F-1/A: Primega Group Holdings Reports Net Loss Amid Soaring Costs

Primega Group Holdings Limited filed an amended F-1 registration statement for the resale of up to 17,840,000 ordinary shares by selling shareholders, with no proceeds going to the company, while reporting a significant net loss for fiscal year 2025.

Summary

• The filing is an Amendment No. 2 to Form F-1 Registration Statement (F-1/A) by Primega Group Holdings Limited (ZDAI).
• It relates to the offer and resale of up to 17,840,000 ordinary shares by identified Selling Shareholders.
• The company will not receive any proceeds from the sale of these shares by the Selling Shareholders.
• ZDAI is a Cayman Islands holding company with primary operations in Hong Kong through its subsidiary, Primega Construction Engineering Co. Limited, which provides soil and rock transportation, diesel oil trading, and construction works.
• Ordinary Shares trade on the Nasdaq Stock Market under the symbol ZDAI, with a closing price of $0.4900 per share on August 29, 2025.
• Total issued and outstanding shares as of the prospectus date are 26,400,000.
• Selling Shareholders beneficially own 17,840,000 Ordinary Shares, representing 67.58% of the outstanding shares.
• For the year ended March 31, 2025, the company reported a net loss of USD 6,981,068, a significant decline from a net income of USD 1,091,285 in 2024.
• Revenue increased by 43.2% to USD 19,275,673 in 2025 from USD 13,464,430 in 2024, driven by increased transportation services and construction projects.
• Gross profit decreased by 39.3% to USD 1,679,665 in 2025, and the gross profit margin fell sharply to 8.7% from 20.6% in 2024.
• General and administrative expenses surged by 561.9% to USD 8,845,949 in 2025, primarily due to USD 6,778,458 in legal and professional fees (settled by share issuance) and a USD 696,639 provision for credit loss.
• Net cash used in operating activities was USD 2,819,237 in 2025, a reversal from net cash provided of USD 2,394,212 in 2024.
• The company does not intend to pay dividends in the foreseeable future, planning to retain earnings for business operation and expansion.

Sentiment

Score: 3

Explanation: While revenue increased, the company reported a substantial net loss and a sharp decline in gross profit margin, indicating severe operational and financial deterioration. The surge in administrative expenses, even if partially non-recurring, and the shift to negative operating cash flow are significant concerns. The large resale of shares by existing shareholders without proceeds to the company, combined with the low stock price, suggests negative market perception and potential dilution pressure. Numerous regulatory and industry-specific risks further dampen sentiment.

Positives

• Revenue increased by 43.2% year-over-year to USD 19,275,673 for the year ended March 31, 2025.
• Demand for transportation services increased, leading to the undertaking of 3 new large-scale transportation projects.
• Revenues from miscellaneous construction works grew by 71.2% in fiscal year 2025.
• The company possesses a fleet of 45 tipper trucks and machinery, supported by a strong network of subcontractors.
• An experienced and professional management team is in place.
• The company's auditor, ZH CPA, LLC, is U.S.-based and inspectable by the PCAOB, mitigating a key regulatory risk for U.S.-listed companies with Hong Kong operations.

Negatives

• A net loss of USD 6,981,068 was recorded for the year ended March 31, 2025, compared to a net income of USD 1,091,285 in the prior year.
• Gross profit decreased by 39.3% to USD 1,679,665.
• The gross profit margin significantly declined to 8.7% in 2025 from 20.6% in 2024.
• General and administrative expenses surged by 561.9% to USD 8,845,949, primarily due to high legal and professional fees (USD 6,778,458) and a provision for credit loss (USD 696,639).
• Cost overruns in construction projects and increasing operational challenges, including skilled labor shortages and surging transportation costs in Hong Kong's weak economic climate, impacted margins.
• Net cash used in operating activities was USD 2,819,237 in 2025, a significant negative shift from the prior year's positive cash flow.
• The company has a concentrated customer base, with approximately 84.57% of revenue derived from a small number of major customers in 2025.
• Reliance on non-recurring projects and competitive tender processes introduces uncertainty in future revenue generation.
• Significant accounts receivable from major customers (USD 6,793,145 in total, with 84.57% from major customers in 2025) pose collection risk.
• No intention to pay dividends in the foreseeable future, limiting shareholder returns to capital appreciation.

Risks

• The PRC government may exercise significant oversight and discretion over business in Hong Kong, potentially intervening in operations or restricting capital movement, which could materially change operations or security value.
• Uncertainties exist regarding the interpretation and enforcement of PRC and Hong Kong laws, rules, and regulations, which can be unpredictable and inconsistent.
• Potential for additional regulatory review from PRC government or SEC, including cybersecurity and overseas listing reviews, could increase compliance costs and hinder operations.
• Trading in Ordinary Shares may be prohibited under the Holding Foreign Companies Accountable Act (HFCA Act) if the auditor cannot be fully inspected for two consecutive years, despite the current auditor being inspectable.
• Additional and more stringent criteria applied to emerging market companies by SEC/Nasdaq could add uncertainties to the offering, business operations, share price, and reputation.
• The enactment of the Hong Kong National Security Law and the Safeguarding National Security Ordinance (SNSO) could impact Hong Kong's autonomy and the company's business operations.
• Exposure to scrutiny, criticism, and negative publicity involving U.S.-listed China-based companies could harm business operations, reputation, and investment value.
• A downturn in the Hong Kong, China, or global economy, or changes in economic and political policies of China, could materially and adversely affect business and financial condition.
• Changes in currency conversion rates between Hong Kong dollars and U.S. dollars may affect the value of investments.
• Political risks are associated with conducting business in Hong Kong, including potential impacts on economic stability.
• The Hong Kong legal system embodies uncertainties that could limit the availability of legal protections, including intellectual property rights and contract enforcement.
• Changes in international trade policies, trade disputes, or trade wars may dampen growth in Hong Kong and affect customer investment decisions.
• Reliance on dividends and other distributions from subsidiaries to fund cash and financing requirements, with potential limitations on subsidiaries' ability to make payments.
• Internal controls over financial reporting may not be effective, potentially leading to errors or fraud.
• Cayman Islands economic substance requirements may affect business and operations.
• A concentrated customer base means any decrease in projects with major customers would adversely affect operations and financial results.
• Revenue relies on successful tenders or quotations for non-recurring projects, and failure to secure new projects would affect business and financial results.
• Operating results are difficult to predict due to various factors, including market demand, political conditions, competition, and cost control.
• Fluctuations in the price or availability of biodiesel oil, a significant operational cost, may adversely affect financial results.
• Capacity to provide soil and rock transportation services is limited by the availability of machinery and equipment, and the inability to expand the fleet poses risks.
• Dependence on third parties for machinery, equipment, and supplies, with no long-term contracts, creates vulnerability to price increases or unavailability.
• Failure, damage, or loss of machinery and equipment may adversely affect operations and financial performance.
• Liability for biodiesel oil leakage during transportation could lead to claims, penalties, and reputational damage.
• The ability to obtain and maintain suitable prices for biodiesel oil trading is essential for profitability.
• Failure to meet schedule requirements in the highly schedule-driven construction services industry could result in financial liability (liquidated damages) and reputational harm.
• Failure to maintain safe work sites could lead to significant losses, employee injuries, investigations, litigation, and damage to reputation.
• Risk of non-payment or delayed payment by customers, including related parties, could adversely affect cash flow and financial condition.
• Revenue may fluctuate due to variation orders in construction contracts, potentially decreasing expected income.
• Reliance on subcontractors for project completion and machinery supply exposes the company to risks of non-performance, delayed performance, or sub-standard performance.
• Responsibility for subcontractors' non-performance or non-compliance, including labor law violations, could lead to legal liabilities and financial impact.
• Increased waste disposal fees (effective April 1, 2024) may intensify competition and divert customers to alternative waste management solutions.
• Industrial accidents at construction sites could lead to claims for employee compensation, personal injuries, fatal accidents, and property damages.
• Deviations from estimated time and costs in projects can lead to cost overruns and adversely affect operations and financial results, especially with fixed-price contracts.
• Irregular cash inflows and outflows in construction projects may affect the net cash flow position and liquidity.
• Dependence on key executives, management team, and professional staff, with risks if significant personnel terminate employment.
• Inability to obtain sufficient funding on acceptable terms for business expansion.
• Insurance coverage may be inadequate to protect against all potential losses.
• Exposure to litigation, arbitration, or other legal proceeding risks.
• Reliance on customers and subcontractors for the provision of machinery and equipment at construction sites, limiting capacity if not available.
• Reliance on a stable workforce; labor shortages, industrial actions, strikes, or material increases in labor costs could adversely affect operations and financial results.
• Inability to successfully implement future business plans and objectives, including acquisitions and joint ventures.
• A sustained outbreak of the COVID-19 pandemic or a severe/prolonged downturn in the global economy could have a material adverse impact.
• An active trading market for Ordinary Shares may not be sustained, affecting liquidity and market price.
• The trading price of Ordinary Shares could be subject to rapid and substantial volatility, making it difficult for investors to assess value.
• Pre-IPO shareholders may sell their Ordinary Shares under Rule 144, potentially impacting the trading price.
• Directors, officers, and principal shareholders have significant voting power and may take actions not in the best interests of other shareholders.
• The board of directors may decline to register the transfer of Ordinary Shares in certain circumstances.
• Disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
• As a foreign private issuer, the company is exempt from certain U.S. securities rules and regulations, potentially affording less protection to investors.
• Potential loss of foreign private issuer status in the future could result in significant additional costs and expenses.
• There is no assurance that the company will not be a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could result in adverse tax consequences.
• As an emerging growth company, the company may take advantage of certain reduced reporting requirements, potentially limiting information available to investors.
• Increased costs will be incurred as a public company, particularly after ceasing to qualify as an emerging growth company.
• As a controlled company under Nasdaq rules, the company may choose to exempt itself from certain corporate governance requirements, potentially affording less protection to public shareholders.
• Selling Shareholders could sell their interests in a private transaction, potentially preventing other shareholders from realizing a change-of-control premium.
• Difficulty enforcing U.S. judgments against the company or its officers/directors in the Cayman Islands or Hong Kong.

Future Outlook

The company intends to pursue strategies for business expansion, including growing through selected strategic acquisition of machinery, enhancing its operations as a construction works subcontractor to undertake excavation works, and further enhancing its project management capability. The company does not anticipate declaring or paying any dividends in the foreseeable future, intending to retain all available funds and future earnings for the operation and expansion of its business.

Management Comments

• "Our management monitors the cash position of our operating subsidiary regularly and prepares budgets on a monthly basis to ensure it has the necessary funds to fulfill its obligations for the foreseeable future and to ensure adequate liquidity."
• "The management of the Company does not expect these consultancy services will recur in the future." (referring to the high legal and professional fees in 2025)
• "We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate declaring or paying any dividends in the foreseeable future."

Industry Context

The company operates in the highly competitive Hong Kong construction industry, which is significantly influenced by government spending on projects, property developer investments, and the general economic conditions in Hong Kong and China. The industry faces ongoing challenges such as skilled labor shortages and surging transportation costs. Recent increases in waste disposal fees (effective April 1, 2024) are expected to intensify competition and may lead customers to seek more cost-effective or alternative waste management solutions, potentially impacting the company's tender success rates and project margins.

Comparison to Industry Standards

• The filing highlights that the construction industry in Hong Kong is highly competitive, often requiring the company to scale down mark-up margins to secure projects, which impacts profitability.
• The industry is described as highly schedule-driven, with failures to meet contractual deadlines potentially leading to liquidated damages and reputational harm.
• The company's reliance on subcontractors and its limited owned machinery fleet are noted as common practices in the Hong Kong construction industry to maximize cost efficiency and flexibility, but also introduce risks related to subcontractor performance and equipment availability.
• No specific comparable companies, projects, or results are provided within the filing to benchmark against global or regional industry standards.

Management Changes

Corporate Governance

Legal Proceedings

• As of the date of this prospectus, the Company, Celestial Power, and Primega Construction are not a party to, and are not aware of any threat of, any legal proceeding that, in the opinion of management, is likely to have a material adverse effect on the business, financial condition, or operations.

Related Party Transactions

• Chi Yip Eng. & (Trans.) Company Limited, owned by the parents of Mr. Man Siu Ming (a director), was a customer, contributing USD 643,748 (3.34% of total revenue) from soil and rock transportation services and USD 33,030 from site management services for the year ended March 31, 2025. No revenue was recorded from Chi Yip in 2024.
• Accounts receivable from Chi Yip amounted to US$445,573 as of March 31, 2025, decreasing from US$392,686 as of March 31, 2024.
• An amount due to Mr. Man Siu Ming (director) was US$530,078 as of March 31, 2025, an increase from US$196,906 as of March 31, 2024. This balance is unsecured, interest-free, and repayable on demand.
• An amount due to Chi Yip (related company) was US$156,248 as of March 31, 2025, related to an initial payment of a finance lease.

Stakeholder Impact

• Shareholders face significant negative impacts due to the substantial net loss, sharp decline in gross profit margin, and the large increase in administrative expenses. The resale of 67.58% of outstanding shares by selling shareholders without proceeds to the company could exert downward pressure on the stock price, and no dividends are expected in the foreseeable future.
• Employees may be affected by the noted risks of skilled labor shortages and increasing labor costs, which could impact job security or compensation if not managed effectively.
• Customers, particularly the concentrated major customers, are critical to the company's revenue. Any changes in their project awards or payment delays could severely impact the company's financial health. New waste disposal fees may also affect customer costs and choices.
• Suppliers and subcontractors are vital for operations, and the company's reliance on them for machinery and services means their performance and pricing directly affect the company's profitability and project execution. Potential liabilities for subcontractor non-compliance could also impact these relationships.
• Creditors, including banks and finance lease providers, may view the company's increased debt, net loss, and negative operating cash flow as heightened credit risk, potentially affecting future funding availability or terms.

Next Steps

• Directors will be up for re-election at the next annual shareholders meeting.
• The company intends to grow through selected strategic acquisition of machinery.
• The company plans to enhance its operations as a construction works subcontractor to undertake excavation works.
• The company aims to further enhance its project management capability.
• Management will continue to closely monitor the COVID-19 situation throughout 2025 and beyond.
• The company intends to retain all available funds and future earnings for business operation and expansion, not declaring dividends in the foreseeable future.

Key Dates

Recommendation

The company reported a substantial net loss and a significant drop in gross profit margin, indicating severe operational and financial deterioration. While revenue increased, it was overshadowed by surging general and administrative expenses, including substantial non-recurring legal and professional fees and credit loss provisions. The shift to negative operating cash flow is a major red flag for liquidity. Furthermore, the filing is for a large resale of shares by existing shareholders, with no proceeds benefiting the company, which typically signals a lack of confidence from insiders and could exert downward pressure on the stock price. The stock is already trading at a low price ($0.49), and the numerous regulatory and operational risks in Hong Kong and China, coupled with the company's poor financial performance, make it a high-risk investment with limited upside potential in the near term.

Keywords

Construction, Hong Kong, Transportation, Soil and Rock, Biodiesel, SEC Filing, F-1/A, ZDAI, Primega Group Holdings, Nasdaq, Public Offering, Share Resale, Financial Results, Net Loss, Gross Profit Margin, Regulatory Risk, China Risk, Corporate Governance, Shareholder