Financial Performance - The company reported a net loss of $5.7 million for the fiscal year ended June 30, 2025, compared to a net profit of $2.4 million for the fiscal year ended June 30, 2024[61]. - For the fiscal years ended June 30, 2025 and 2024, specialized oilfield equipment revenue accounted for 48.0% and 46.9% of total revenue, respectively[64]. - As of June 30, 2025, accounts receivable amounted to approximately $2.0 million, down from $3.5 million in 2024, indicating potential cash flow issues[87]. - The demand for oil equipment is highly volatile and often correlates with oil and natural gas prices, complicating future profit predictions[62]. - The company has a limited operating history in specialized oilfield equipment, making it difficult to predict future growth or financial results[64]. Regulatory and Compliance Risks - The company is subject to new regulatory requirements under the Overseas Listing Regulations, which may impose additional compliance burdens[43]. - The Holding Foreign Companies Accountable Act may lead to the prohibition of trading STAK Inc.'s Ordinary Shares if the auditor is not subject to PCAOB inspection for two consecutive years[46]. - The PCAOB has determined it can conduct inspections and investigations of audit firms based in mainland China, which may affect the company's compliance status[51]. - The company is subject to uncertainties regarding compliance with new regulatory requirements, which could adversely affect its ability to pursue subsequent offerings[133]. - The PRC government has significant authority to influence the company's operations, which could materially impact its business and the value of its securities[135]. Corporate Structure and Governance - The company is a "controlled company" under Nasdaq rules, with Mr. Chuanbo Jiang owning 83.7% of Class B Ordinary Shares, representing approximately 77.0% of total voting power[104]. - Directors and officers collectively own approximately 98.6% of total voting power, which may influence corporate transactions and decisions significantly[102]. - The dual class share structure allows Class B shares to have 30 votes per share compared to 1 vote for Class A shares, potentially limiting the influence of Class A shareholders[116]. - Future issuances of Class B Ordinary Shares may dilute the interests of Class A shareholders and further concentrate voting power among certain shareholders[119]. - The company may rely on exemptions from corporate governance rules due to its controlled status, which could afford less protection to public shareholders[110]. Market and Competitive Environment - The company faces intense competition in the oilfield maintenance industry, which may adversely affect its market share and profitability[80]. - The company's growth is dependent on maintaining and enlarging its customer base, which may be affected by competition and customer satisfaction[66]. - The trading price of the Ordinary Shares may be volatile due to factors such as market conditions and the performance of other Chinese companies listed in the U.S.[172]. - The market price of the Ordinary Shares may decline if substantial amounts are sold in the public market or if there is perceived potential for such sales[180]. Operational Challenges - The company relies on a collaborative outsourcing model for production, which poses risks if government policies change or demand exceeds capacity[40]. - The company may face significant liability claims or complaints from customers, which could divert management attention and resources[74]. - The quality of products and services is critical, and any failure in quality control could adversely impact the company's reputation and financial condition[70]. - The company does not maintain insurance for its properties, equipment, or business interruptions, which could expose it to significant liabilities[96]. Future Plans and Investments - The company plans to use part of the IPO proceeds to establish a qualified factory and obtain specialized vehicle production permission, but there is no guarantee of timely approval[40]. - The company plans to invest significantly in acquiring new customers and retaining existing ones, particularly its top customers, to drive net income growth[79]. - The company’s growth strategy relies on raising additional capital for investments in research, development, and marketing, which may not be available on favorable terms[97]. - The company may require additional capital due to changing business conditions, which could lead to selling more equity or incurring debt, resulting in shareholder dilution[183]. Legal and Tax Considerations - The company is subject to potential claims and lawsuits that could divert management's attention and result in significant costs[76]. - There are uncertainties regarding tax implications for transactions involving PRC taxable assets, which may adversely affect financial condition and operations[166]. - The company faces challenges in enforcing foreign judgments in China, which may complicate legal actions against it or its management[167]. - The withholding tax rate of up to 10% applies to dividends payable by Chinese companies to non-PRC-resident enterprises unless exempted or reduced by treaties[143]. COVID-19 Impact - The resurgence of COVID-19 in China has negatively impacted the company's manufacturing business, affecting its financial performance for the fiscal year 2022[99]. Shareholder Rights and Limitations - Shareholders have limited rights to inspect corporate records under Cayman Islands law, which may complicate obtaining necessary information for shareholder actions[108]. - The concentration of ownership may discourage changes in control that could benefit Class A shareholders, impacting their investment value[117].
STAK Inc.(STAK) - 2025 Q4 - Annual Report