10-K: EvoAir Holdings Reports FY25 Loss Amid Revenue Decline

EvoAir Holdings Inc. reported a significant net loss of $14.97 million for fiscal year 2025, despite a reduction in operating expenses, as revenue declined by 9.5% and the company continues to operate with a substantial working capital deficit.

Summary

• Net loss for fiscal year 2025 was $14,968,005, an improvement from $26,315,396 in fiscal year 2024, primarily due to a lower intangible asset impairment charge.
• Revenue decreased by 9.5% to $284,666 in FY2025 from $314,719 in FY2024, mainly due to lower air-conditioner sales, partially offset by stronger sales of Ionic Nano Copper Zinc products.
• Gross loss widened by 137.6% to $19,767 in FY2025 from $8,319 in FY2024, attributed to lower production volumes and reduced operating efficiency.
• Operating expenses decreased by 43.1% to $14,969,984 in FY2025, largely due to a significantly lower intangible asset impairment charge ($6,931,502 in FY2025 vs. $20,580,040 in FY2024), partially offset by increased stock-based compensation.
• The working capital deficit widened to $2,685,006 as of August 31, 2025, from $893,886 as of August 31, 2024.
• Accumulated deficit reached $54,028,719 as of August 31, 2025.
• Cash used in operating activities increased to $1,158,760 in FY2025 from $939,775 in FY2024.
• A 1-for-4 reverse stock split was effective on September 11, 2024, reducing outstanding shares from 102,742,362 to 25,685,591.
• The company issued 1,494,935 shares of Common Stock in November 2024 for consulting services related to a proposed initial public offering and corporate/business development.
• Material weaknesses in internal control over financial reporting were identified, including limited accounting personnel, insufficient written policies, and a lack of segregation of duties or independent governance/oversight.

Sentiment

Score: 3

Explanation: While the net loss improved due to a lower non-cash impairment charge, core operational metrics like revenue and gross profit deteriorated, and the working capital deficit significantly widened. The company remains a going concern with substantial accumulated losses and identified material weaknesses in internal controls, indicating significant financial challenges despite strategic growth plans and innovative products.

Positives

• Net loss improved by 43.1% year-over-year, primarily driven by a lower intangible asset impairment charge.
• Experienced stronger sales contributions from the Ionic Nano Copper Zinc (INCZN) product line, which is gaining market acceptance.
• Strategic plan includes expanding product offerings, geographical expansion into high-demand markets (Southeast Asia, China, Middle East, Indonesia, India), and revenue diversification.
• Actively pursuing plans to raise additional funding and uplist to the Nasdaq Capital Market, which is expected to enhance access to capital.
• Successful development and patenting of eco-friendly HVAC technologies, including EvoAirTM and e-Cond EVOTM, with granted patents in multiple countries.
• Collaboration with a Malaysian university confirmed EvoAirTM's outdoor condensing unit (Coolpressor) produces lower temperature air, more environmentally friendly than conventional units.

Negatives

• Revenue decreased by 9.5% in fiscal year 2025, mainly due to softer demand for air-conditioners.
• Gross loss widened by 137.6% in FY2025, primarily due to lower production volumes and inefficient absorption of fixed manufacturing costs.
• Reported a significant accumulated deficit of $54,028,719 as of August 31, 2025.
• The working capital deficit significantly widened by over 200% to $2,685,006 as of August 31, 2025.
• Cash used in operating activities increased by 23.0% in FY2025.
• The company has not yet established a sustainable ongoing source of revenue sufficient to cover its operating costs, raising doubt about its ability to continue as a going concern.
• Identified material weaknesses in internal control over financial reporting, including limited accounting personnel, insufficient written policies, and lack of segregation of duties/independent oversight.
• No dividends have been paid in the past and none are expected in the foreseeable future, limiting investor returns to stock appreciation.

Risks

• Inability to continue innovation, meet evolving market trends, adapt to changing customer demands, and maintain a culture of innovation.
• Operating in a highly competitive air-conditioning and air purifying industry with numerous multinational, regional, and local competitors.
• Failure to create brand influence and attract new users and customers for products.
• Climate change and associated regulations could render existing technology non-compliant or obsolete, despite the focus on eco-friendly products.
• Dependence on continued and substantial investments in information technology (IT) infrastructure, which may not yield anticipated benefits and is vulnerable to cyber-attacks.
• Infringement of or failure to protect intellectual property rights, or claims of infringing on third-party intellectual property rights, could adversely affect future growth and success.
• Reliance on a variety of raw materials and supplier-provided parts exposes the company to significant shortages, supplier capacity constraints, production disruptions, price increases, or tariffs.
• Introduction of new products and technologies involves risks, and the company may not realize the degree or timing of benefits initially anticipated.
• Failure to achieve and maintain a high level of product and service quality could damage reputation, harm customer confidence, and lead to increased costs or legal exposure.
• Subject to various litigation, environmental, and other legal and compliance risks, including potential asbestos-related claims.
• Failure to comply with anti-corruption laws and regulations, or effectively manage employees, customers, and business partners, could severely damage reputation.
• Business depends on the continued contributions of Dr. Low Wai Koon (founder, CEO, Chairman), and the loss of his expertise without Key Man insurance could severely impede operations.
• Developments in the social, political, regulatory, and economic environment in Malaysia, where a significant portion of operations are based, may have a material adverse impact.
• Subject to foreign exchange control policies in Malaysia, which could restrict the ability to repatriate dividends or other payments from subsidiaries.
• Inflationary pressures in Asia, including Malaysia, may increase operational costs and negatively impact profitability.
• Unauthorized disclosure, destruction, or modification of data through cybersecurity breaches, computer viruses, or other disruptions could expose the company to liability and damage its reputation.
• There may not be sufficient liquidity in the market for the company's securities for investors to sell their holdings.
• Volatility in the share price may subject the company to securities litigation.
• Stockholders may be diluted significantly through efforts to obtain financing and satisfy obligations through the issuance of securities.
• As a smaller reporting company and emerging growth company, reduced disclosure requirements may make the common stock less attractive to investors.
• The company plans to list on Nasdaq Capital Market, but may not be able to maintain its listing, which could limit investors' ability to make transactions and subject it to additional trading restrictions.
• The price of common stock may rapidly fluctuate or decline regardless of operating performance, resulting in substantial losses for investors.
• Natural disasters, epidemics, or other unexpected events may disrupt operations, adversely affect results, and may not be fully covered by insurance.
• Affected by global economic, capital market, and political conditions, particularly in the construction, transportation, and infrastructure industries.
• Business success depends on attracting and retaining qualified personnel.

Future Outlook

The company intends to pursue strategies to further develop and expand its business, including continued investment in research and development for hybrid air-conditioning products, expanding distribution into other Southeast Asian markets, China, and potentially the Middle East, Indonesia, and India. It plans to promote air purifier and air-sanitizing products, expand INCU Technology applications into more sectors and personal healthcare, and develop/distribute INCZN health supplements to diversify product offerings. Management is confident that these investments will position the company for long-term growth and profitability as it scales operations and capitalizes on emerging opportunities, with a focus on enhancing operational efficiencies and achieving economies of scale.

Management Comments

• We are steadily building momentum and expanding the products reach across various markets, including residential, commercial, and industrial sectors.
• The Group remains committed to strengthening the traction of EvoAir air-conditioner and driving its adoption across diverse market segments, positioning ourselves for future growth in the emerging eco-friendly air-conditioning space.
• We remain confident in the long-term prospects of EvoAir and are focused on continuing to innovate and address challenges, with a view to establishing the product as a leading solution in the sustainable cooling market.
• The Company remains focused on optimizing its cost structure and enhancing operational efficiencies. As we continue to scale operations and expand our product offerings, we are positive that these efforts will improve gross margins and position the Company for profitability in the future.
• Management remains confident that these investments will position the Company for long-term growth and profitability as it scales operations and capitalizes on emerging opportunities.
• Strategies to enhance operational efficiencies and achieve economies of scale are key priorities moving forward.

Industry Context

The global air conditioning market is projected for significant growth, with demand expected to reach 5.6 billion units by 2050, driven largely by emerging economies in Asia. There is a growing global awareness and regulatory push (e.g., Kigali Amendment) to reduce greenhouse gas emissions and improve energy efficiency in cooling systems. EvoAir Holdings Inc. positions itself within this trend by developing and marketing eco-friendly HVAC products with proprietary HECS technology, aiming to reduce waste heat and energy consumption. The company also diversifies into air purification and health supplements, aligning with broader public health and environmental concerns. While the industry is dominated by large multinational corporations, EvoAir focuses on innovation in sustainable cooling and air sanitization solutions, particularly in Asian markets.

Comparison to Industry Standards

• EvoAir's e-Cond EVOTM and EvoAirTM products utilize patent-pending Heat Emission Control System (HECS) technology, designed to reduce waste heat and energy consumption by at least 20% compared to conventional air-conditioning units.
• The EvoAirTM system uses R32 refrigerant, which is 9% lower in density than the traditionally used R410A and allows for at least a 30% reduction in refrigerant use compared to conventional systems, contributing to lower global warming potential.
• A study conducted with a Malaysian university concluded that air produced by EvoAirTM's outdoor condensing unit (Coolpressor) is lower in temperature and more favorable for plant growth compared to hot air from conventional units, highlighting an environmental advantage.
• The global air conditioner demand is estimated at 131,638 thousand units in 2024, with China accounting for 38% of total demand, indicating a large market for EvoAir's products, particularly in Asia.
• The company operates in an industry with major global players like Daikin, Midea, Trane, Carrier, and Mitsubishi Electric, which have HVAC revenues ranging from billions to tens of billions of USD, making EvoAir a relatively small, specialized player.

Corporate Governance

Legal Proceedings

• Not currently subject to any legal proceedings, and no such proceeding is threatened, that would have a material impact on the company's properties, results of operations, or financial condition.

Related Party Transactions

• Amounts due to shareholders (Dr. Low Wai Koon, Chan Kok Wei, Tan Soon Hock, Oh Teik Huat, Mok Ngan Nooi) totaled $2,436,407 as of August 31, 2025, an increase from $1,202,692 as of August 31, 2024. These loans are unsecured, accrue interest at 3% to 8% per annum, and have a tenure of 6 months, until successful uplisting or mutually agreed terms.

Stakeholder Impact

• Shareholders face potential significant dilution from future equity issuances required for capital raising and operational funding.
• Shareholders' return on investment is currently limited to stock price appreciation, as no dividends have been paid or are expected in the foreseeable future.
• Shareholders are exposed to high stock price volatility and the risk of delisting from Nasdaq if the uplisting is unsuccessful or maintenance requirements are not met.
• Employees benefit from continued investment in personnel training and the research and development department.
• Customers can expect continued innovation in eco-friendly HVAC and air-sanitizing products, with expanded product offerings and geographical reach.
• Suppliers and creditors are exposed to the company's financial challenges, including a widening working capital deficit and reliance on future funding, and the company's reliance on suppliers for raw materials and parts exposes it to price volatility and disruptions.

Next Steps

• Continue development of hybrid air-conditioning products to increase product offerings and expand client base, especially commercial and industrial clients.
• Expand distribution into other South East Asia markets, China, and Asia, with possible future expansion into the Middle East, Indonesia, and India.
• Expand usage and application of INCU Technology into more sectors and markets, including commercial, industrial, public sanitation projects, and personal healthcare products.
• Continue innovation through investment into research and development to further improve product lines and reduce carbon emissions.
• Continue embracing promotions and creating awareness for environmental sustainability, aiming to become an international player in the HVAC sector focusing on ESG efforts.
• Build on the further development and distribution of INCZN health supplement to diversify product offerings.
• Actively pursue plans to raise additional funding to support operations and business expansion.
• Continue preparations to uplist on the Nasdaq Capital Market.
• Address identified material weaknesses in internal control over financial reporting.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by a substantial accumulated deficit of over $54 million, a significantly widening working capital deficit, and consistent operating losses. While the net loss decreased year-over-year, this was primarily due to a lower non-cash impairment charge, masking a decline in revenue and a widening gross loss from core operations. The 'going concern' warning from auditors, coupled with identified material weaknesses in internal controls, signals fundamental operational and financial instability. Despite strategic growth plans and innovative products, the current financial trajectory and reliance on future capital raises for survival present a high-risk investment profile with significant downside potential and limited near-term upside. Investors should consider divesting to avoid further capital erosion.

Keywords

HVAC, eco-friendly, air conditioning, air purifier, green technology, intellectual property, Malaysia, China, Nasdaq uplisting, INCZN, e-Cond EVO, EvoAir, environmental sustainability, financial reporting, going concern, reverse stock split, cybersecurity risks