value of the Placement Agent Warrants.
Total issuance cost were allocated to the individual equity components on the same relative fair value basis used to allocate gross proceeds, resulting in $72,480 allocated to the Class A Ordinary Shares, $1,225,759 allocated to the Pre-Funded Warrants, and $1,825,795 allocated to the Investor Warrants. The issuance of the Placement Agent Warrants had no net effect on total shareholders’ equity, as the offsetting fair value was recorded within additional paid-in capital.
Net Amounts Recorded in Equity
After allocation of the issuance costs, the Company recorded net amounts within shareholders’ equity of $339,916 attributable to the Class A Ordinary Shares, $5,748,513 attributable to the Pre-Funded Warrants, and $8,562,537 attributable to the Investor Warrants, for a total of $14,650,966, representing gross proceeds of $17,775,000 less total offering costs of $3,124,034.
The net amount recorded for the Class A Ordinary Shares was allocated between share capital, at par value, and additional paid-in capital. The net amounts recorded for the Pre-Funded Warrants, the Investor Warrants, and the Placement Agent Warrants were recorded within additional paid-in capital, as these instruments are equity-classified.
F-41
SKYLINE BUILDERS GROUP
HOLDING LIMITED AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
14. Shareholders’ Equity (cont.)
Fair Value Measurement
The fair value of the Class A Ordinary Shares issued was based on the Company’s closing stock price on the date of issuance of $1.05 per share. The fair value of the Pre-Funded Warrants, the Investor Warrants, and the Placement Agent Warrants was estimated using the Black-Scholes option-pricing model, which the Company classifies as a Level 3 fair value measurement within the fair value hierarchy established by ASC 820, Fair Value Measurement, due to the use of significant unobservable inputs, including expected volatility. Significant inputs used in the valuation as of the date of issuance included a stock price of $1.05, exercise prices of $0.00001 for the Pre-Funded Warrants, $0.60 for Investor Warrant A, $0.65 for Investor Warrant B, and $0.73 for the Placement Agent Warrants, an expected term of five years for each of the Warrants, an expected dividend yield of 0%, a risk-free interest rate of 3.7%, and expected volatility of 68.80%, in each case consistent with the remaining contractual term of the applicable instrument. Applying these assumptions, the Company estimated a value of $1.0499 per Pre-Funded Warrant, $0.7461 per Investor Warrant A, $0.7304 per Investor Warrant B, and $0.7069 per Placement Agent Warrant, resulting in aggregate fair values of $24,137,587 for the Pre-Funded Warrants, $18,167,887 for Investor Warrant A, $17,785,580 for Investor Warrant B, and $1,377,034 for the Placement Agent Warrants.
August 2025 Class A Ordinary Share Retirement
During the year ended March 31, 2026, the Company retired 18,500,000 Class A Ordinary Shares held by one shareholder for a total cash payment of $7,000,000. The Company accounted for the retirement in accordance with ASC 505-30-30-8, as amended by ASU 2025-12, Codification Improvements, which the Company early adopted for the year ended March 31, 2026, as permitted by the standard’s transition guidance allowing early adoption annual periods for which consolidated financial statements have not yet been issued. Pursuant to its elected accounting policy under the amended guidance, the Company records the excess of the repurchase price over the par value of retired shares entirely as a reduction of additional paid-in capital, to the extent additional paid-in capital does not become negative. As the Company had sufficient additional paid-in capital, the full $7,000,000 payment less the par value of the shares retired in the amount of $185 was recorded as a reduction of additional paid-in capital within shareholders’ equity.
October 2025 Offering
The Company completed a private placement (the “Offering”) of its Class A Ordinary Shares, together with pre-funded warrants in lieu of shares, and warrants to purchase Class A Ordinary Shares, for aggregate gross proceeds of $23,885,000, before deducting the issuance costs. The Offering closed in two tranches: an initial closing on October 28, 2025, at which the Company issued Class A Ordinary Shares, and a subsequent closing on November 3, 2025, at which the Company issued Pre-Funded Warrants in lieu of shares, together with the Investor Warrants and the Placement Agent Warrants.
The Offering consisted of the sale of units, each unit comprised of one Class A Ordinary Share (or, at the purchaser’s election, one pre-funded warrant in lieu of one share) and a warrant to purchase one Class A Ordinary Share (the “Investor Warrant”), at a combined offering price of approximately $1.375 per unit. In connection with the Offering, the Company also issued warrants to its placement agent, as partial compensation for services rendered (the “Placement Agent Warrants,” and together with the Pre-Funded Warrants and the Investor Warrants, the “Warrants”).
In total, the Company issued 727,272 Class A Ordinary Shares and 16,643,636 pre-funded warrants exercisable for Class A Ordinary Shares (the “Pre-Funded Warrants”), together with 17,370,908 Investor Warrants and 1,389,673 Placement Agent Warrants. The Class A Ordinary Shares were issued on October 28, 2025, and the Pre-Funded Warrants, the Investor Warrants, and the Placement Agent Warrants were issued on November 3, 2025. The Investor Warrants and the Placement Agent Warrants have a term of five years from the date of issuance. The Pre-Funded Warrants do not have a stated expiration date and remain exercisable until exercised in full (the “Termination Date”).
F-42
SKYLINE BUILDERS GROUP
HOLDING LIMITED AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
14. Shareholders’ Equity (cont.)
The Pre-Funded Warrants are exercisable at any time after issuance at a nominal exercise price equal to the par value of the Class A Ordinary Shares and do not require cashless exercise. The Investor Warrants are exercisable at $1.50 per share and permit cashless (net share settlement) exercise at the holder’s election and are subject to an exercise price reset feature, described below. The Placement Agent Warrants are exercisable at $1.375 per share, also permit cashless exercise, and are likewise subject to the reset feature.
Each of the Investor Warrants and the Placement Agent Warrants contains an exercise price reset feature, pursuant to which the exercise price is subject to downward adjustment (but not above the original exercise price) if the Company subsequently issues Class A Ordinary Shares or Ordinary Share equivalents at an effective price per share below the then-current exercise price, subject to a floor price of $1.50. The Pre-Funded Warrants do not contain a reset feature.
The Company evaluated the Warrants under ASC 480, Distinguishing Liabilities from Equity, and ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity, to determine whether the Warrants should be classified as liabilities or as equity.
The Company concluded that the Warrants do not fall within the scope of ASC 480, as they are not mandatorily redeemable, do not obligate the Company to repurchase its own shares, and are not indexed to an obligation to issue a variable number of shares based on a fixed monetary amount known at inception. The Company further concluded that the Warrants are indexed to the Company’s own stock and satisfy the equity classification criteria of ASC 815-40-25.
In reaching this conclusion, the Company specifically considered the exercise price reset (down round protection) feature contained in the Investor Warrants and the Placement Agent Warrants. Under ASC 815-40, a down round feature, by itself, does not preclude a freestanding financial instrument that is indexed to and potentially settled in an entity’s own stock from qualifying for equity classification. Accordingly, the presence of the reset feature did not affect the Company’s equity classification conclusion. All other terms of the Warrants were also assessed against the fixed-for-fixed criteria and other conditions in ASC 815-40-25 and were determined to be consistent with equity classification. As equity-classified instruments, the Warrants are not subject to remeasurement in subsequent periods.
Allocation of Proceeds
The Offering involved the issuance of multiple equity-classified instruments — Class A Ordinary Shares, Pre-Funded Warrants, and Investor Warrants — for a single, non-allocated aggregate purchase price. The Company allocated the gross proceeds among the individual components on a relative fair value basis. The fair value of each component was estimated as of the date of issuance using option-pricing model for the Pre-Funded Warrants, the Investor Warrants and Placement Agent Warrants.
The fair value of the Class A Ordinary Shares issued was $2,116,362, representing approximately 2% of the aggregate fair value of the components subject to allocation. The fair value of the Pre-Funded Warrants was $72,897,744, or approximately 54% of the aggregate estimated fair value, and the fair value of the Investor Warrants was $60,106,464, or approximately 44% of the aggregate estimated fair value, together totaling approximately $135,120,570. Applying these relative fair value percentages to the $23,885,000 of gross proceeds resulted in allocated gross proceeds of $374,105 to the Class A Ordinary Shares, $12,885,992 to the Pre-Funded Warrants, and $10,624,903 to the Investor Warrants.
F-43
SKYLINE BUILDERS GROUP
HOLDING LIMITED AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
14. Shareholders’ Equity (cont.)
The issuance costs
The Company incurred cash offering costs of approximately $3,085,800, consisting of placement agent cash fees, legal, and other direct incremental costs of the Offering. In addition, the Company issued the Placement Agent Warrants, described above, as partial compensation for placement agent services. Those specific incremental costs directly attributable to the Offering — including the estimated grant-date fair value of the Placement Agent Warrants of $4,888,289 — were charged against the gross proceeds as a reduction of equity. Total issuance costs recognized as a reduction of equity were in the amount of $7,974,089, consisting of the $3,085,800 of cash costs and the $4,888,289 fair value of the Placement Agent Warrants.
Total issuance costs were allocated to the individual equity components on the same relative fair value basis used to allocate gross proceeds, resulting in $124,896 allocated to the Class A Ordinary Shares, $4,302,033 allocated to the Pre-Funded Warrants, and $3,547,160 allocated to the Investor Warrants. The issuance of the Placement Agent Warrants had no net effect on total shareholders’ equity, as the offsetting fair value was recorded within additional paid-in capital.
Net Amounts Recorded in Equity
After allocation of the issuance costs, the Company recorded net amounts within shareholders’ equity of $249,209 attributable to the Class A Ordinary Shares, $8,583,959 attributable to the Pre-Funded Warrants, and $7,077,743 attributable to the Investor Warrants, for a total of $15,910,911, representing gross proceeds of $23,885,000 less total issuance costs of $7,974,089.
The net amount recorded for the Class A Ordinary Shares was allocated between share capital, at par value, and additional paid-in capital. The net amounts recorded for the Pre-Funded Warrants, the Investor Warrants, and the Placement Agent Warrants were recorded within additional paid-in capital, as these instruments are equity-classified.
Fair Value Measurement
The fair value of the Class A Ordinary Shares issued was based on the Company’s closing stock price on the date of issuance of $2.91 per share, reflecting the closing stock price on October 28, 2025, the date those shares were issued. The fair value of the Pre-Funded Warrants, the Investor Warrants, and the Placement Agent Warrants was estimated using the Black-Scholes option-pricing model, which the Company classifies as a Level 3 fair value measurement within the fair value hierarchy established by ASC 820, Fair Value Measurement, due to the use of significant unobservable inputs, including expected volatility. Significant inputs used in the valuation as of November 3, 2025, the date those instruments were issued, included a stock price of $4.38, exercise prices of $0.0001 for the Pre-Funded Warrants, $1.50 for the Investor Warrants, and $1.375 for the Placement Agent Warrants, an expected term of five years for each of the Warrants, an expected dividend yield of 0%, a risk-free interest rate of 3.7%, and expected volatility of 66.40% for the Pre-Funded Warrants and 66.00% for the Investor Warrants and the Placement Agent Warrants, in each case consistent with the remaining contractual term of the applicable instrument. Applying these assumptions, the Company estimated a value of $4.3799 per Pre-Funded Warrant, $3.4602 per Investor Warrant, and $3.5176 per Placement Agent Warrant, resulting in aggregate fair values of $72,897,744 for the Pre-Funded Warrants, $60,106,464 for the Investor Warrants, and $4,888,289 for the Placement Agent Warrants.
January 2026 Warrant Exchange
On January 23, 2026, the Company entered into an exchange agreement with the holders of the Investor Warrant A and the Investor Warrant B, each originally issued in the Company’s August 2025 Offering (as described above), pursuant to which such holders exchanged their Investor Warrant A and Investor Warrant B for new warrants to purchase 47,326,025 Series A Ordinary Shares (the “Series A Warrants”). The Series A Warrants are exercisable at a nominal exercise price, and the underlying Series A Ordinary Shares are convertible into Class A Ordinary Shares on a one-for-one basis at the holder’s election, pursuant to Article 2.9(b) of the Company’s Amended and Restated Memorandum and Articles of Association.
F-44
SKYLINE BUILDERS GROUP
HOLDING LIMITED AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
14. Shareholders’ Equity (cont.)
The Company evaluated the exchange under ASC 815-40-35, Derivatives and Hedging — Contracts in Entity’s Own Equity, which addresses the accounting for modifications or exchanges of freestanding equity-classified written call options. The Company concluded that the Series A Warrants are equity-classified, consistent with the classification of the Investor Warrant A and the Investor Warrant B immediately prior to the exchange. Because the Investor Warrant A and the Investor Warrant B remained equity-classified both before and after the exchange, the Company measured the effect of the exchange as the excess, if any, of the fair value of the Series A Warrants immediately after the exchange over the fair value of the Investor Warrant A and the Investor Warrant B immediately before the exchange.
The fair value of the Investor Warrant A and the Investor Warrant B immediately before the exchange, estimated using the Black-Scholes option-pricing model, was $76,298,179 and $75,588,516, respectively, for a combined fair value of $151,886,695. The fair value of the Series A Warrants immediately after the exchange was $168,480,649, based on 47,326,025 Series A Warrants and the Company’s closing stock price of $3.56 per share on January 23, 2026. The excess of the fair value of the Series A Warrants over the combined fair value of the Investor Warrant A and the Investor Warrant B immediately before the exchange was $16,593,954.
Because the exchange did not involve the receipt of goods or services from the warrant holders, was not undertaken in connection with the issuance of new debt or equity, and did not involve a modification of an award held by an employee or director, the Company recognized the $16,593,954 excess as a deemed dividend. The deemed dividend was recorded as a reduction of retained earnings and a corresponding increase to additional paid-in capital, with no net effect on total shareholders’ equity and no effect on the Company’s net income (loss). The deemed dividend was reflected as an adjustment in the Company’s computation of net income (loss) attributable to holders of Class A Ordinary Shares for purposes of earnings per share.
Each Series A Preferred Share is convertible at the option of the holder, at any time after issuance and without payment of any additional consideration, into one Class A Ordinary Share, subject to certain anti-dilution adjustments described in the Company’s Memorandum and Articles, pursuant to which the conversion ratio is subject to downward adjustment and other customary adjustments for share splits, recapitalizations, reorganizations, and similar transactions. The Series A Preferred Shares do not contain a mandatory or contingent redemption feature. Settlement of conversions of Series A Convertible Preferred Shares is required to be made solely through the issuance of ordinary shares; the Company does not have the option, and holders do not have the right, to settle conversions in cash or other assets.
The Company evaluated the Series A Preferred Shares under ASC 480, Distinguishing Liabilities from Equity, and ASC 480-10-S99-3A, Accounting for Redeemable Equity Instruments, and concluded that the Series A Preferred Shares should be classified within permanent equity, as the Series A Preferred Shares do not contain any feature that would require or permit redemption at the option of the holder, upon the occurrence of an event outside the Company’s control, or otherwise. The Company also evaluated the conversion feature within the Series B Preferred Shares under ASC 815-15, Derivatives and Hedging — Embedded Derivatives, and concluded that the conversion feature is indexed to the Company’s own stock and would be classified within stockholders’ equity if freestanding, and therefore qualifies for the scope exception in ASC 815-10-15 and does not require bifurcation as a separate embedded derivative.
Fair Value Measurement
The fair value of the Investor Warrant A and the Investor Warrant B immediately before the exchange was estimated using the Black-Scholes option-pricing model, which the Company classifies as a Level 3 fair value measurement within the fair value hierarchy established by ASC 820, Fair Value Measurement, due to the use of significant unobservable inputs, including expected volatility. Significant inputs used in the valuation as of January 23, 2026 included a stock price of $3.56, exercise prices of $0.60 for the Investor Warrant A and $0.65 for the Investor Warrant B, a remaining expected term of 4.60 years for each warrant, an expected dividend yield of 0%, a risk-free interest rate of 3.8%, and expected volatility of 71%, in each case consistent with the remaining contractual term of the applicable instrument. Applying these assumptions, the Company estimated a value of $3.1335 per Investor Warrant A and $3.1043 per Investor Warrant B. The fair value of the Series A Warrants immediately after the exchange was based on the Company’s closing stock price of $3.56 per share on January 23, 2026, consistent with the nominal exercise price of the Series A Warrants.
Series B Preferred Share Financing (February and March 2026)
On February 13, 2026, the Company completed an initial closing of a private placement of its Series B Preferred Shares (the “Series B Financing”), pursuant to which the Company issued 6,322 Series B Preferred Shares at a price of $5,000 per share, for gross proceeds of $31,590,000, before deducting issuance costs. On March 26, 2026, the Company completed an additional closing of the Series B Financing, pursuant to which the Company issued 120 Series B Preferred Shares at a price of $5,000 per share, for gross proceeds of $600,000, before deducting issuance costs. In connection with each closing, the Company also issued warrants to its placement agent, as partial compensation for services rendered (the “Placement Agent Warrants”).
F-45
SKYLINE BUILDERS GROUP
HOLDING LIMITED AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
14. Shareholders’ Equity (cont.)
In connection with the initial closing, the Company issued 789,750 Placement Agent Warrants, and in connection with the additional closing, the Company issued 15,000 Placement Agent Warrants. The Placement Agent Warrants have a term of five years from the date of issuance, are exercisable into Class A Ordinary Shares at $2.40 per share, permit cashless exercise, and are subject to an exercise price reset feature, pursuant to which the exercise price is subject to downward adjustment (but not above the original exercise price) if the Company subsequently issues Class A Ordinary Shares or Ordinary Share equivalents at an effective price per share below the then-current exercise price, subject to a floor price of $1.50.
Each Series B Preferred Share is convertible into Class A Ordinary Shares at a conversion price of $2.40 per share, subject to certain anti-dilution adjustments described in the Company’s Memorandum and Articles, pursuant to which the conversion price is subject to downward adjustment, subject to a floor of $1.50 per share, and other customary adjustments for share splits, recapitalizations, reorganizations, and similar transactions. The Series B Preferred Shares do not contain a mandatory or contingent redemption feature. Settlement of conversions of Series B Convertible Preferred Shares is required to be made solely through the issuance of ordinary shares; the Company does not have the option, and holders do not have the right, to settle conversions in cash or other assets.
The Company evaluated the Series B Preferred Shares under ASC 480, Distinguishing Liabilities from Equity, and ASC 480-10-S99-3A, Accounting for Redeemable Equity Instruments, and concluded that the Series B Preferred Shares should be classified within permanent equity, as the Series B Preferred Shares do not contain any feature that would require or permit redemption at the option of the holder, upon the occurrence of an event outside the Company’s control, or otherwise. The Company also evaluated the conversion feature within the Series B Preferred Shares under ASC 815-15, Derivatives and Hedging — Embedded Derivatives, and concluded that the conversion feature is indexed to the Company’s own stock and would be classified within stockholders’ equity if freestanding, and therefore qualifies for the scope exception in ASC 815-10-15 and does not require bifurcation as a separate embedded derivative. The Company evaluated the Placement Agent Warrants under ASC 480 and ASC 815-40, consistent with its evaluation of the placement agent warrants issued in the Company’s prior offerings, and concluded that the Placement Agent Warrants are equity-classified. The exercise price reset feature contained in the Placement Agent Warrants did not affect this conclusion, consistent with ASC 815-40.
The Company allocated the gross proceeds from each closing entirely to the Series B Preferred Shares, net of the issuance costs described below. The estimated grant-date fair value of the Placement Agent Warrants was recognized as an issuance cost, as described below.
In connection with the initial closing, the Company incurred cash issuance costs of $3,406,150, and issued Placement Agent Warrants with an estimated grant-date fair value of $1,530,138, for total issuance costs of $4,936,288. In connection with the additional closing, the Company incurred cash issuance costs of $50,200, and issued Placement Agent Warrants with an estimated grant-date fair value of $32,963, for total issuance costs of $83,163. Consistent with the Company’s accounting for issuance costs in its prior offerings, these costs were charged against the gross proceeds as a reduction of equity.
After deducting total issuance costs of $4,936,288, the Company recorded net amount of $26,774,962 from the initial closing within shareholders’ equity, attributable to the Series B Preferred Shares. After deducting total issuance costs of $83,163, the Company recorded net amount of $516,837 from the additional closing within shareholders’ equity, also attributable to the Series B Preferred Shares. The fair value of the Placement Agent Warrants issued in connection with each closing was recorded within additional paid-in capital, as these instruments are equity-classified.
F-46
SKYLINE BUILDERS GROUP
HOLDING LIMITED AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
14. Shareholders’ Equity (cont.)
Fair Value Measurement
The fair value of the Placement Agent Warrants issued in connection with the initial closing and the additional closing was estimated using the Black-Scholes option-pricing model, which the Company classifies as a Level 3 fair value measurement within the fair value hierarchy established by ASC 820, Fair Value Measurement, due to the use of significant unobservable inputs, including expected volatility. Significant inputs used in the valuation of the 789,750 Placement Agent Warrants issued on February 13, 2026 included a stock price of $2.94, an exercise price of $2.40, an expected term of five years, an expected dividend yield of 0%, a risk-free interest rate of 3.6%, and expected volatility of 72%, resulting in an estimated value of $1.9363 per warrant and an aggregate fair value of $1,530,138. Significant inputs used in the valuation of the 15,000 Placement Agent Warrants issued on March 26, 2026 included a stock price of $3.21, an exercise price of $2.40, an expected term of five years, an expected dividend yield of 0%, a risk-free interest rate of 4.1%, and expected volatility of 73%, resulting in an estimated value of $2.1976 per warrant and an aggregate fair value of $32,963.
Warrants
Warrant activity during the year ended March 31, 2026 is indicated below:
| Pre-Funded Warrants | Investor Warrant A | Investor Warrant B | Investor Warrants (Oct 2025) | Placement Agent Warrants | Total | |||||||||||||||||||
| As at March 31, 2025 | - | - | - | - | - | - | ||||||||||||||||||
| Issued — August 2025 Offering | 22,990,000 | 24,349,314 | 24,349,314 | - | 1,947,945 | 73,636,573 | ||||||||||||||||||
| Issued — October 2025 Offering | 16,643,636 | - | - | 17,370,908 | 1,389,673 | 35,404,217 | ||||||||||||||||||
| Exchanged — January 2026 | - | (24,349,314 | ) | (24,349,314 | ) | - | - | (48,698,628 | ) | |||||||||||||||
| Exercise | (3,670,000 | ) | - | - | - | - | (3,670,000 | ) | ||||||||||||||||
| Issued — Series B Financing | - | - | - | - | 804,750 | 804,750 | ||||||||||||||||||
| Issued — March 2026 Convertible Notes | - | - | - | - | 652,500 | 652,500 | ||||||||||||||||||
| As at March 31, 2026 | 35,963,636 | - | - | 17,370,908 | 4,794,868 | 58,129,507 | ||||||||||||||||||
| Exercise Price | $ | 0.00001 (par) | - | - | $ | 1.50 | $0.73–$2.40 | |||||||||||||||||
| Expiration Date | No stated expiration / 5years | - | - | Nov-30 | August 2030–March 2031 | |||||||||||||||||||
F-47
SKYLINE BUILDERS GROUP
HOLDING LIMITED AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
14. Shareholders’ Equity (cont.)
Share Award
During the year ended March 31, 2026, the Company granted certain share award to a director of the Company. The Initial Equity Award consists of 3,000,000 Class A ordinary shares granted to the Executive, vesting in four equal quarterly installments beginning on the Effective Date (January 1, 2026). For the fiscal year ended March 31, 2026, the first installment of 750,000 shares (25% of the total award) vested on March 31, 2026.
The fair value of the shares vested was determined by using the number of shares vested multiplying grant date market price of the Company’s Class A ordinary shares. The first installment of 750,000 shares and corresponding fair value in the amount of $2,235,000 was recorded under Class A Shares to be Issued.
This table details the changes in the unvested shares for the fiscal year ended March 31, 2026:
Non-vested Class A Ordinary Shares Activity
| Non-vested Shares | Number of Shares | Weighted- Average Grant-Date Fair Value | ||||||
| Unvested at April 1, 2025 | — | $ | — | |||||
| Granted | 3,000,000 | $ | 2.98 | |||||
| Vested | (750,000 | ) | $ | 2.98 | ||||
| Forfeited / Cancelled | — | $ | — | |||||
| Unvested at March 31, 2026 | 2,250,000 | $ | 2.98 | |||||
Share-Based Compensation Expense recognized in the Consolidated Statements of Operations and Comprehensive Income
| Year ended March 31, 2026 | ||||
| General and administrative expenses | $ | 2,235,000 | ||
| Total share-based compensation expense | $ | 2,235,000 | ||
| Income tax benefit related to share-based compensation | — | |||
As of March 31, 2026, total unrecognized compensation expense related to unvested Class A ordinary share awards was $6,705,000, which is expected to be recognized over a weighted-average period of 0.75 years. The total fair value of shares vested during the year ended March 31, 2026 was $2,235,000.
Cash dividend
No dividend was paid, proposed or declared for the ordinary shareholders of the Company for the year ended March 31, 2026 (2025: US$Nil).
15. Employee Benefit Plans
Employees of the Company located in Hong Kong participate in a compulsory saving scheme (pension fund) for the retirement of residents in Hong Kong. Employees are required to contribute monthly to mandatory provident fund schemes provided by approved private organizations, according to their salaries and the period of employment. The Group has a defined contribution pension scheme for its qualifying employees. The scheme assets are held under a provident fund managed by an independent fund manager. The Company and its employees are each required to make contributions to the scheme calculated at 5% of the employees’ basic salaries on monthly basis, subject to a cap of monthly relevant income of HK$30,000 (US$3,844).
F-48
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
15. Employee Benefit Plans (cont.)
Defined Benefit Pension Plan
Employment Ordinance of the Laws of Hong Kong requires employers to assure the liability of severance payment if an employee who has been working for the employer for not less than 24 months under a continuous contract is, due to redundancy, dismissed, laid off, or upon expiry of a fixed-term employment contract. The ordinance also requires employers to assure the liability of long service payment if an employee who has been working for the employer for not less than 5 years under a continuous contract is dismissed, dies, resigns on ground of ill health or on or after 65 years old, or upon expiry of a fixed-term employment contract. There were 73, 127 and 236 employees as of March 31, 2026, 2025 and 2024, respectively.
The following table sets forth a summary of net periodic benefit cost for the years ended March 31, 2026, 2025 and 2024:
| Year Ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| Interest cost | $ | 542 | $ | 1,390 | 4,004 | |||||||
| Current service cost | 6,197 | 17,416 | 39,295 | |||||||||
| Gain on settlement | (34,373 | ) | (81,046 | ) | (18,150 | ) | ||||||
| Recognized net actuarial (gains) losses | 500 | (23,832 | ) | 12,715 | ||||||||
| Net periodic benefit cost | $ | (27,134 | ) | $ | (86,072 | ) | 37,864 | |||||
| 2026 | 2025 | 2024 | ||||||||||
| Actuarial assumptions used to determine net cost: | ||||||||||||
| Discount rate | 2.27% - 3.58 | % | 2.88% - 3.64 | % | 3.48% – 4.30 | % | ||||||
| Expected return on assets | 4.00 | % | 3.00% - 3.64 | % | 3.48% – 4.30 | % | ||||||
| Rate of increase in salary | 2.50 | % | 2.50 | % | 2.50 | % | ||||||
Undiscounted Future benefit payments under the plans for the next ten years are estimated as follows:
| For the year ending March 31, | ||||
| 2027 | $ | 41,280 | ||
| 2028 | — | |||
| 2029 | — | |||
| 2030 | 9,445 | |||
| 2031 | 11,366 | |||
| 2032 – 2036 | 85,124 | |||
| Total | $ | 147,215 | ||
The following tables provide a reconciliation of the changes in the benefit obligations for the years ended March 31, 2026, 2025 and 2024, and a summary of the funded status as of March 31, 2026 and 2025:
| Year Ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| Change in Benefit Obligations, (net) | ||||||||||||
| Balance at beginning of year | $ | 60,829 | $ | 146,191 | $ | 107,956 | ||||||
| Interest cost | 542 | 1,390 | 4,004 | |||||||||
| Current service cost | 6,197 | 17,416 | 39,295 | |||||||||
| Gain on settlement | (34,373 | ) | (81,046 | ) | (18,150 | ) | ||||||
| Benefit paid | (862 | ) | — | — | ||||||||
| Actuarial (gain) loss | 500 | (23,832 | ) | 12,715 | ||||||||
| Exchange difference | (349 | ) | 710 | 371 | ||||||||
| Balance at end of year | $ | 32,484 | $ | 60,829 | $ | 146,191 | ||||||
F-49
SKYLINE BUILDERS GROUP HOLDING LIMITED AND ITS
SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
15. Employee Benefit Plans (cont.)
| 2026 | 2025 | |||||||
| Gross long service payment obligation | $ | (48,522 | ) | $ | (96,934 | ) | ||
| Add: Attributed contributions | 16,038 | 36,105 | ||||||
| Total net unfunded amount recognized in consolidated balance sheets | $ | (32,484 | ) | $ | (60,829 | ) | ||
| Net unfunded amounts recognized in consolidated balance sheets consist of: | ||||||||
| Current liabilities included in accrued expenses and other current liabilities | $ | (21,429 | ) | $ | (26,467 | ) | ||
| Long-term liabilities included in other long-term liabilities, net of current portion | (11,055 | ) | (34,362 | ) | ||||
| Total net unfunded amount recognized in consolidated balance sheets | $ | (32,484 | ) | $ | (60,829 | ) | ||
16. Convertible Notes
On March 26, 2026, the Company issued Senior Unsecured Convertible Notes with an aggregate principal amount of $16,575,000 (the “March 26 Notes”), for gross proceeds of $16,575,000, before deducting issuance costs. On March 31, 2026, the Company issued additional convertible notes with an aggregate principal amount of $3,000,000 (the “March 31 Notes,” and together with the March 26 Notes, the “Convertible Notes”), for gross proceeds of $3,000,000, before deducting issuance costs. In connection with each issuance, the Company also issued warrants to its placement agent, as partial compensation for services rendered (the “Placement Agent Warrants”).
In connection with the issuance of the March 26 Notes, the Company issued 552,500 Placement Agent Warrants, and in connection with the issuance of the March 31 Notes, the Company issued 100,000 Placement Agent Warrants. The Placement Agent Warrants have a term of five years from the date of issuance, are exercisable into Class A Ordinary Shares at $2.40 per share, permit cashless exercise, and are subject to an exercise price reset feature, pursuant to which the exercise price is subject to downward adjustment (but not above the original exercise price) if the Company subsequently issues Class A Ordinary Shares or Ordinary Share equivalents at an effective price per share below the then-current exercise price, subject to a floor price of $1.50.
The March 26 Notes mature on March 26, 2029, and the March 31 Notes mature on March 31, 2029 (each, an “Expiration Date”), unless earlier converted or redeemed. The Convertible Notes bear interest at a rate of 6% per annum (the “Applicable Coupon Rate”), provided that upon the occurrence of an Event of Default, the Applicable Coupon Rate increases to 15% per annum.
At the election of the holder, all or a portion of the outstanding principal amount of the Convertible Notes is convertible into Class A Ordinary Shares at a conversion price equal to the greater of (i) $2.40 per share and (ii) the price per share payable by the holders of the Company’s Series B Preferred Shares.
At any time beginning 18 months after the applicable issuance date, the Company has the right to redeem all or a portion of the amounts then outstanding under the Convertible Notes, upon at least 20 trading days’ prior written notice to the noteholder (a “Company Redemption Notice”). The redemption amount is equal to the outstanding principal balance, plus all accrued and unpaid interest, plus a redemption premium (the “Company Redemption Premium”). Following receipt of a Company Redemption Notice, the noteholder has 19 trading days to elect to convert all or any portion of the Convertible Notes in lieu of redemption.
The Company evaluated the Convertible Notes under ASC 480, Distinguishing Liabilities from Equity, and concluded that the Convertible Notes should be classified as a liability. The Convertible Notes contain a number of embedded features, including the optional conversion feature described above (pursuant to which the conversion price is the greater of $2.40 per share and the price per share payable by holders of the Series B Preferred Shares) and the optional redemption feature described above (pursuant to which the Company may redeem the Convertible Notes, subject to the noteholder’s right to convert in lieu of redemption). Management evaluated whether the Convertible Notes were issued with a substantial premium that would require separate recognition in additional paid-in capital, and determined that the Convertible Notes do not contain a substantial premium recorded in equity, because the net proceeds received by the Company did not exceed the principal amount of the Convertible Notes repayable at maturity. Based on this determination, and in lieu of separately identifying and bifurcating the embedded conversion and redemption features, the Company elected to account for the Convertible Notes in their entirety under the fair value option in accordance with ASC 825-10-15-4, Financial Instruments — Recognition — Scope and Scope Exceptions, pursuant to which the Convertible Notes are initially recognized at fair value and subsequently remeasured to fair value at each reporting date, with changes in fair value recognized in the Company’s statement of operations. Because the fair value option was elected, the Company did not separately account for or bifurcate any embedded features within the Convertible Notes, consistent with ASC 815-15-25-1(b) and ASC 815-15-25-4.
The Convertible Notes contain customary affirmative and negative covenants and events of default, including covenants related to legal existence, compliance with laws, periodic reporting, share reservation, restrictions on dividends, certain affiliate transactions, equity repurchases, amendments adverse to noteholder rights, and actions that could impair the Company’s obligations under the Convertible Notes. Events of default include, among others, nonpayment, bankruptcy or insolvency events, certain cross-defaults and judgments above $1.0 million, failure to timely deliver shares upon conversion, failure to timely file required SEC reports, material covenant breaches, and failure to maintain Nasdaq listing requirements. Upon an Event of Default, the interest rate increases from 6% to 15% per annum for so long as the default remains uncured, and the noteholders may exercise applicable remedies under the Convertible Notes. As of March 31, 2026, the Company was in compliance with the covenants under the Convertible Notes, and no Events of Default had occurred.
F-50
SKYLINE
BUILDERS GROUP HOLDING LIMITED AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
16. Convertible Notes (cont.)
The Company evaluated the Placement Agent Warrants under ASC 480 and ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity, consistent with its evaluation of placement agent warrants issued in the Company’s prior offerings, and concluded that the Placement Agent Warrants are equity-classified. The exercise price reset feature contained in the Placement Agent Warrants did not affect this conclusion, consistent with ASC 815-40-15-7I.
At issuance, the fair value of the March 26 Notes and the March 31 Notes was determined to equal the gross proceeds received of $16,575,000 and $3,000,000, respectively, resulting in no gain or loss on initial recognition. The Company incurred cash issuance costs of $1,876,000 in connection with the March 26 Notes and $356,150 in connection with the March 31 Notes. In addition, the Company issued the Placement Agent Warrants described above, with an estimated grant-date fair value of $1,214,151 for the March 26 Notes and $209,503 for the March 31 Notes. Because the Convertible Notes are measured under the fair value option, transaction costs and other costs directly attributable to the issuance, including the fair value of the Placement Agent Warrants, are not deferred or capitalized, but are recognized immediately in earnings, consistent with ASC 825-10-25-3. Accordingly, the Company recognized a loss on issuance of $3,090,151 related to the March 26 Notes and $565,653 related to the March 31 Notes, for a combined loss on issuance of $3,655,804 in the Company’s consolidated statement of operations. The offsetting fair value of the Placement Agent Warrants of $1,214,151 and $209,503 was recorded within additional paid-in capital, as these instruments are equity-classified.
Subsequent Measurement
Fair Value Measurement
The fair value of the Convertible Notes was estimated using a binomial lattice model incorporating the notes’ key terms, including the 6.0% coupon, 3-year maturity, holder optional and default-related conversion features, and issuer/change-of-control redemption provisions. Significant inputs included a stock price of $3.09, a conversion price of $2.40, a risk-free rate of 3.77% (interpolated from U.S. Treasury rates), a discount rate of 13.4% based on a CCC-rated yield index reflecting the Company’s credit profile, and volatility of 40.0%, derived from a guideline public company analysis and adjusted for the conversion feature’s illiquidity. Because the new investor notes were issued in an arm’s-length transaction, a calibration discount of 30.9% was applied to the model-derived fair value of both note tranches so that the new investor notes’ fair value equaled transaction proceeds, consistent with the presumption that transaction price represents fair value at inception. Changes in these unobservable inputs, particularly volatility and the discount and calibration rates, could result in materially different fair value measurements. The Company classifies convertible notes as a Level 3 fair value measurement within the fair value hierarchy established by ASC 820, Fair Value Measurement, due to the use of significant unobservable inputs, including The Company remeasures the Convertible Notes to fair value at each reporting date, with changes in fair value recognized in earnings. As of March 31, 2026, the aggregate fair value of the Convertible Notes was $19,567,461, reflecting a decrease in fair value of $7,539 since issuance, which the Company recognized as a gain in the Company’s consolidated statement of operations for the year ended March 31, 2026.
The fair value of the Placement Agent Warrants was estimated using the Black-Scholes option-pricing model, which the Company classifies as a Level 3 fair value measurement within the fair value hierarchy established by ASC 820, due to the use of significant unobservable inputs, including expected volatility. Significant inputs used in the valuation of the 552,500 Placement Agent Warrants issued on March 26, 2026 included a stock price of $3.21, an exercise price of $2.40, an expected term of five years, an expected dividend yield of 0%, a risk-free interest rate of 4.1%, and expected volatility of 73%, resulting in an estimated value of $2.1976 per warrant and an aggregate fair value of $1,214,151. Significant inputs used in the valuation of the 100,000 Placement Agent Warrants issued on March 31, 2026 included a stock price of $3.09, an exercise price of $2.40, an expected term of five years, an expected dividend yield of 0%, a risk-free interest rate of 3.9%, and expected volatility of 74%, resulting in an estimated value of $2.0950 per warrant and an aggregate fair value of $209,503.
During the yar ended March 31, 2026, the Company accrued interest in the amount of US$16,348 related to the convertible notes and made nil payment, the accrued interest balance as at March 31, 2026 was US$16,348.
F-51
SKYLINE
BUILDERS GROUP HOLDING LIMITED AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
17. Kin Chiu Development Acquisition
On November 17, 2025, the Company acquired 100% of the equity of Kin Chiu Development, a construction execution entity, from Lam Ngo Chiu, the Company’s CEO and Kin Chiu Development’s former owner, for nominal consideration of HK$1. The Company determined that KCD is a VIE, as its equity at-risk is insufficient to finance its operations without additional subordinated financial support, and that the Company is the primary beneficiary, as it has both the power to direct Kin Chiu Development ’s significant activities and the obligation to absorb losses or right to receive benefits through its 100% equity ownership. Accordingly, the Company consolidates Kin Chiu Development.
The Company further determined that KCD does not meet the definition of a business under ASC 805, as substantially all of the fair value of the assets acquired was concentrated in a single asset group (property and equipment). Consistent with ASC 810-10-30-3, the assets acquired and liabilities assumed were recognized and measured at fair value using the guidance in ASC 805-20, as follows:
| Asset / Liability | Allocated Cost | |||
| Cash | $ | 1,763 | ||
| Property and equipment | $ | 26,521 | ||
| Total assets | $ | 28,284 | ||
| Accrued and other payables | $ | 26,061 | ||
| Total liabilities | $ | 26,061 | ||
| Net assets acquired | $ | 2,223 | ||
| Consideration transferred | $ | - | ||
| Gain recognized (other income) | $ | 2,223 | ||
| Asset / Liability | Allocated Cost | |||
| Cash | $ | 1,763 | ||
| Property and equipment | $ | 26,521 | ||
| Total assets | $ | 28,284 | ||
| Accrued and other payables | $ | 26,061 | ||
| Total liabilities | $ | 26,061 | ||
| Net assets acquired | $ | 2,223 | ||
| Consideration transferred | $ | - | ||
| Gain recognized (other income) | $ | 2,223 | ||
As nominal consideration was effectively paid, the Company recognized a gain of $2,223, representing the excess of the fair value of net assets acquired over consideration transferred, within other income. The acquisition was determined to be immaterial to the Company’s consolidated financial statements.
F-52
SKYLINE
BUILDERS GROUP HOLDING LIMITED AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
18. Commitments and Contingencies
Commitments
As at March 31, 2026, the Company has capital commitment of US$17,000,000 for investment in Reemag (Note 20). As at March 31, 2025, the Company did not have any significant capital and other commitments.
Contingencies
Legal Proceedings
The Company is involved in several legal proceedings in which damages and claims have been asserted against it. The Company’s management and legal counsel believe that it has a number of valid defenses to such proceedings and claims and intend to vigorously defend itself. The Company do not believe that any such matters will have a material adverse effect on its financial position, results of operations, or liquidity as many of these employee related claims are covered under the Company’s insurance covers. The Company record a loss contingency if the potential loss from a proceeding or claim is considered probable and the amount can be reasonably estimated or a range of loss can be determined. Based on the current status of these proceedings, the Company has not recorded a loss contingency, as any potential loss is not considered probable and reasonably estimable, and the Company is unable to estimate a range of reasonably possible loss. The Company provide disclosure when it is reasonably possible that a loss will be incurred in excess of any recorded provision. Significant judgment is required in these determinations. As additional information becomes available, the Company reassess prior determinations and may change our estimates. Additional claims may be asserted against the Company in the future. Litigation is subject to many uncertainties, and the outcome of litigation is not predictable with assurance. It is possible that a litigation matter for which liabilities have not been recorded could be decided unfavorably to the Company, and that any such unfavorable decision could have a material adverse effect on our financial position, results of operations, or liquidity.
19. Segment Reporting
ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments.
The Company uses the management approach to determine reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker (“CODM”), Mr. Ngo Chiu Lam (CEO and director of the Company), for making decisions, allocating resources and assessing performance.
The CODM reviews financial information on a consolidated basis and uses the consolidated net income, as reported on the consolidated statements of operations and comprehensive income, to assess performance of the Company and to allocate resources as part of the annual reporting process and to assess the performance of the Company’s single reportable segment, primarily by monitoring actual results versus the plan.
The significant expenses reviewed by the CODM are consolidated operating expenses, as presented in the consolidated statement of operations and comprehensive income. Consolidated operating expenses include general and administrative expenses and allowance for expected credit losses. General and administrative expenses include staff costs (including directors’ remuneration) US$1,133,708, US$687,695 and $506,890 for the years ended March 31, 2026, 2025 and 2024, respectively and depreciation and amortization expense US$144,669, US$356,025 and US$448,986 for the years ended March 31, 2026, 2025 and 2024, respectively, see Note 7 “Property, Plant and Equipment, net” and Note 8, “Leases”. Other segment items consist of interest expense and other income, as presented in the consolidated statement of operations
Other segment items for the years ended March 31, 2026, 2025 and 2024, income totaled US$19,966,422 and expenses totaled US$652,702 and US$541,328, respectively, and consisted of:
Interest expense of US$771,946, US$891,379 and US$733,220, respectively
Fair value loss of derivative liabilities of US$3,648,265, US$nil and US$nil, respectively.
Fair value gain of other investments of US$23,437,041, US$nil and US$nil, respectively.
Other income, net of US$949,592, $238,677 and $191,892, respectively, primarily related to gain on acquisition of subsidiary, consultancy fee income from joint ventures, gain from benefit obligations of the employee benefit plans, distribution fee income.
The CODM does not utilize consolidated balance sheet information when evaluating performance or allocating resources.
F-53
SKYLINE
BUILDERS GROUP HOLDING LIMITED AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2026, 2025 and 2024
(Expressed in United States Dollars (“US$”))
19. Segment Reporting (cont.)
Based on the management’s assessment, the Company determined that it has only one operating segment and therefore one reportable segment as defined by ASC 280. For the year ended March 31, 2026, 100% of the Company’s total revenue contributed within Hong Kong, and 64%, 34% and 2% of the Company’s total assets contributed within Hong Kong, Kazakhstan and United States, respectively; for the years ended March 31, 2025 and 2024, revenue and assets within Hong Kong contributed 100% of the Company’s total revenue. The single segment represents the Company’s core business as an Approved Public Works Contractor undertaking roads and drainage to its customers in Hong Kong.
The following table presents revenue by sector for the years ended March 31, 2026, 2025 and 2024, respectively:
| Year Ended March 31, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| Revenue | ||||||||||||
| Public | $ | 50,111,828 | $ | 46,009,519 | $ | 48,298,181 | ||||||
| Private | — | — | 523,438 | |||||||||
| Total revenue | $ | 50,111,828 | $ | 46,009,519 | $ | 48,821,619 | ||||||
20. Subsequent Events
(i) On March 29, 2026, QLE entered into a securities exchange agreement with Dablam LP, pursuant to which QLE assigned and transferred 1,995,000 Class B Ordinary Shares to Dablam LP in exchange for the concurrent assignment and transfer by Dablam LP of 1,995,000 Class A Ordinary Shares to QLE.
As of the date of this report, the share exchange has not yet been reflected in the records of the Company’s transfer agent. The Company is working with the transfer agent to update its records accordingly. Notwithstanding the pending administrative update, the share exchange became effective on March 29, 2026, in accordance with the terms of the securities exchange agreement, and the Company has reflected the resulting change in share ownership in its records as of that date.
(ii) On April 30, 2026, the Company entered into a transaction agreement (the “Transaction Agreement”) with SKBL Merger Sub Inc., a Cayman Islands exempted company with limited liability (“SKBL Merger Sub”), Cove Kaz Capital Group LLC, a Delaware limited liability company (“Cove Kaz”), and Kaz Resources LLC, a Delaware limited liability company (“KRLLC”). Defined terms used in this report that are not otherwise defined shall have the meaning ascribed to them in the Transaction Agreement.
For the purpose of engaging in the transactions contemplated by the Transaction Agreement, (i) Cove Kaz incorporated SKBL Merger Sub, a newly incorporated Cayman Islands exempted company with limited liability that is wholly owned by Cove Kaz; and (ii) KRLLC will form AIFC NewCo as a newly incorporated private company in the Astana International Financial Centre (“AIFC NewCo”). KRLLC owns 100% of the issued and outstanding participatory interests (the “KCMLLP Interests”) in Kaz Critical Minerals LLP, a limited liability partnership incorporated and existing under the laws of Republic of Kazakhstan (“KCMLLP”). Prior to the Closing Date, and subject to the terms and conditions set forth in the Transaction Agreement, KCMLLP will merge with and into AIFC NewCo, with AIFC NewCo being the surviving entity in such merger. The Transaction Agreement includes several conditions to closing including government and regulatory approvals, some of which are outstanding as of the date hereof.
On April 21, 2026, the Company also entered into a loan agreement with Cove Kaz, pursuant to which the Company provided a loan to Cove Kaz in the sum of US$23,100,000 (the “Principal”), which shall be repaid to the Company with simple interest accrued on the Principal at a rate equal to 10% per annum from the date of this loan until the Principal and all interest accrued thereon is paid. On June 2, 2026, the Company, entered into a convertible loan agreement with Cove Kaz. The Convertible Loan Agreement supersedes the loan agreement between the Company and Cove Kaz dated April 21, 2026. Pursuant to the Convertible Loan Agreement, the Company agrees to make available to Cove Kaz a loan facility in an aggregate amount of up to US$45,000,000 (the “Commitment”), of which the sum of US$23,100,000 was loaned to Cove Kaz on April 22, 2026 (the “Initial Advance”). The remaining undrawn portion of the Commitment, equal to US$21,900,000, may be drawn from time to time by Cove Kaz in accordance with the procedure set out in the Convertible Loan Agreement (each such advance, together with the Initial Advance, an “Advance,” and the aggregate outstanding principal amount of all Advances from time to time, the “Principal”). The Principal shall be repaid to the Company with simple interest accrued on the outstanding Principal at a rate equal to 10% per annum from the date each Advance is made until the Principal and all interest accrued thereon is paid. On June 10, 2026, the sum of US$21,900,000 was loaned to Cove Kaz.
(iii) On May 14, 2026, Skyline Builders Group Holding Limited, a Cayman Islands exempted company with limited liability (the “Company”), entered into an assignment and assumption agreement (the “Assignment and Assumption Agreement”) with Reemag LLC (“Reemag”) and American Ventures LLC, Series XLVIII Remag, an independent third party (the “Assignee”). Pursuant to the Assignment and Assumption Agreement, the Company has agreed to sell, transfer, and assign to the Assignee (i) its full 13.09% LLC membership interest in Reemag, (ii) certain future rights and obligations of the Company to acquire additional membership interests in Reemag under that certain Subscription Agreement between the Company and Reemag dated as of November 26, 2025, as amended by that certain First Amendment to Subscription Agreement dated as of March 26, 2026 (as so amended, the “Amended Subscription Agreement”), and (iii) all other rights and obligations of the Company under the Amended Subscription Agreement, in consideration for a cash payment to the Company of $3,000,000. The consideration is received by the Company and no fair value gain or loss was recognized from the assignment.
(iv) After year end and up to date of these consolidated financial statements, the Company issued 150,000 Class A Ordinary shares pursuant to warrants holders exercise of pre-funded warrants and issued 350,613 Class A Ordinary shares pursuant to warrants holders exercise of placement agent warrants and received proceeds in the amount of $263,846. Also, the pre-funded warrants holders exercised 400,000 pre-funded warrants to acquire 400,000 Class A Ordinary Shares, as of the date of these consolidated financial statements, the 400,000 Class A Ordinary Shares has not yet been reflected in the records of the Company’s transfer agent. The Company is working with the transfer agent to update its records accordingly.
(v) On August 17, 2026, the Company acquired two highly prospective gold and silver mineral properties in Nevada for an aggregate purchase price of US$136,000. The two properties acquired are (i) Mill Creek, an early-stage gold exploration project acquired from Paramount Gold (NYSE: PZG), and (ii) Irwin Mine, a past-producing property with historic high-grade intrusive-related gold and silver. Both mineral properties are at an early stage of exploration.
The Company has assessed all events from March 31, 2026, up through the date that these consolidated financial statements are available to be issued, and there […]
F-54