20-F: EPWK Holdings Faces Delisting, Soaring Losses Amidst Strategic Shifts

EPWK Holdings Ltd. reported a significant increase in net losses to $10.44 million for fiscal year 2025, alongside its delisting from Nasdaq and ongoing concerns about its ability to continue as a going concern.

Summary

• Net loss dramatically increased to $10.44 million for the fiscal year ended June 30, 2025, compared to $1.20 million in 2024 and $1.08 million in 2023.
• Total revenue grew by 37.7% to $27.84 million in FY2025, primarily driven by the launch of a new digital marketing service which contributed $10.84 million.
• Gross profit decreased by 10.3% to $3.39 million in FY2025, with the gross profit margin falling to 12.17% from 18.69% in FY2024, largely due to the lower margin of the new digital marketing service.
• Operating expenses surged by 158.3% to $14.16 million in FY2025, mainly due to a 173.2% increase in sales and marketing expenses ($7.48 million) and a 265.9% increase in general and administrative expenses ($6.25 million).
• The increase in sales and marketing and G&A expenses included $2.7 million and $4.04 million, respectively, in share-based compensation to external consultants for advisory services post-IPO.
• Research and development expenses decreased by 58.9% to $0.43 million in FY2025, as most network framework and platforms are considered ready.
• The company was delisted from the Nasdaq Global Market on December 23, 2025, and its Class A ordinary shares are now quoted on the OTCID Basic Market under the symbol EPWKF.
• As of June 30, 2025, the company had an accumulated deficit of $29.3 million and a negative working capital of $0.9 million, raising substantial doubt about its ability to continue as a going concern.
• A public offering in October 2025 raised aggregate gross proceeds of $8 million, before deducting placement agent fees and other estimated expenses.
• The company's shareholders approved a 40-for-1 share consolidation, effective November 17, 2025, and an increase in authorized share capital, including increasing Class B ordinary share voting power from 15 to 100 votes per share.
• Material weaknesses in internal control over financial reporting were identified, including a lack of sufficient accounting and financial reporting personnel with U.S. GAAP and SEC experience, and inadequate financial reporting policies.
• The company operates through a Variable Interest Entity (VIE) structure in China, which carries inherent regulatory and enforceability risks under PRC laws.

Sentiment

Score: 2

Explanation: The company faces severe financial challenges, including a substantial increase in net losses, negative working capital, and a 'going concern' warning from auditors. The delisting from Nasdaq is a major blow to its market standing and liquidity. While revenue growth from a new service and a recent capital raise offer some positive notes, they are overshadowed by the magnitude of losses, operational expense increases, and the fundamental uncertainty about the company's future viability and internal control weaknesses.

Positives

• Total revenue increased by 37.7% to $27.84 million in FY2025, driven by the introduction of a new digital marketing service.
• The company successfully raised $8 million in gross proceeds from a public offering in October 2025, providing additional capital.
• The company's platform has shown strong user growth over the years, with 9.04 million registered buyers and 17.51 million registered sellers as of June 30, 2025.
• EPWK VIE generated increasing revenues: $27.84 million in FY2025, $20.22 million in FY2024, and $19.80 million in FY2023.
• The company holds a total of 226 intellectual property rights, including 9 PRC patents, 11 registered trademarks, and 177 copyrights, indicating a focus on proprietary assets.
• Management believes actions are being taken to obtain additional funding and implement a strategic plan to continue as a going concern.

Negatives

• Net loss significantly widened to $10.44 million in FY2025, a substantial increase from $1.20 million in FY2024.
• The company was delisted from the Nasdaq Global Market on December 23, 2025, and now trades on the less liquid OTCID Basic Market.
• Gross profit decreased by 10.3% in FY2025, and the gross profit margin declined to 12.17% from 18.69% in the prior year, partly due to the lower margin of the new digital marketing service.
• Operating expenses, particularly sales and marketing and general and administrative, saw massive increases in FY2025, contributing heavily to the net loss.
• The company has an accumulated deficit of $29.3 million and negative working capital of $0.9 million as of June 30, 2025, raising substantial doubt about its ability to continue as a going concern.
• Revenue from online promotion, premium business solutions, value-added services, and shared office rental and management all decreased in FY2025.
• The company is gradually ceasing to provide IP registration services to customers in 2025, impacting value-added services revenue.
• Material weaknesses in internal control over financial reporting were identified, indicating potential risks in financial reporting accuracy and fraud prevention.

Risks

• History of net losses and uncertainty in achieving or sustaining profitability, with an accumulated deficit of $29.30 million as of June 30, 2025.
• Dependence on attracting and retaining a community of buyers and sellers; loss of users or failure to grow user engagement could adversely impact the business.
• Inability to generate sufficient operating cash flows and working capital to continue as a going concern, potentially requiring additional capital that may not be available.
• Failure to maintain a balanced pool of freelancers with diversified skills to meet evolving business customer demands.
• Users may circumvent the platform to avoid transaction fees, adversely affecting revenue.
• Heavy reliance on the reliability, security, and performance of software; serious errors, defects, or security vulnerabilities could lead to lost revenue, reputational damage, and legal claims.
• Inability to maintain and improve platform quality, develop new products/services, or enhance existing features could adversely affect business.
• Intense competition in the freelance marketplace industry, with homogeneous products and services leading to price wars and reduced gross profit margins.
• Dependence on effective operation with mobile operating systems, networks, and standards not controlled by the company; changes could adversely impact mobile user growth and engagement.
• Failure to maintain and enhance brand awareness could materially and adversely affect business and results of operations.
• Operating in a competitive environment with rapidly evolving technologies and market trends for business incubators.
• Reliance on search engines, social networking sites, and online streaming services for user acquisition; changes in policies or pricing could limit ability to attract new users.
• Failure to protect confidential user information and network against security breaches could damage reputation and harm business.
• Need for additional capital to fund future operations; if unavailable, planned expansion and marketing efforts may be reduced, impacting revenue.
• Inability to manage anticipated growth effectively, requiring robust legal, accounting, and human resource management systems.
• Subject to third-party payment services and money transmitter regulations; changes or failures in these services could impair operations.
• Failure to hire, retain, and train qualified employees or sufficient workforce while controlling labor costs.
• Failure to make adequate contributions to various employee benefit plans as required by PRC regulations, potentially leading to penalties.
• Substantial dependence on the continued retention of key personnel, particularly Mr. Guohua Huang.
• Inability to adequately protect intellectual property rights, allowing competitors to offer similar products and services.
• Reliance on Xiamen International Bank for payment processing and escrow services; restrictions or unavailability could materially affect business.
• Business operations may be materially affected by increasing inflation rates in China.
• Lack of direct ownership of operating entities in China (VIE structure) and reliance on contractual arrangements, which may not be effective or enforceable under PRC law.
• Uncertainties regarding the interpretation and application of PRC laws, rules, and regulations, including those governing foreign investment, cybersecurity, and data protection.
• PRC government intervention or influence over operations at any time, potentially leading to material changes or limiting ability to offer securities.
• Restrictions on foreign exchange and the ability to transfer cash between subsidiaries, the consolidated VIE, and investors outside PRC or Hong Kong.
• Delisting from Nasdaq and trading on the OTCID Basic Market may continue to have a material adverse effect on trading and price, and relisting on other exchanges is uncertain.
• Future dilution from equity offerings or acquisitions.
• FINRA sales practice requirements may limit shareholders' ability to buy and sell securities, affecting trading activity.
• Investment in securities is speculative, with no assurance of return.
• Certain existing shareholders (Mr. Guohua Huang) have control over the company, and their interests may not align with other shareholders.
• Sale or availability for sale of substantial amounts of Class A Ordinary Shares could adversely affect market price.
• Lack of effective internal controls over financial reporting may affect ability to accurately report financial results or prevent fraud.
• As an emerging growth company, may not be subject to all public company requirements, potentially affecting investor confidence.
• Increased costs as a public company, especially after ceasing to qualify as an emerging growth company or foreign private issuer.
• Anti-takeover provisions in memorandum and articles of association may discourage, delay, or prevent a change in control.
• Board of directors may decline to register transfers of Class A Ordinary Shares in certain circumstances.
• Shareholders may be unable to present proposals before general meetings or extraordinary general meetings not called by shareholders.
• Classification as a passive foreign investment company (PFIC) could have adverse U.S. federal income tax consequences for U.S. taxpayers.
• Class A Ordinary Shares are currently considered penny stocks, negatively affecting price and liquidity.
• Exclusive jurisdiction and forum selection provisions in memorandum and articles of association may impact shareholders' ability to bring actions or increase costs.
• Foreign currency exchange rate fluctuations could adversely affect business, results of operations, and financial condition.
• Liquidity risk due to reliance on cash inflows from operations and short-term bank loans.
• Interest rate risk from short-term bank loans.

Future Outlook

Management plans to continue improving operations by leveraging more types of services through its online platform and active users to generate sustainable profits and positive cash flows. They anticipate reducing operating loss and negative operating cash flow in the upcoming year. The company also intends to continuously evaluate investment opportunities, including acquiring local office sharing brands and companies that integrate and refine services, and investing in relevant service providers or startups in incubation programs. However, there is no assurance that the company will be successful in securing sufficient funds to sustain or grow its operations.

Management Comments

• "We believe that our cash on hand and anticipated cash flows from operating activities will be sufficient to meet our anticipated working capital requirements and capital expenditures in the ordinary course of business for the next 12 months, [but] we cannot assure you this will be the case."
• "Managements plan is to continue improve operations by leveraging more types of services through its online platform and active users registered thereon in order to generate sustainable profits and positive cash flows."
• "Management believes that the Company will reduce the operating loss and negative operating cash flow in the upcoming year."
• "We will continue to focus on multi-channel marketing methods, establish a perfect combination of online and offline promotion methods, and establish a perfect promotion matrix, especially the traffic acquisition of short video platform and information flow platform."
• "We also plan to enhance our artificial intelligence and big data technology capabilities to provide personalized user experience, user matching ancillary services, more effective and flexible communication methods for our users, and improve the efficiency and reliability of our marketplace."
• "We will continue to add more service categories to better satisfy buyer requirements and attract more sellers with different skills."
• "We plan to continuously evaluate various investment opportunities, including acquiring local office sharing brands with strong regional influence and companies that may help us further integrate and refine our services."

Industry Context

The company operates in the highly competitive and rapidly evolving crowdsourcing and digital marketing industries in China. The market is characterized by frequent product introductions, changing user demands, and evolving industry standards. The COVID-19 pandemic and macroeconomic downturn have intensified competition and increased remote work trends. The domestic freelance and crowdsourcing industries are fragmented, with many platforms lacking core competitiveness and vulnerable to price wars, which limits overall market influence. The company aims to differentiate through brand awareness, diversified products, and strategic acquisitions. The IT service market and VAT reporting service industry in China are directly impacted by broader Chinese economic conditions.

Comparison to Industry Standards

• The company identifies Zhubajie.com, Project Easy, Time Wealth.com, Mission China, Zhicheng, Creative.com, and China Reward Writer as traditional freelance websites in the domestic freelance and crowdsourcing industries.
• Compared to Zhubajie.com, which has a larger scale of operation, most other platforms, including the company's, are not well-known and their main products and services are homogeneous, leading to vulnerability to price wars and reduced gross profit margins.
• The overall market influence of the industry is limited as there is no single leading company, affecting overall industry expansion.

Corporate Governance

Legal Proceedings

• Currently not a party to any material legal or administrative proceedings.
• May from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business, which could result in substantial cost and diversion of resources.

Related Party Transactions

• Loans from Controlled Shareholder Mr. Guohua Huang: $2,034,989 as of June 30, 2025 (vs. $1,386,022 in 2024 and $278,056 in 2023). These loans are non-interest bearing and non-fixed term, used for daily operations.
• Loans from Xiamen Yipin Hengrun IP Partners (controlled by a key management): $5,654 as of June 30, 2025 (vs. $0 in 2024 and 2023). These loans are non-interest bearing and non-fixed term, used for daily operations.
• The company signed a lease contract with a related company controlled by CEO and Chairman Mr. Guohua Huang for office space from October 1, 2025, to December 31, 2028, with a monthly rental of $19,557 (first 3 months waived).
• The company borrowed a bridge loan to Yipin Hengrun IP Partners and Yipin Huicheng IP Agency Co., Ltd., with amounts of $499,051 and $4,188, respectively, in September 2025. These loans are without maturity date and interest free.
• The company obtained related parties loans from Guohua Huang, Yipin Hengrun IP partners, and Kunchi Huang with amounts of $387,794, $81,956, and $139,595, respectively, in September 2025. These loans are without maturity date and interest free.

Stakeholder Impact

• **Shareholders**: Significant negative impact due to delisting from Nasdaq, increased net losses, and substantial doubt about the company's ability to continue as a going concern. The share consolidation failed to prevent delisting, and the stock now trades on a less liquid market. Future equity offerings could lead to dilution.
• **Employees**: Labor costs are a significant component of expenses, and the company aims to control these while growing. Failure to retain qualified employees or manage costs could affect the business. The company participates in various government-sponsored employee benefit plans.
• **Customers (Buyers & Sellers)**: The company's growth depends on attracting and retaining users. Decreased engagement due to platform quality issues, pricing, or competition could harm the business. IP protection and dispute resolution services are provided to maintain trust.
• **Creditors**: The company has outstanding bank loans and related party payables. The 'going concern' warning and increased losses raise concerns about the company's ability to meet its obligations.
• **Suppliers**: The company has significant advances to suppliers and accounts payable to suppliers, indicating ongoing relationships. Changes in business conditions could affect these relationships.

Next Steps

• Continue to improve operations by leveraging more types of services through the online platform and active users to generate sustainable profits and positive cash flows.
• Reduce operating loss and negative operating cash flow in the upcoming year.
• Continuously evaluate investment opportunities, including acquiring local office sharing brands and companies that integrate and refine services.
• Pursue additional investment opportunities through investing in relevant service providers or in start-ups and SMEs in incubation and acceleration programs.
• Implement measures to address material weaknesses in internal control over financial reporting, including hiring experienced personnel, expanding training, developing accounting policy manuals, and establishing controls for complex transactions.

Key Dates

Recommendation

The company's financial health has severely deteriorated, evidenced by a massive increase in net losses to over $10 million in FY2025 and a negative working capital position. The auditor's 'going concern' warning highlights fundamental doubts about its long-term viability. The delisting from Nasdaq, a major exchange, to the less liquid OTCID Basic Market is a critical blow to investor confidence and access to capital. While a recent capital raise provides some short-term relief, the underlying issues of escalating operating expenses, declining gross margins in core segments, and identified material weaknesses in internal controls suggest significant operational and governance challenges. The high concentration of voting power with the controlling shareholder also presents governance risks. Given these severe and compounding negative factors, a seasoned investor would likely recommend a strong sell to mitigate further losses.

Keywords

Crowdsourcing, Digital Marketing, Freelance Platform, VIE Structure, SEC Filing, Nasdaq Delisting, Net Loss, Operating Expenses, China Economy, Intellectual Property, Corporate Governance, Financial Reporting, Capital Raise, Share Consolidation, Risk Management, Technology Platform, Small and Medium-sized Enterprises (SMEs), Value-Added Services, Shared Office Space, Cybersecurity, Data Privacy, PRC Regulations