Item 1A. Risk Factors
Item
1A. Risk Factors.
As a smaller reporting
company, we are not required to include risk factors in this Report. However, below are a number of material risks, uncertainties and
other factors that could have a material effect on the Company and its operations as a result of recent developments. You should carefully
consider the risks described below before purchasing our common stock. The risks highlighted here are not the only ones that we may face.
For example, additional risks presently unknown to us or that we currently consider immaterial or unlikely to occur could also impair
our operations. If any of the risks or uncertainties described below or any such additional risks and uncertainties actually occur, our
business, prospects, financial condition, or results of operations could be negatively affected, and you might lose all or part of your
investment.
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We are, and
may continue to be, subject to litigation including individual and class action lawsuits, as well as investigations and enforcement actions
by regulators and governmental authorities. These matters are often expensive and time consuming, and, if resolved adversely, could harm
our business, financial condition, and operating results.
As discussed in “Item
1. Business - Recent Developments,” we are, and from time to time may become, subject to litigation and various legal proceedings,
including litigation and proceedings related to stockholder derivative suits, class action lawsuits and other matters, that involve claims
for substantial amounts of money or for other relief or that might necessitate changes to our business or operations. In addition to this,
we have been, currently are, and may from time to time become subject to, government and regulatory investigations, inquiries, actions
or requests, other proceedings and enforcement actions alleging violations of laws, rules, and regulations, both foreign and domestic.
The defense of these actions may be both time consuming and expensive. We evaluate these litigation claims and legal proceedings to assess
the likelihood of unfavorable outcomes and to estimate, if possible, the monetary amount of potential losses. Based on these assessments
and estimates, we may establish reserves and/or disclose the relevant litigation claims or legal proceedings, as and when required or
appropriate. These assessments and estimates are based on information available to management at the time of such assessment or estimation
and involve a significant amount of judgment. As a result, actual outcomes or losses could differ materially from those envisioned by
our current assessments and estimates. Our failure to successfully defend or settle any of these litigations or legal proceedings could
result in liability that, to the extent not covered by our insurance, could have an adverse effect on our business, financial condition
and results of operations.
The scope, determination,
and impact of claims, lawsuits, government and regulatory investigations, enforcement actions, disputes, and proceedings to which we are
subject cannot be predicted with certainty, and may result in:
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substantial payments to satisfy judgments, fines, or penalties;
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substantial outside counsel, advisor, and consultant fees and costs;
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substantial administrative costs, including arbitration fees;
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loss of productivity and high demands on employee time;
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criminal sanctions or consent decrees;
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termination of certain employees, including members of our executive team;
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barring of certain employees from participating in our business in whole or in part;
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orders that restrict our business or prevent us from offering certain products or services;
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changes to our business model and practices
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delays to planned transactions, service launches or improvements; and
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damage to our brand and reputation.
We are, and
may continue to be, subject to securities litigation, which is expensive and could divert management attention, cause harm to our reputation
and result in significant damages for which we could be responsible.
We are subject to securities
class action litigation, which is expensive, could divert our management’s attention, harm our reputation, and leave us liable for
substantial damages. For example, as discussed in “Item 1. Business - Recent Developments,” on December 9, 2022, Piero Crivellaro,
purportedly on behalf of the persons or entities who purchased or acquired publicly traded securities of the Company between February
2021 and November 2022, filed a putative class action against the Company, certain of our officers and directors, and other defendants
in the United States District Court for the Eastern District of New York, alleging violations of federal securities laws related to alleged
false or misleading disclosures made by the Company in its public filings. The plaintiff seeks unspecified damages, plus interest, costs,
fees, and attorneys’ fees.
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Litigation of this type could
result in substantial costs and diversion of management’s attention and resources, which could adversely impact our business. Any
adverse determination in litigation could also subject us to significant liabilities.
We are responsible
for the indemnification of our officers and directors.
Should our officers and/or
directors require us to contribute to their defense, we may be required to spend significant amounts of our capital. Our Certificate of
Incorporation and bylaws also provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances,
against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association
with or activities on behalf of our company. This indemnification policy could result in substantial expenditures, which we may be unable
to recoup. If these expenditures are significant or involves issues which result in significant liability for our key personnel, we may
be unable to continue operating as a going concern.
We depend
on a limited number of major customers who are able to exert a high degree of influence over us and the loss of a major customer could
adversely impact on our business.
For the years ended June
30, 2026 and 2025, Chongqing Iron & Steel Ltd. accounted for 100% and 94.4% of the Company’s revenues, respectively. There can
be no assurance that our major customer will continue to purchase our services in the same amount that it has in the past. The loss of
our major customer or a material reduction in sales to a major customer could have a material adverse effect on our sales and results
of operations. Additionally, given the high concentration of our customer base, a default by or a significant reduction in future transactions
with our major customer could materially reduce our revenues, profitability, liquidity and growth prospects.
We depend
on a limited number of suppliers who are able to exert a high degree of influence over us and the loss of our major suppliers could adversely
impact on our business.
For the year ended June 30,
2026, two suppliers accounted for approximately 28.5% and 18.2% of the total purchases, respectively. For the year ended June 30, 2025,
three suppliers accounted for approximately 34.4%, 16.3%, and 10.5% of our total purchases, respectively. There can be no assurance that
our major suppliers will continue to supply us with the materials or services required to operate our business in the same amount that
they have in the past. The loss of our major suppliers or a material reduction in the materials or services they provide to us could have
a material adverse effect on our business and results of operations.
Our growth
depends in part on the success of our relationships with third parties.
A key component of our growth
strategy is to develop or expand our relationships with third parties. For example, we are investing resources in establishing strategic
relationships with market players across a variety of industries to generate new customers. These programs may not roll out as quickly
as planned or produce the results we anticipated. A significant portion of our business depends on attracting and retaining new and existing
solar partners. Negotiating relationships with our solar partners, investing in due diligence efforts with potential solar partners, training
such third parties and contractors, and monitoring them for compliance with our standards require significant time and resources and may
present greater risks and challenges than expanding a direct sales or installation team. If we are unsuccessful in establishing or maintaining
our relationships with these third parties, our ability to grow our business and address our market opportunity could be impaired. Even
if we are able to establish and maintain these relationships, we may not be able to execute on our goal of leveraging these relationships
to meaningfully expand our business, brand recognition and customer base. This would limit our growth potential and our opportunities
to generate significant additional revenue or cash flows.
The restatement
of our prior financial statements may affect investor confidence and raise reputational issues and may subject us to additional risks
and uncertainties, including increased professional costs and the increased possibility of legal proceedings and regulatory inquiries.
As discussed in our Current
Form on Form 8-K filed on February 28, 2023, as amended by Amendment No. 1 filed on March 6, 2023, we determined to restate our financial
statements as of and for the year ended June 30, 2021, three and six months ended September 30, 2021 and three and nine months ended December
31, 2021 after we identified errors related to, incorrect accounting treatment of related party loan receivable, incorrect recognition
of revenue from freight shipping services and incorrect accounting treatment of recovery (provision) for credit losses. As a result of
these errors and the resulting restatements of our financial statements for the impacted periods, we have incurred, and may continue to
incur, unanticipated costs for accounting and legal fees in connection with or related to the restatements, and have become subject to
a number of additional risks and uncertainties, including the increased possibility of litigation and regulatory inquiries. Any of the
foregoing may affect investor confidence in the accuracy of our financial disclosures and may raise reputational risks for our business,
both of which could harm our business and financial results.
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We have fully
remediated the material weaknesses in our internal control over financial reporting. However, if our remediation of these material weaknesses
turns out to be not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over
financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could
be impaired. In addition, the presence of material weaknesses increases the risk of a material misstatement of our consolidated financial
statements.
As a public company, we are
required, pursuant to Section 404(a) of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness
of our internal control over financial reporting in our Annual Report on Form 10-K. Effective internal control over financial reporting
is necessary for reliable financial reports and, together with adequate disclosure controls and procedures, such internal controls are
designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation,
could cause our Company to fail to meet our reporting obligations. Ineffective internal controls could also cause investors to lose confidence
in reported financial information, which could have a negative effect on the trading price of our common stock.
Our management’s assessment
must include disclosure of any material weaknesses identified by management in our internal control over financial reporting. Our management’s
assessment could detect problems with internal controls. Undetected material weaknesses in internal controls could lead to financial statement
restatements and require our Company to incur the expense of remediation.
A material weakness is a
deficiency or combination of deficiencies in a company’s internal control over financial reporting such that there is a reasonable
possibility that a material misstatement of its consolidated financial statements would not be prevented or detected on a timely basis.
This deficiency could result in additional misstatements to its consolidated financial statements that would be material and would not
be prevented or detected on a timely basis.
As discussed in “Item
9.A Controls and Procedures - Disclosure Controls and Procedures,” under the supervision and with the participation of our management,
we have taken measures to improve our disclosure controls and procedures.
We have fully remediated
the material weaknesses in our internal control over financial reporting. However, if our remediation of these material weaknesses turns
out to be ineffective, it may cause our Company to become subject to investigation or sanctions by the SEC. It may also adversely affect
investor confidence in our Company and, as a result, the value of our common stock. There can be no assurance that additional material
weaknesses will not be identified in the future. In addition, if we are unable to continue to meet our financial reporting obligations,
we may not be able to remain listed on Nasdaq.
Our ability
to maintain compliance with Nasdaq continued listing requirements, including whether we are able to maintain the closing bid price of
our common stock, could result in the delisting of our common stock.
Our common stock is currently
listed on The Nasdaq Capital Market (“Nasdaq”). To maintain this listing, we must satisfy minimum financial and other requirements.
On November 19, 2025, the
Company received a staff determination notice from the Nasdaq, informing the Company that its Common Stock failed to comply with the $1
minimum bid price required for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) for the 30 consecutive
business days prior to the date of the Notice. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided with an initial
compliance period of 180 calendar days, or until May 18, 2026, to regain compliance with the minimum bid price requirement. On May 19,
2026, the Company was granted an additional 180-day compliance period, or until November 16, 2026, to regain compliance with the minimum
bid price requirement.
On August 10, 2026, the Company
received a written notification from Nasdaq, indicating that the Company has regained compliance with the Rule 5550(a)(2), based on the
closing bid price of the Company’s Common Stock for the last 10 consecutive business days, from July 27, 2026 to August 7, 2026.
Accordingly, Nasdaq has determined that this matter is now closed.
There can be also no assurance
that our stock price will continue to meet the minimum bid price requirement or we will meet other requirements for continued listing
on Nasdaq. If our common stock is delisted from Nasdaq and we are unable to list our common stock on another national securities exchange,
we expect our common stock would be quoted on an over-the-counter market. If this were to occur, we and our stockholders could face significant
material adverse consequences, including the limited availability of market quotations for our common stock; substantially decreased trading
in our common stock; decreased market liquidity of our common stock as a result of the loss of market efficiencies associated with Nasdaq
and the loss of federal preemption of state securities laws; an adverse effect on our ability to issue additional securities or obtain
additional financing in the future on acceptable terms, if at all; potential loss of confidence by investors, suppliers, partners, and
employees and fewer business development opportunities; and limited news and analyst coverage. Additionally, the market price of our common
stock may decline further, and stockholders may lose some or all of their investment.
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Our proposed
data center business is at an early stage, and we may not enter into definitive agreements or successfully develop or operate the contemplated
project.
In August 2026, we entered
into a non-binding strategic development framework agreement with Florence Development LLC relating to an approximately 900-acre industrial
site in Florence, South Carolina, pursuant to which the parties intend to evaluate the potential development of a large-scale platform
for AI computing, hyperscale data center and high-performance computing infrastructure. Except for certain provisions relating to exclusivity,
confidentiality, publicity, representations, expenses, term, remedies and governing law, the Framework Agreement is non-binding and does
not obligate either party to proceed with the contemplated project or enter into any definitive transaction. We have not entered into
definitive agreements for the development or operation of the contemplated project.
The development of a large-scale
data center project would require substantial additional planning, capital and resources and would depend on numerous factors, including
satisfactory completion of due diligence, availability and adequacy of power and other utility infrastructure, access to financing, receipt
of necessary governmental and corporate approvals, negotiation and execution of definitive agreements, and our ability to obtain the personnel,
technology, equipment and other resources necessary to develop and operate the project. We have limited experience developing or operating
large-scale data center or high-performance computing infrastructure. Accordingly, we may encounter delays, increased costs, financing
difficulties or other challenges in pursuing this proposed business.
There can be no assurance
that we will enter into any definitive agreement relating to the contemplated project, obtain the financing, power capacity, approvals
or other resources necessary to develop it, or successfully commence or operate a data center business. If we devote significant management
attention or financial resources to this opportunity but are unable to consummate or successfully develop the contemplated project, our
business, financial condition and results of operations could be materially adversely affected.
The
development of our proposed data center business may require substantial capital, and we may be unable to obtain sufficient financing
on acceptable terms or at all.
The development, construction
and operation of large-scale data center and high-performance computing infrastructure are capital intensive and may require significant
expenditures for land development, construction, power and utility infrastructure, computing and networking equipment and other facilities
and equipment. We have not yet determined the total capital requirements for the project contemplated by the Framework Agreement, and
the actual costs of developing the project, if pursued, could be substantially greater than currently anticipated. We may need to obtain
substantial additional debt or equity financing or financing from strategic or other third parties to fund the proposed project. There
can be no assurance that such financing will be available when needed or on commercially acceptable terms, or at all. Any equity financing
could result in substantial dilution to our existing stockholders, while debt financing could impose significant repayment obligations
and restrictive covenants. If we are unable to obtain sufficient financing, we may be required to delay, reduce the scope of or abandon
the proposed data center project.
Our proposed
data center project will depend on the availability of sufficient power and other infrastructure and the receipt of necessary approvals,
any of which may delay or prevent development of the project.
Large-scale AI computing,
hyperscale data center and high-performance computing facilities require substantial and reliable supplies of electricity, as well as
adequate telecommunications, water, transportation and other infrastructure. The Framework Agreement remains subject to, among other matters,
confirmation of utility availability and the completion of satisfactory due diligence. We have not yet completed these conditions or established
that the contemplated site will have access to the power capacity and other infrastructure necessary to support the project at the scale
contemplated. Development of the project may also require zoning, land-use, environmental, construction and other governmental permits
and approvals and may depend on the construction or expansion of utility and other infrastructure by third parties. We cannot assure you
that sufficient power or other infrastructure will be available when required or on commercially reasonable terms, or that all necessary
permits and approvals will be obtained in a timely manner or at all. Any inability to secure adequate infrastructure or required approvals
could increase our costs, materially delay or reduce the scope of the contemplated project, or prevent us from developing the project
altogether.
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For additional risks relating
to our operations, see the section titled “Risk Factors” contained in our Registration Statement on Form S-3, filed with the
SEC on September 9, 2024 and other filings we file with the SEC from time to time.