20-F: STAK INC. Reports FY25 Net Loss Amid Growth & Strategic Shifts

STAK INC. reported a net loss of $5.7 million for fiscal year 2025 despite a 31.69% revenue increase, driven by higher operating expenses and one-time losses.

Summary

• STAK INC. is a Cayman Islands holding company that conducts its operations through PRC subsidiaries, specializing in oilfield-specialized production and maintenance equipment, vehicles, and automation solutions.
• Total revenue increased by 31.69% to $24.9 million for the fiscal year ended June 30, 2025, from $18.9 million in 2024.
• The company recorded a net loss of $5.7 million in fiscal year 2025, a significant decline from net incomes of $2.4 million in 2024 and $3.5 million in 2023.
• Gross profit increased by 35.54% to $7.7 million in 2025, with the gross profit margin slightly rising to 30.86% from 29.99% in 2024.
• Operating expenses surged by 276.21% to $10.8 million in 2025, primarily due to a 1,149.44% increase in general and administrative expenses, which included $3.9 million in share-based compensation, $1.6 million in professional fees, and $0.5 million in provision for credit losses.
• Research and development expenses increased by 94.88% to $3.3 million in 2025, reflecting investment in new products and existing product refinement.
• The company incurred one-time losses of $1.5 million from the sale of property and equipment due to production factory relocation and $1.1 million from the sale of accounts receivable to accelerate cash collection.
• STAK INC. completed its initial public offering (IPO) in February/March 2025, raising approximately $4.2 million in net proceeds.
• A dual-class share structure was adopted on June 5, 2025, granting Class B Ordinary Shares 30 votes per share, while Class A Ordinary Shares retain one vote per share. The CEO and COO collectively hold 98.6% of the total voting power.

Sentiment

Score: 4

Explanation: The company shows strong revenue growth and R&D investment, indicating strategic efforts for future positioning. However, the significant net loss for FY2025, driven by substantial increases in operating expenses and one-time losses, coupled with ongoing operational and regulatory risks (e.g., lack of production permit, customer concentration), presents a challenging financial picture. The overall sentiment is cautious, leaning towards negative due to the shift to unprofitability.

Positives

• Total revenue increased by 31.69% to $24.9 million for the fiscal year ended June 30, 2025, demonstrating strong top-line growth.
• Gross profit increased by 35.54% to $7.7 million in 2025, with a slight improvement in gross profit margin to 30.86%.
• Sales of specialized oilfield vehicles more than doubled, increasing by 101.78% to $10.9 million in 2025, driven by a strategic shift towards higher-priced, higher-margin products.
• Service income from automation solutions remained stable at $1.8 million, indicating consistent demand and positive customer feedback.
• Significant investment in research and development, with expenses increasing by 94.88% to $3.3 million in 2025, focusing on intelligence, lightweighting, safety, environmental protection, and internet connectivity.
• Established academic collaborations with Dalian University of Technology Jiangsu Research Institute and Jiangsu University for R&D, leveraging external expertise and controlling costs.
• Possesses a substantial intellectual property portfolio, including 57 registered patents and 48 software copyrights in China.
• Received support from local government for its IPO plan and inclusion in the 'Long Teng Action Plan' as a key enterprise for future securities exchange listing.
• The company's auditor, HTL International, LLC, is US-based and subject to PCAOB inspection, mitigating risks associated with the Holding Foreign Companies Accountable Act (HFCA Act).

Negatives

• Reported a net loss of $5.7 million for the fiscal year ended June 30, 2025, a significant reversal from net incomes in prior years.
• Total operating expenses increased by 276.21% to $10.8 million in 2025, largely due to a 1,149.44% increase in general and administrative expenses.
• General and administrative expenses were significantly impacted by $3.9 million in share-based compensation, $1.6 million in professional fees, and $0.5 million in provision for credit losses in 2025.
• Incurred a $1.5 million loss from the sale of property and equipment due to the relocation of its production factory.
• Recognized a $1.1 million loss from the sale of accounts receivable, indicating a need to accelerate cash collection and optimize operating cash flow, potentially due to collection difficulties.
• Highly dependent on a few top customers, with the top three customers contributing approximately 62% of revenue in 2025, posing concentration risk.
• Does not hold a special vehicle production permission from the Chinese Ministry of Industry and Information Technology, relying on a collaborative outsourcing model, which presents policy risks and business expansion bottlenecks.
• Failed to timely register a branch office in Shiyan, China, for operations that began in June 2021, until September 2024, exposing the company to potential administrative penalties and tax liabilities.
• Does not expect to receive government subsidies continuously, as the significant subsidies in prior years were one-time in nature.
• No dividends are expected to be paid in the foreseeable future, requiring investors to rely solely on share price appreciation for returns.

Risks

• Operating history may not be indicative of future growth or financial results, and the company may not sustain historical growth rates.
• Inability to maintain profitability, as evidenced by the $5.7 million net loss in fiscal year 2025.
• The oilfield equipment industry is volatile, with demand fluctuating significantly in correlation with oil and natural gas prices.
• Limited operating history and experience in specialized oilfield equipment and integrated solutions make business evaluation difficult.
• Failure to maintain and enlarge the customer base or strengthen customer engagement may adversely affect business and results of operations.
• Failure to maintain the quality of products and services, especially given reliance on outsourced vehicle assembly, could harm reputation and financial condition.
• Dependence on cooperation with business partners and suppliers; disruptions or failures of these partners could negatively affect the business.
• Potential for significant liability claims or complaints from customers, litigation, and regulatory investigations.
• Heavy dependence on top customers, with a risk of revenue decrease if these customers reduce budgets or switch providers.
• Intense industry competition from new entrants and established companies, some with greater resources or specialized vehicle production permits.
• Dependence on key executives and highly qualified managers; inability to retain them could adversely affect the business.
• Pandemics, epidemics, natural disasters, terrorist activities, and political unrest could disrupt operations.
• The dual-class share structure with different voting rights may adversely affect the value and liquidity of Class A Ordinary Shares and limit the ability of other shareholders to influence corporate matters.
• Future issuances of Class B Ordinary Shares may be dilutive to holders of Class A Ordinary Shares and further concentrate voting power.
• Uncertainties and rapid changes in the PRC legal system could negatively impact business operations and limit legal protections.
• Increased Chinese government oversight and control over overseas offerings and foreign investments in mainland China-based issuers may limit the ability to offer securities.
• Subject to CSRC filing procedures for subsequent securities offerings, and potential requirements for CAC approval, which may not be obtained in a timely manner or at all.
• Difficulties in remitting subsequent offering proceeds to mainland China due to governmental registration processes.
• Difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against the company or its management.
• Reliance on dividends from PRC Subsidiaries, which are subject to restrictions on distributable earnings and statutory reserve funds under PRC law.
• The Chinese government may intervene in or influence operations at any time, potentially impacting the value of securities.
• PRC regulation of loans and direct investment by offshore holding companies may delay the use of proceeds to fund PRC Subsidiaries.
• Potential delisting under the HFCA Act if the PCAOB is unable to inspect auditors for two consecutive years, despite the current auditor being US-based.
• Uncertainty regarding indirect transfers of equity interests in PRC resident enterprises by non-PRC holding companies.
• Failure to make adequate contributions to employee benefit plans and withhold individual income tax as required by PRC regulations may result in penalties.
• Lack of a special vehicle production permission from the Chinese Ministry of Industry and Information Technology, relying on outsourcing, which brings policy risks and business expansion bottlenecks.
• Uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
• The market price for Ordinary Shares may be volatile.
• Management team has limited experience managing a public company.
• If securities or industry analysts do not publish research or reports, or if they adversely change recommendations, the market price and trading volume could decline.
• Investors must rely on price appreciation for return on investment, as no dividends are expected in the foreseeable future.
• Substantial future sales or perceived potential sales of Ordinary Shares could cause the price to decline.
• Need for additional capital, which could result in dilution or increased debt service obligations.
• Certain existing shareholders (CEO and COO) have substantial influence over the company, and their interests may not align with other shareholders.
• Difficulties in protecting interests and limited ability to protect rights through U.S. courts due to Cayman Islands incorporation.
• Limited shareholder rights to present proposals before annual or extraordinary general meetings.
• Recently introduced economic substance legislation of the Cayman Islands may impact the company or its operations.
• Certain judgments obtained against the company by shareholders may not be enforceable.
• As a foreign private issuer, the company is exempt from certain provisions applicable to U.S. domestic public companies, potentially affording less protection to shareholders.
• As an emerging growth company, the company may take advantage of certain reduced reporting requirements.
• Potential loss of foreign private issuer status in the future could result in significant additional costs and expenses.
• Increased costs as a result of being a public company.
• Potential classification as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes could subject U.S. investors to significant adverse tax consequences.
• Exposure to liquidity risk if unable to provide sufficient capital resources to meet commitments and business needs.
• Inflation risk in China could affect costs and expenses.
• Interest rate risk related to long-term borrowings.
• Foreign currency translation and transaction risk due to RMB denomination of operations and assets.

Future Outlook

The company plans to use a portion of its IPO proceeds to establish a qualified factory and obtain specialized vehicle production permission, which is currently outsourced. It intends to continue expanding its sales network and product offerings, focusing R&D efforts on its own vehicle products. The company also aims to establish maintenance service bases across oilfields nationwide. No cash dividends are anticipated in the foreseeable future, as earnings will be retained for business growth and debt repayment. The company expects to incur significant legal, accounting, and other expenses as a public entity and may seek additional capital if cash requirements exceed current resources.

Management Comments

• Our vision is to help oilfield services companies reduce costs and increase efficiency by providing the cutting-edge integrated oilfield equipment and automation solutions service.
• Our mission is to become a powerful provider for the niche markets of specialized oilfield vehicles and equipment in China.
• We believe that by collaborating with academic institutions, we can meet our research and development needs and control our research and development costs.
• We believe our current working capital is sufficient to support our operations for the next twelve months from the date of this Annual Report.
• We do not anticipate declaring or paying any dividends in the foreseeable future, as we plan to retain our retained earnings to continue to grow our business.

Industry Context

STAK INC. operates in the intensely competitive and volatile oilfield maintenance industry, where demand for equipment often correlates with oil and natural gas prices. The industry is experiencing trends towards intelligence, lightweighting, safety, environmental protection, and internet connectivity in specialized equipment. The company faces competition from both domestic and international players, some of whom possess specialized vehicle manufacturing permits, giving them a potential pricing advantage. The broader Chinese regulatory environment is also tightening oversight on overseas listings and foreign investments, adding a layer of uncertainty to operations and future offerings.

Comparison to Industry Standards

• The company's reliance on outsourcing for specialized vehicle production due to the lack of a Ministry of Industry and Information Technology permit places it at a disadvantage compared to competitors who possess such permits and can design and manufacture oil pumping trucks themselves, potentially offering a pricing advantage.

Corporate Governance

Related Party Transactions

• Shareholder contributions from Mr. Chuanbo Jiang ($38,500 in 2024, $2,804,556 in 2023), Ms. Huyun Gao ($7,500 in 2024, $553,652 in 2023), Mr. Huailiang Xu ($2,000 in 2024, $168,516 in 2023), Mr. Haoyu Xiong ($1,500 in 2024, $126,134 in 2023), and Mr. Cheukyin Tai ($500 in 2024, $6,895 in 2023) to PRC operating subsidiary YLAN.
• WFOE acquired 100% equity interest in YLAN from its former shareholders (including related parties) for $0.7 million in September 2023, treated as a corporate restructuring under common control.
• Repurchased 7,700,000 Class A Ordinary Shares from Lanying Capital Limited (100% owned by CEO Chuanbo Jiang) and 1,500,000 Class A Ordinary Shares from MT. Yang Holding Ltd (100% owned by COO Huyun Gao), and issued corresponding Class B Ordinary Shares to them on June 13, 2025.
• Amounts due from Mr. Chuanbo Jiang were $87,472 as of June 30, 2025, and $133,482 as of June 30, 2024, representing on-demand advances for operational purposes.
• Amounts due to Ms. Huyun Gao were $30,222 as of June 30, 2025, and $42,487 as of June 30, 2024, representing advances for daily operations with no fixed repayment term or interest.

Stakeholder Impact

• Shareholders: The net loss in FY2025 and the dual-class share structure with concentrated voting power may negatively impact minority shareholders' influence and investment returns. No expected dividends mean returns rely solely on price appreciation. The IPO and potential future capital raises could dilute existing shareholders.
• Employees: The 2025 Share Incentive Plan aims to attract and retain key personnel, potentially benefiting employees. However, the company's financial performance and operational challenges could impact job security or future compensation.
• Customers: The focus on R&D for automation and higher-margin products, along with plans for maintenance service bases, could lead to improved product quality and service, benefiting customers. However, dependence on a few top customers creates risk if those relationships sour.
• Suppliers: The company's dependence on a few key suppliers and its outsourcing model means supplier relationships are critical. Delays in payments or changes in terms could impact suppliers.
• Creditors: Increased short-term and long-term borrowings, coupled with a net loss, could raise concerns for creditors regarding the company's ability to service its debt, although current working capital is deemed sufficient for the next 12 months.

Next Steps

• Establish a qualified factory and obtain specialized vehicle production permission using IPO proceeds.
• Continue to expand sales network and product offerings.
• Focus research and development efforts on own vehicle products.
• Establish maintenance service bases across oilfields nationwide.
• Implement measures to strictly control and reduce expenses.
• Seek additional credit facilities and/or equity financing if cash requirements exceed current resources.
• Continue efforts to set up an internal audit department and enhance the effectiveness of the internal control system.
• Implement regular U.S. GAAP accounting and financial reporting training programs for personnel.

Key Dates

Recommendation

STAK INC. is undergoing a significant transition, marked by strong revenue growth and increased investment in R&D, particularly in automation and higher-margin specialized oilfield vehicles. These strategic initiatives, coupled with local government support and a robust intellectual property portfolio, suggest future growth potential. However, the company reported a substantial net loss in FY2025, driven by a sharp increase in operating expenses (including significant share-based compensation) and one-time losses from asset sales and accounts receivable. Key risks include dependence on outsourcing for vehicle production due to lack of permits, high customer concentration, and uncertainties in the PRC regulatory environment. While the company has identified and is addressing internal control weaknesses, the immediate financial performance and inherent risks warrant a cautious approach. A 'hold' recommendation allows investors to monitor the execution of its growth strategies, the successful remediation of operational and internal control issues, and the path to sustained profitability before making further investment decisions.

Keywords

Oilfield Equipment, Specialized Vehicles, Automation Solutions, Energy Sector, China, SEC Filing, 20-F, STAK INC., Manufacturing, Industrial Automation, Corporate Governance, IPO, Cayman Islands, PRC Regulations, Financial Results