Customer Concentration and Revenue - For the year ended December 31, 2024, two customers accounted for 18% and 17% of total revenues, while in 2023, two customers accounted for 33% and 10%[70]. - The company has encountered risks related to customer concentration, with a few major customers accounting for a substantial portion of revenues[71]. - The Company has a concentration of credit risk, with Customer A contributing HKD 1,771,000 (approximately US12,011,000 and HK5,981,000 and HK$3,059,000, representing 27% and 31% of total revenues respectively[90]. - The Company primarily derives its income from commissions, securities underwriting, and asset management fees, with no material amount of investment securities held for its own account[160]. Operating History and Market Risks - The company has a limited operating history since its subsidiaries began operations in 2018, which increases investment risks due to uncertainties in future growth and market acceptance[63]. - The company faces significant competition in the online brokerage industry, with larger competitors potentially having better resources and market presence[68]. - The company’s business growth may be affected by changes in global and regional macroeconomic conditions, including uncertainties in the Chinese economy[81]. - The online brokerage service industry in Hong Kong is at an early stage, and applicable laws may change, impacting the Company's operations and compliance costs[134]. Regulatory and Compliance Risks - The Company is subject to extensive regulatory requirements in Hong Kong, and non-compliance may result in penalties or revocation of licenses, adversely affecting its business and financial condition[133]. - The Company is classified as a "foreign private issuer," leading to less frequent reporting obligations compared to U.S. domestic companies[58]. - The Company may face increased costs if it loses its foreign private issuer status, requiring compliance with more extensive U.S. reporting requirements[173]. - The enactment of the Hong Kong National Security Law could impact the Company's operations, with potential sanctions affecting its business[138]. Cybersecurity and Operational Risks - The Company has not experienced any material cybersecurity breaches in the past, but it remains vulnerable to potential attacks that could compromise user information[110]. - The Company faces risks from unexpected network interruptions and system failures that could disrupt its services and affect customer satisfaction[107]. - The Company relies on third-party service providers for critical infrastructure and market information, and any failures in these services could adversely affect its operations[112]. Management and Governance - The company is classified as a "controlled company," with founders owning approximately 52.52% of ordinary shares, which may exempt it from certain Nasdaq corporate governance requirements[59]. - The Company's founder and CEO own an aggregate of 71.59% of the total voting power of the Company's outstanding Ordinary Shares, which may lead to conflicts of interest with minority shareholders[121]. - The Company is dependent on key executives and highly qualified managers, with a significant risk associated with their recruitment and retention[119]. Capital and Liquidity - A significant decrease in the company's liquidity could negatively affect its business and financial management, reducing customer confidence[93]. - The Company may need additional capital and could sell more Ordinary Shares or incur debt, leading to potential dilution for shareholders[167]. - The Company does not expect to pay dividends in the foreseeable future, intending to retain available funds for business development[164]. Risk Management and Internal Controls - The Company has invested significantly in developing risk management policies, but these may not be fully effective in all market environments or against all types of risks[103]. - As of December 31, 2024, the Company's management assessed its internal controls over financial reporting as effective[178]. - The Company has retained an external consultant to assist in maintaining its internal controls over financial reporting[178]. Changes in Customer Behavior and Market Adaptation - The company must adapt to evolving customer needs to maintain trading volume and customer retention, which is critical for its financial performance[75]. - The Company emphasizes the importance of timely and cost-effective responses to user needs, as failure to do so may materially affect its business and results of operations[100]. - The Company must continue to invest in new service offerings to remain competitive, but there are risks associated with the development and market acceptance of these services[102].
Plutus Financial Group Limited(PLUT) - 2024 Q4 - Annual Report