Ps International(PSIG) - 2024 Q4 - Annual Report

Regulatory Environment - The company operates exclusively in Hong Kong, with no operations or data processing in Mainland China, mitigating direct regulatory impacts from PRC laws[34]. - The PRC Data Security Law and Personal Information Protection Law, effective in 2021, do not currently apply to the company as it does not conduct operations in Mainland China[47][48]. - The company faces potential risks from evolving PRC laws that may be applied to its Hong Kong operations, which could adversely affect its business and financial condition[39][40]. - Regulatory compliance costs may increase due to uncertainties surrounding PRC laws, potentially impacting operational efficiency and financial performance[43]. - The company has not collected or managed personal information in Mainland China, thus believes it is not subject to the recent outbound data transfer regulations[49]. - The PRC government may exert more control over overseas listings and foreign investments, which could limit the company's ability to offer securities to investors[39]. - The company acknowledges the risk of future PRC laws affecting its operations if it expands into Mainland China[44]. - There is significant uncertainty regarding the interpretation and enforcement of new PRC laws, which could lead to compliance challenges for the company[50]. - The company has not faced any penalties or legal actions under the current PRC laws, as it maintains operations solely in Hong Kong[48]. - The company remains vigilant about potential regulatory changes that could impact its business model and operational strategies in the future[42]. Trade and Economic Conditions - Revenue from freight forwarding services for export shipments to the United States contributed approximately US $75.2 million, US$ 122.3 million, and US $61.7 million for the years ended December 31, 2022, 2023, and 2024 respectively, representing approximately 77.3%, 87.4%, and 70.9% of total export revenue for the corresponding periods[62]. - The U.S. government has imposed additional tariffs on specified products imported from China, with cumulative tariffs exceeding 100% between the U.S. and China[63]. - The company is subject to risks related to changes in trade policies, tariff regulations, and embargoes that could adversely affect its customers' business[62]. - A significant portion of the company's business is derived from customers in Mainland China for export/re-export needs to the United States, which is heavily influenced by global economic conditions and international trade levels[64]. - Political tensions between the United States and China could reduce trade levels and adversely affect the company's business prospects and financial condition[65]. - Economic downturns in key regions, including Asia, the European Union, and the United States, could reduce international trade volumes, directly impacting demand for shipping and freight forwarding services[70]. - Changes in global economic, financial, and political conditions, such as trade restrictions and sanctions, may lead to a material decline in demand for the company's services[68]. - The company is sensitive to cyclical fluctuations in demand for freight services driven by international trade activities and economic conditions[69]. - The company's operations are significantly influenced by the political, economic, and social conditions in Hong Kong and Mainland China, which could adversely affect its business[67]. Customer and Revenue Concentration - The top five customers accounted for approximately 72.6%, 81.4%, and 65% of the company's revenue for the years ended December 31, 2022, 2023, and 2024 respectively[90]. - The largest customer, Yanwen Logistics Co., Ltd, represented 59.7%, 75.3%, and 39.3% of total revenues for the same years[90]. - Revenue from freight forwarding services to other freight forwarders accounted for approximately 98.3%, 99.6%, and 99.6% of total revenue for the years ended December 31, 2022, 2023, and 2024 respectively[106]. Operational Risks - The company is susceptible to fluctuations in demand and supply for cargo space, which can impact profitability[100]. - The company relies on block space arrangements and aircraft charter agreements, committing to pay for cargo space regardless of utilization[99]. - The company faces risks from potential disintermediation in the freight forwarding industry due to digitization and direct shipping trends[103]. - Any failure to identify shipments carrying dangerous or illicit goods may lead to investigations and penalties, adversely affecting reputation and operations[109]. - The company is dependent on suppliers for cargo space, and disruptions in their performance could significantly impact financial results[111]. - The company’s profitability may be adversely impacted if investments in equipment and infrastructure do not align with customer demand[115]. - Net cash outflow from operating activities may affect liquidity, particularly if trade receivables deteriorate[117]. - Historical growth rates and gross profit margins may not be maintained, with operating results subject to significant fluctuations due to various external factors[118]. - The company is exposed to credit risks from customers, with a typical credit period of 45-60 days, which may lead to cash flow mismatches[119]. - There is a risk of material difficulties in debt collections and potential defaults by customers, which could adversely affect the company's financial position[120]. - The company may face litigation and regulatory investigations, which could exceed insurance coverage and adversely impact operating results[121]. - Negative publicity regarding the company or its industry could harm its reputation and business, affecting customer retention and financial performance[122]. Growth and Strategic Initiatives - The growth strategy includes expanding services in cross-border e-Commerce logistics, but the long-term viability of e-Commerce models remains uncertain[124]. - Future growth is contingent on factors such as the growth of the U.S. freight forwarding market and the ability to retain key staff[126]. - The company may pursue acquisitions for growth, which involve risks such as integration challenges and potential increases in indebtedness[128]. Financial and Compliance Risks - The company is subject to increased legal and operational costs associated with being a public company, which may strain resources[160]. - The company may incur significant legal, accounting, and other expenses as a result of operating as a public company, particularly after ceasing to qualify as an "emerging growth company"[199]. - The company is currently evaluating and monitoring developments regarding compliance with public company regulations, but cannot predict the amount or timing of additional costs[199]. - The company may lose its foreign private issuer status if more than 50% of its voting securities are owned by U.S. residents or if a majority of its directors or executive officers are U.S. citizens or residents[191]. - The company is classified as an "emerging growth company," which allows it to take advantage of certain exemptions from disclosure requirements, potentially making its shares less attractive to investors[198]. - The company may be classified as a passive foreign investment company (PFIC), which could result in adverse U.S. federal income tax consequences for U.S. holders of its ordinary shares[200]. Cybersecurity and Technology Risks - Cybersecurity risks are a major concern, with potential impacts including operational disruptions, data breaches, and increased costs for protection against such events[145]. - The company has identified a material weakness in internal control over financial reporting, which could lead to misstatements in financial statements and affect compliance with reporting requirements[156]. - The company relies heavily on its information technology systems for operations, and any failure to maintain or enhance these systems could lead to competitive disadvantages and revenue declines[142]. - The company plans to enhance its information technology systems to improve efficiency and meet customer demands for integrated solutions, which may incur significant ongoing software development costs[144]. Market and Trading Conditions - The Holding Foreign Companies Accountable Act may impact the trading of the company's securities in the U.S. if auditors in China cannot be inspected, potentially affecting investment value[163]. - The SEC may prohibit trading of securities if an issuer's audit reports are from firms in jurisdictions not inspected by the PCAOB for two consecutive years[164]. - The PCAOB determined it was unable to inspect firms in mainland China and Hong Kong until December 15, 2022, when it removed these jurisdictions from the non-inspection list[166]. - If identified as a Commission-Identified Issuer for two consecutive years, the company's securities could be prohibited from trading in the U.S., significantly impairing capital raising efforts[167]. - The independent auditor, WWC, P.C., is subject to PCAOB inspections, with the last inspection occurring in December 2023[168]. - The company has not issued securities prior to the Business Combination, and there is no assurance that an active trading market for its Ordinary Shares will develop[169]. - The company expects to issue additional share capital in the future, which may result in significant dilution for existing shareholders[179]. - The Unit Purchase Option allows for the purchase of up to 431,250 Option Units, which could increase the number of shares eligible for resale and result in dilution[180]. - The company does not expect to pay dividends in the foreseeable future, retaining funds for business development and growth[181]. - The board of directors has discretion over dividend distribution, which will depend on future financial conditions and operational results[182]. - Compliance with public company requirements may strain resources and divert management's attention, increasing legal and financial costs[183]. Business Combination and Corporate Structure - The Business Combination with AIB was completed on July 18, 2024, resulting in PSI becoming a wholly-owned subsidiary of PS International Group Ltd[210]. - Each ordinary share of PSI was converted into the right to receive 90% of Ordinary Shares based on the Exchange Ratio, with a contingent right for an additional 10%[211]. - The Company's Ordinary Shares began trading on The Nasdaq Capital Market under the symbol "PSIG" on July 19, 2024[212]. - The Company qualifies as an "emerging growth company" with less than$ 1.235 billion in revenue for the last fiscal year, allowing it to take advantage of reduced reporting requirements[224]. - The Company will remain an emerging growth company until it meets certain revenue or market value thresholds, or after five years post-IPO[225]. - The Company is classified as a "foreign private issuer," resulting in less stringent reporting obligations compared to U.S. domestic issuers[226]. - The Company has entered into lock-up agreements with shareholders, restricting the transfer of shares for a period of six months post-Closing Date[213]. - A Support Agreement was established to ensure shareholder support for the Business Combination, with specific conditions regarding share transfers[214]. - The Company has a corporate structure that includes subsidiaries PSI (BVI), BGG (BVI), and PSIHK, which are engaged in logistics and freight handling services[218].