20-F: EpicQuest Reports FY25 Loss, Nasdaq Compliance Issues Amid Strategic Expansion

EpicQuest Education Group International Limited reported a net loss of $2.5 million for fiscal year 2025, alongside ongoing Nasdaq minimum bid price non-compliance, while continuing its global expansion in education and sports entertainment.

Summary

• Reported a net loss of $2,526,613 for the fiscal year ended September 30, 2025, a decrease from $6,571,184 net loss in FY2024.
• Revenue increased by $0.8 million (9.6%) to $8,939,989 in FY2025 from $8,153,546 in FY2024.
• Davis University (DU) revenue increased by $2.7 million, driven by new programs and higher student enrollment.
• Quest Holdings International LLC (QHI) revenue decreased by $2.3 million due to a significant decline in student enrollment in English education programs.
• Operating expenses decreased by $2.6 million in FY2025 compared to FY2024, primarily due to lower stock-based compensation and management fees.
• Accumulated deficit of $17,387,799 and negative operating cash flow of $2,946,315 as of September 30, 2025, raising substantial doubt about the company's ability to continue as a going concern.
• Cash and cash equivalents increased to $5.1 million as of September 30, 2025, from $1.5 million in FY2024, mainly due to equity financing.
• Received a Nasdaq delinquency notification on March 7, 2025, for failing to meet the $1.00 minimum bid price, with an extension granted until March 2, 2026; a reverse share split is likely.
• The planned Argentina Men's National Soccer Team exhibition matches in China, for which $7.5 million was prepaid, were rescheduled from March 2024 and are now proposed for September 2026.
• Identified material weaknesses in internal control over financial reporting as of September 30, 2025, including lack of proper risk assessment, review of non-routine transactions, and formal documentation.

Sentiment

Score: 3

Explanation: While the company saw a reduced net loss and revenue growth in some segments, the persistent 'going concern' doubt, Nasdaq non-compliance, significant delays in a major investment (AFA matches), and identified material weaknesses in internal controls indicate a highly precarious financial and operational situation. The positive developments are overshadowed by fundamental solvency and governance issues.

Positives

• Net loss decreased by $4.1 million from $6,571,184 in FY2024 to $2,526,613 in FY2025.
• Total revenue increased by 9.6% to $8,939,989 in FY2025.
• Davis University (DU) revenue increased by $2.7 million, driven by new programs and higher student enrollment.
• Operating expenses decreased by $2.6 million in FY2025, mainly due to lower stock-based compensation and management fees.
• Cash and cash equivalents increased to $5.1 million as of September 30, 2025, from $1.5 million in FY2024, bolstered by private placements.
• Davis University's international student enrollment for Q1 2025 reached 407, a significant increase from 102 in Q1 2023 and 220 in Q1 2024.
• Davis College was approved by the HLC to offer a four-year Bachelor of Science in Business degree in June 2023 and converted to Davis University in November 2023.
• Davis University's online education courses and programs were approved by the HLC on September 12, 2023.
• Expanded international collaborations, including agreements with Beijing New Oriental Vision Overseas Consulting Co., Ltd., Peking University School of Education, Shanghai Jiao Tong University, Chinese University of Hong Kong (Shenzhen Campus), and The Center of Advanced Studies (CAS) in Japan and Ecuador.
• EduGlobal College received approval for two new cooperative (co-op) diploma programs (two-year Business Studies Diploma and one-year Business Studies Certificate) in March 2024.
• Opened a recruiting office in Sri Lanka in September 2023 to attract students from Southeast Asia and the Middle East.

Negatives

• Incurred recurring net losses and negative cash flows from operations, raising substantial doubt about the ability to continue as a going concern.
• Accumulated deficit of $17,387,799 as of September 30, 2025.
• Negative operating cash flow of $2,946,315 as of September 30, 2025.
• Quest Holdings International LLC (QHI) revenue decreased by $2.3 million due to a significant decline in student enrollment in English education programs.
• Non-compliance with Nasdaq's minimum bid price requirement ($1.00), requiring a likely reverse share split by March 2, 2026, to avoid delisting.
• The Argentina Football Association (AFA) exhibition matches, for which $7.5 million was prepaid, were rescheduled from March 2024 and are now proposed for September 2026, indicating a delay in realizing returns on this investment.
• Identified material weaknesses in internal control over financial reporting, including lack of proper risk assessment, review of non-routine transactions, and formal documentation.
• The company's business is highly dependent on the ability of international students to obtain and maintain U.S. visas, which is subject to unpredictable U.S. government immigration policies.
• Significant oversight and potential intervention by the Chinese government in operations and foreign investment in China-based issuers could materially and adversely affect the business and securities value.
• The company's independent registered public accounting firm's report contains an explanatory paragraph relating to the ability to continue as a going concern.

Risks

• Uncertainty regarding the ability to continue as a going concern due to recurring net losses and negative cash flows from operations.
• No assurance of maintaining profitability despite historical net income.
• Failure to attract and retain students could materially and adversely affect business and prospects.
• Results of operations may fluctuate significantly due to various factors, including ability to attract new customers, operating expenses, economic conditions in China, and emphasis on customer experience.
• Parental and student interest in travel and education abroad opportunities may be adversely affected by pandemics like COVID-19.
• Extensive regulation of education services in China and potential government actions for non-compliance with PRC laws.
• Recent regulatory developments in China may subject the company to additional review, disclosure requirements, or government interference, potentially affecting business and securities value.
• The Chinese government may intervene or influence operations at any time, or exert more control over overseas offerings and foreign investment in China-based issuers.
• Implementation of industry-wide regulations directly targeting business operations could cause securities to significantly decline in value or become worthless.
• Uncertainties arising from the legal system in China, where laws and regulations can change quickly without sufficient notice.
• Potential inability to procure additional permits, authorizations, and approvals for operations in China.
• Restrictions on the transfer of cash out of the PRC due to government controls on Renminbi convertibility.
• Changes in China's economic, political, or social conditions or government policies could have a material adverse effect.
• Downturn in the global or Chinese economy could adversely affect business and operations.
• Adverse effects from political tensions between the United States and China, including potential restrictions on China-based companies accessing U.S. capital markets.
• High dependence on the ability of international students to obtain admission to and maintain enrollment in U.S. colleges and universities, subject to U.S. government immigration policies and restrictions.
• Students may not continue engaging courses due to perceived lack of improvement, change in requirements, or general dissatisfaction, affecting business and reputation.
• Failure to protect confidential customer information against security breaches could damage reputation and harm business.
• Failure to strengthen and protect brands could materially affect operations and financial situation.
• Inability to implement growth strategy and future plans successfully, including acquisitions.
• Significant competition in the education sector, potentially leading to loss of market share and profitability.
• Dependence on the skill and experience of management; failure to attract or retain suitable personnel could adversely affect operations.
• Inability to adequately protect intellectual property, leading to reduced competitiveness.
• Seasonality of operations, with higher revenue typically in the second half of the calendar year.
• Need for additional capital, which may not be available on acceptable terms or at all, leading to dilution or increased debt obligations.
• Subject to changing laws, rules, and regulations in the U.S. and other jurisdictions, increasing costs and risks of non-compliance.
• Risks related to lawsuits and other claims brought by clients or business partners.
• Concentration of ownership by management team members, influencing corporate matters.
• Inability to establish appropriate internal financial reporting controls and procedures, leading to reporting failures, restatements, and regulatory scrutiny.
• Lack of experience of management team as officers of a publicly traded company may hinder compliance with Sarbanes-Oxley Act.
• Cybersecurity risks, including potential breaches and failures in information systems.
• Unlikely to pay dividends in the foreseeable future.
• Fewer protections as a shareholder under British Virgin Islands law compared to U.S. law.
• British Virgin Islands companies may not have standing to initiate shareholder derivative actions in U.S. federal courts.
• British Virgin Islands courts are unlikely to recognize or enforce U.S. judgments based on certain U.S. securities law liability provisions.
• Risk of delisting from Nasdaq Capital Market due to non-compliance with minimum bid price requirement.
• Potential delisting if the Public Company Accounting Oversight Board (PCAOB) is unable to inspect or investigate the auditor completely under the Holding Foreign Companies Accountable Act (HFCAA).
• Market price for common shares may be volatile due to various factors, including regulatory developments, performance of other China-based companies, and negative publicity.
• Disclosure obligations differ as a foreign private issuer, potentially providing less information to investors than U.S. domestic reporting companies.
• Potential loss of foreign private issuer status in the future, resulting in significant additional costs and expenses.
• Exposure to risks relating to evaluations of controls required by Sarbanes-Oxley Act of 2002.
• Reliance on exemptions from certain disclosure requirements as an emerging growth company under the JOBS Act, which may make common shares less attractive to some investors.
• Potential classification as a passive foreign investment company (PFIC), resulting in adverse U.S. federal income tax consequences to U.S. holders.
• If securities or industry analysts do not publish research or publish inaccurate/unfavorable research, market price and trading volume could decline.
• Principal shareholders have substantial influence, and their interests may not align with other shareholders.
• Permitted to adopt certain home country practices in corporate governance that differ from Nasdaq standards, potentially affording less protection to shareholders.

Future Outlook

The company plans to implement cost-cutting measures, actively seek additional equity financing, and explore strategic partnerships with more universities to introduce new educational programs and increase revenue sources. It intends to develop numerous collaborative programs with higher education institutions, open additional projects in new markets like Vietnam and Hong Kong, and build self-built private international schools. The company also expects an increase in student enrollment at Miami University Regionals as China relaxes travel restrictions and anticipates more students from countries other than China to join programs in the next fiscal year.

Management Comments

• We believe that our plans to address these concerns are feasible, there is no assurance that our actions will be successful in mitigating the substantial doubt about our ability to continue as a going concern.
• We believe that Davis offers immediate synergies with our existing operations as well as significant long-term growth opportunities in the U.S., the foundation of our global expansion strategy.
• We believe that our entry into the career-oriented community college field will help us to recruit international students from China as well as to help us to enter the Southeast Asian markets.
• We believe that our post-study services are one of the most important reasons why agents and parents choose us.
• We are so confident in the quality of our services that we offer an investment guarantee with respect to the progress and graduation of our students.
• We believe that it is very difficult to replicate our business model due to the inherent challenges related to reaching recruiting agreements with universities in North America, especially those ranked as high as, or higher than, Miami University, the dormitories and catering services that we provide for students... and our relationships in China.
• We believe that the vast majority of English language programs are in need of improvement. We believe, however, that this is one of the Company's strengths and intend to open training facilities nationwide to combine English language programs with university credit hours, a cost saving measure for Chinese students who plan to study abroad.
• We believe that strengthening of online training programs in combination with streamlining the network of training models can effectively reduce the cost of travel.
• We believe that the facilities that we currently rent are adequate to meet our needs for the foreseeable future, and we believe that we will be able to obtain adequate facilities, principally through leasing of additional properties, to accommodate our future expansion plans.
• We believe our relations with our employees are good.
• We believe that we have limited exposure to cyber threats other than emails and project data storage.

Industry Context

The international education market, particularly in China, is rapidly evolving, highly fragmented, and competitive. There's increasing interest from the Chinese government and foreign universities in the PRC education market, with a focus on high-quality, low-risk study abroad options. The company operates in a sector influenced by global economic conditions, geopolitical tensions (U.S.-China), and government policies (e.g., China's "double reduction" policy, U.S. immigration policies). The increasing use of online platforms is lowering entry barriers, intensifying competition from both international and domestic players. The company's strategy of offering comprehensive post-study services and unique university partnerships aims to differentiate itself in this competitive landscape. The expansion into career-training and sports entertainment reflects a diversification beyond traditional language and university pathway programs.

Comparison to Industry Standards

• The company competes with Chinese recruiting offices of top 100 ranked US universities, international education groups such as Shorelight, Study Group, INTO, ELS, and ICM Manitoba International College, and foreign universities marketing in China.
• The company believes its comprehensive post-study services, including dormitory management, academic guidance, and internship services, differentiate it from competitors, as "no other education group offers similar services."
• The company claims a "high success rate" with an "investment guarantee" for student progress and graduation, which is a strong competitive claim.
• The business model, involving recruiting agreements with highly-ranked North American universities (like Miami University), and providing integrated dormitory and catering services, is considered to have a "high barrier to entry" compared to competitors.
• The company's commission rates and guidance services are presented as a competitive advantage over foreign university recruiting offices.
• The company's English language programs are positioned as a strength in an area where "the vast majority of English language programs are in need of improvement."

Management Changes

Corporate Governance

Legal Proceedings

• The company is subject to legal proceedings and regulatory actions in the ordinary course of business, but does not anticipate that the final outcome of any such matter will have a material adverse effect on its consolidated business, financial position, cash flows, or results of operations.
• No current involvement in any lawsuits with customers.

Related Party Transactions

• A related party balance of $140,000 as of September 30, 2025, and 2024, relates to IPO costs paid by Jianbo Zhang (Founder, CEO, and ultimate controlling shareholder) on behalf of the company. This balance is unsecured, non-interest bearing, and due on demand.

Stakeholder Impact

• Shareholders: Face significant risks due to recurring net losses, negative operating cash flow, and substantial doubt about the company's ability to continue as a going concern. Potential for delisting from Nasdaq and likely reverse stock split could negatively impact share price and liquidity. Dilution from recent capital raises and potential future equity financing. Less protection under BVI law compared to U.S. law.
• Employees: The company contributes to defined contribution retirement schemes. Relations with employees are believed to be good.
• Customers (Students/Parents): Impacted by the company's ability to attract and retain students, maintain education quality, and respond to market trends. U.S. immigration policies and potential dissatisfaction with programs are risks.
• Business Partners: Relationships with partners like Miami University, Peking University, and New Oriental Consulting are crucial for student recruitment and program delivery. Delays in projects like the AFA matches could affect partner relationships.
• Creditors: The company's going concern uncertainty and accumulated deficit pose risks to creditors.

Next Steps

• Implement cost-cutting measures, including reductions in discretionary spending.
• Actively seek additional equity financing.
• Explore strategic partnerships with more universities to introduce new educational programs and increase revenue sources.
• Develop numerous collaborative programs with renowned higher education institutions.
• Open additional projects in new markets, including Vietnam, Hong Kong, and other countries/regions, mainly for self-built private international schools (high school and colleges).
• Establish cooperation with local well-known universities in new markets.
• Prioritize domestic recruiting with an initial focus on Ohio and Michigan to increase student body at Davis University.
• Target educational institutions that meet acquisition criteria and offer high potential synergies.
• Develop new educational programs at Davis University.
• Recruit students from China and other Asian countries for Davis University, deploying the academic model established at Miami University Regional Campuses.
• Open training facilities nationwide to combine English language programs with university credit hours.
• Recruit students from Belt and Road countries.
• Strengthen online training programs and streamline the network of training models to reduce travel costs.
• Develop a virtual library of new media training resources.
• Implement training programs for sales personnel (e.g., business English email, commercial business communications, PPT production, presentation skills, sales consulting skills).
• Likely effect a reverse share split of common shares prior to March 2, 2026, to regain Nasdaq compliance.
• SouthGilmore is considering AFA's proposal to organize the two exhibition matches in September 2026.

Key Dates

Recommendation

The company faces severe fundamental challenges, including recurring net losses, negative operating cash flow, and an explicit "going concern" warning from its auditor. Its non-compliance with Nasdaq's minimum bid price requirement, necessitating a likely reverse stock split, signals significant market distress and potential delisting. A substantial $7.5 million investment in a sports event remains delayed with no clear resolution, tying up capital. Furthermore, identified material weaknesses in internal controls raise serious questions about financial reporting reliability and corporate governance. While some revenue growth and reduced net loss are noted, these are overshadowed by the existential threat of going concern, regulatory non-compliance, and operational inefficiencies. These factors collectively point to a highly speculative and risky investment, warranting a strong sell recommendation.

Keywords

Education Services, International Students, Study Abroad, Career Training, Higher Education, China Education, Canada Education, US Education, Nasdaq Listing, Going Concern, Financial Performance, SEC Filing, Risk Management, Corporate Governance, Student Recruitment, Davis University, EduGlobal College, Sports Entertainment, Capital Raise, Share Dilution, Regulatory Compliance, Cybersecurity, British Virgin Islands, Foreign Private Issuer, PFIC