SDAI Limited: FY2024 Financial Analysis – Net Profit Decline

Report Overview

• Company: SDAI Limited
• Report Date: 7 April 2025
• Financial Year: Ended 31 December 2024

Business Description

The document does not provide a detailed description of SDAI Limited’s core business operations, business segments, geographic footprint, industry position, competitors, market share, revenue streams, customer base, supply chain, or competitive advantages.

Key Financial Statement Analysis & Investor Considerations

Disclaimer of Opinion

• The Independent Auditor, Foo Kon Tan LLP, issued a Disclaimer of Opinion on the Audited Financial Statements for FY2024. [[1]]
• The auditor was unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion due to the significance of matters described in the ‘Basis of Disclaimer of Opinion’ section. [[1]]
• Investor Implication: A disclaimer of opinion is a serious red flag, indicating significant uncertainty and potential issues with the reliability of the financial statements.

Going Concern Uncertainty

• Note 2 to the financial statements highlights a material uncertainty related to the company’s ability to continue as a going concern. [[3]]
• As at 31 December 2024, the Group’s current liabilities exceeded current assets by \$532,590 and had a deficit in equity of \$7,433,641. [[3]] The Company’s current liabilities exceeded current assets by \$349,987 and had a deficit in equity of \$7,241,051. [[3]]
• The Group incurred a loss for the year of \$1,714,328 and net cash used in operating activities was \$3,400,392. [[3]]
• The auditor was unable to obtain sufficient appropriate evidence regarding the appropriateness of the going concern assumption. [[3]]
• Management believes they can address matters raised in the Notice of Compliance (“NOC”), successfully complete corporate turnaround plans and restructuring, and obtain sufficient new loan financing and extend existing loan maturities. [[3]]
• Investor Implication: Significant doubt exists about the company’s ability to continue operating. Reliance on future events to resolve the going concern issue is highly speculative.

Notice of Compliance (NOC) from SGX RegCo

• The company received NOCs from the Singapore Exchange Regulation (SGX RegCo) related to internal control weaknesses and a special audit. [[3, 7]]
• A Special Audit was commissioned to review matters raised in the First NOC, payroll matters, unauthorized transactions, internal controls, and whistleblowing policies. [[7]]
• The Special Auditor issued the first phase of the special audit on 21 July 2023, covering Payroll Matter and Unauthorised Transaction. [[4, 8]]
• As of the report date, the Special Audit has yet to be finalised. [[4, 9]]
• Investor Implication: Ongoing regulatory scrutiny and unresolved issues related to internal controls and potential breaches of regulations create substantial risk.

Payroll Matter and Unauthorised Transaction

• The Special Auditor’s first phase identified suspected payroll irregularities of \$520,000 and an unauthorized transaction involving US\$480,010. [[8, 9]]
• These issues raise concerns about potential breaches of the Employment of Foreign Manpower Act and potential contravention of directors’ fiduciary duties. [[9]]
• Investor Implication: These findings suggest potential governance and compliance failures within the company.

Suspension of Trading

• The shares of the Company have been suspended from trading on the SGX-ST since 12 July 2021. [[2]]
• Investor Implication: Investors cannot readily buy or sell shares, creating illiquidity and uncertainty.

Loans and Financing

• The company entered into loan agreements, including an interest-free loan of \$4,000,000 with Asian Accounts Receivable Exchange Pte Ltd, renewed until 30 June 2026. [[9]]
• The company also entered into a loan agreement with a director of the Company for an interest-free loan of \$4,000,000, renewed until 30 June 2026. [[9]]
• The company entered into four separate redeemable loan agreements with other parties for an interest-free loan of an aggregate principal sum of \$1,000,000 with a maturity date on 30 June 2026. [[9]]
• Investor Implication: Reliance on loans, including those from related parties, to maintain operations may indicate financial distress.

Net Profit Growth/Decline

• The Group incurred a loss for the year of \$1,714,328 (2023 – \$5,558,223). [[3]]
• Investor Implication: The company’s net loss indicates poor financial performance.

Key Strengths

Based on the provided document, it is difficult to identify any significant strengths of SDAI Limited. The report primarily highlights concerns and uncertainties.

Key Risks

• Going Concern Uncertainty: Significant doubt about the company’s ability to continue as a going concern.
• Disclaimer of Opinion: The auditor’s inability to express an opinion due to insufficient audit evidence.
• Regulatory Scrutiny: Ongoing investigation by SGX RegCo and unresolved issues related to compliance.
• Internal Control Weaknesses: Identified lapses in internal controls and potential breaches of regulations.
• Illiquidity: Suspension of trading on the SGX-ST.

Special Activity or Action to Improve Profitability

The company is attempting to address matters raised in the NOC, complete corporate turnaround plans and restructuring, and obtain new loan financing. However, the success of these efforts is uncertain.

Investment Recommendations & Disclaimer

For Current Holders:

Given the Disclaimer of Opinion, significant going concern uncertainties, ongoing regulatory scrutiny, and suspension of trading, current holders should seriously consider divesting their shares if possible, recognizing the potential for further losses. The risks appear to significantly outweigh any potential rewards.

For Potential Investors:

Investing in SDAI Limited at this time is highly speculative and not recommended. The financial statements have significant uncertainties, and the company faces substantial challenges. Potential investors should avoid this stock until the issues are resolved, and the company demonstrates a clear path to financial stability and regulatory compliance.

Disclaimer:

The above recommendations are based solely on the provided financial report and do not constitute financial advice. Investors should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions.

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