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Item 1A. Risk Factors

2026-10-13 compared with 2025-10-07 · 107 added, 53 removed, 78 unchanged (67% of the section changed)

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If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected.

In such case the trading price of our common stock and warrants could decline due to any of these risks or uncertainties, and you may lose part or all of your investment.

In such case the trading price of our common stock could decline due to any of these risks or uncertainties, and you may lose part or all of your investment.

Risks Related to Our Business

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Our financial statements have been prepared assuming we will continue as a going concern.

Since inception we have experienced recurring net losses which losses caused an accumulated deficit of approximately $64.1 million as of June 30, 2025.

These factors, among others, raise substantial doubt about our ability to continue as a going concern.

For the year ended June 30, 2026, we generated net income of $856,102, due primarily to a non-cash, non-recurring gain on extinguishment of debt;

however, we used net cash in operating activities of $913,888 and had a working capital deficit of $1,951,292.

These factors raise substantial doubt about our ability to continue as a going concern for a period of one year from the date of issuance of the accompanying financial statements.

Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

See Note 1 to the consolidated financial statements.

Management’s plans to address these conditions include the continued issuance of equity and debt securities.

As of the date of this Annual Report, the Company has no committed sources of financing.

There can be no assurance that additional capital will be available on acceptable terms, or at all.

If we are unable to raise sufficient capital, we may be required to curtail or cease operations.

Our future performance will depend on the continued engagement of key members of our management team.

Our future performance depends to a large extent on the continued services of members of our current management and other key personnel.

Our future performance largely depends on the continued services of members of our current management and other key personnel.

While we have employment agreements with certain of our executive officers and key employees, the failure to secure the continued services of these or other key personnel for any reason, could have a material adverse effect on our business, operations, and prospects.

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In addition, we had negative cash flow from operations for the year ended June 30, 2026, of approximately $913,888.

We do not have any liquid or other assets that can be liquidated to pay our current liabilities while we continue to incur additional liabilities to our officer and certain service providers who are working to prepare the documents required to be filed with the Securities and Exchange Commission to enable our common shares to be registered for trading.

We do not have any liquid or other assets that can be liquidated to pay our current liabilities while we continue to incur additional liabilities to our officers and certain service providers who assist us in meeting our reporting obligations under the Exchange Act.

Since we currently have limited operations, the only ways we have of paying our current liabilities are to issue our common or preferred shares to our creditors or to issue unsecured promissory notes which may include certain features such as convertibility into common or preferred shares or warrants to purchase additional common or preferred shares in the future.

We had $1,593,484 of convertible notes, notes payable, and accrued interest payable as of June 30, 2025, of which $1,117,285 of this amount is past due, and we do not have the funds necessary to pay these obligations.

In addition to funding our operating expenses, we need capital to pay various debt obligations totaling approximately $1,117,285 as of June 30, 2025 which are either currently past due or which are due in the current fiscal year.

Currently, there is $190,450 principal amount of the convertible notes payable which is past due, $535,000 principal of the notes payable which is past due, and $391,835 of accrued interest which is past due.

The interest on the past due principal amounts will continue to accrue monthly at their stated rates.

Holders of past due notes do not have a security interest in our assets.

The existence of these obligations provides additional challenges to us in our efforts to raise capital to fund our operations.

We had $108,009 in convertible notes payable outstanding as of June 30, 2026, with accrued interest of $108,678 (see Note 4).

We had promissory notes payable with a face amount of $144,600 ($122,589 net of $22,011 of unamortized discount), with $16,438 of related accrued interest, as of June 30, 2026 (see Note 5).

See Note 16 – Subsequent Events for developments after June 30, 2026 affecting certain of these notes.

In the event we consummate a transaction with a profitable company, we may not be able to utilize our net operating loss carryover which may have a negative impact on your investment.

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These factors will substantially increase the uncertainty, and thus the risk, of investing in our shares.

We have not filed corporate income tax returns since fiscal 2008, which could expose us to penalties, interest, and other enforcement action.

The Company has not filed federal or state corporate income tax returns for any fiscal year beginning with the fiscal year ended June 30, 2008.

This failure may result in the assessment of penalties and interest, potential disallowance or limitation of net operating loss carryforwards, and examination by taxing authorities for all open years.

We have not recorded an accrual for potential penalties or interest because we are currently unable to reasonably estimate the amount of any such exposure.

When historical returns are filed, they will remain subject to examination for at least three years after the filing date.

See Note 11 to the consolidated financial statements.

In addition, the $2,923,004 gain on extinguishment of debt recognized in fiscal 2026 may constitute cancellation-of-indebtedness income for federal income tax purposes.

To the extent that income is excluded from taxable income under Section 108 of the Internal Revenue Code, our net operating loss carryforwards and other tax attributes would be reduced.

See Note 11 to the consolidated financial statements.

We have a history of entering into non-binding letters of intent and other proposed transactions that have not been consummated, and investors should not place undue reliance on the announcement of future transactions.

We have, from time to time, entered into non-binding letters of intent and pursued other proposed acquisitions, business combinations, and strategic transactions that were ultimately terminated prior to closing, including our proposed acquisition of ConnexUS AI Inc., which was terminated in June 2026 after we had advanced funds and incurred costs in connection with the proposed transaction.

We may continue to announce proposed transactions in the future that do not result in the consummation of a definitive agreement or closing.

Investors should not place undue reliance on our announcements of proposed transactions, and our pursuit of such transactions may divert management attention and Company resources without a corresponding benefit if the transactions are not completed.

A substantial portion of our fiscal 2026 results depended on non-recurring gains from debt-extinguishment transactions.

During fiscal 2026, the Company recognized an aggregate gain on extinguishment of debt of $2,923,004, consisting of $1,248,079 from the settlement of accrued compensation and consulting fees owed to non-affiliated employees and consultants with common stock, $1,626,318 from the April 2026 exchanges of debt and former-director advances for Series D Convertible Preferred Stock (including $279,230 of separately forgiven accrued interest and net of a $10,013 write-off of unamortized debt discount), and $48,607 from cash settlements of a note payable and vendor payables at a discount (see Note 9).

Without this gain, we would have reported a net loss of $2,059,370 for the year ended June 30, 2026 rather than net income of $856,102.

These gains are non-recurring;

we do not expect to recognize gains of this magnitude in future periods, and our results of operations going forward will more directly reflect our ongoing operating losses.

Management's fair value measurement of the Series D Convertible Preferred Stock issued in exchange for debt involved significant judgment and is subject to revision.

In April 2026, we issued 1,444,859 shares of Series D Convertible Preferred Stock in exchange for outstanding debt and related-party obligations.

Because the Series D Convertible Preferred Stock does not trade in an active market, management estimated its fair value ($0.058 per share, or $83,802 in the aggregate) using a conversion-parity methodology based on the volume-weighted average price of our common stock and the Series D's fixed conversion ratio, without a separately measured adjustment for the Series D's cumulative dividend, liquidation preference, anti-dilution, or redemption features.

Management has classified this measurement within Level 3 of the fair value hierarchy.

This valuation is inherently judgmental, is sensitive to the trading price of our thinly-traded common stock, and could be challenged by our auditors, the SEC, or in litigation.

A different valuation conclusion, including one that assigned separate value to the Series D's preferences, could have resulted in materially different amounts for the mezzanine equity carrying value, additional paid-in capital, and the $1,626,318 gain on extinguishment recognized in connection with these transactions, and any future revision could require us to restate our financial statements.

We used the same conversion-parity methodology to estimate the fair value of the 35,000 shares of Series D Convertible Preferred Stock issued on September 21, 2026 in exchange for convertible notes, and we expect to recognize an estimated gain on extinguishment of debt of approximately $91,636 in the quarter ending September 30, 2026 in connection with that exchange;

that estimate is subject to the same uncertainty (see Note 16 – Subsequent Events).

We have experienced significant, recent turnover in our Board of Directors and executive officers, which could adversely affect our business.

During fiscal 2026, we experienced substantial changes in our Board of Directors and executive management, including the resignations of two independent directors in April 2026, the appointment of a new Chairman and Chief Executive Officer and a new Chief Operating Officer/Chief Technology Officer later that same month, and the subsequent resignation of that Chief Operating Officer/Chief Technology Officer in June 2026 upon termination of a proposed acquisition.

Our current Chief Executive Officer has served in that role only since April 2026.

This level of turnover in a short period increases the risk of disruption to our operations, strategy, and internal controls, and there can be no assurance that our current leadership will remain in place or that future transitions will not occur.

Economic conditions may affect our ability to obtain financing.

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These factors substantially increase the uncertainty, and thus the risk, of investing in our shares.

There are a number of factors related to our common stock which may have an adverse effect on our shareholders.

Shareholders’ interests in our Company will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares or raise funds through the sale of equity securities.

In the event that we are required to issue additional shares, enter into private placements to raise financing through the sale of equity securities, the interests of existing shareholders in our Company will be diluted and existing shareholders may suffer dilution in their net book value per share depending on the price at which such securities are sold.

If we do issue additional shares, it will cause a reduction in the proportionate ownership and voting power of all existing shareholders.

Any significant cybersecurity incident or disruption of our information technology systems or those of third-party partners could materially damage user relationships and subject us to significant reputational, financial, legal and operation consequences.

We may depend on our information technology systems, as well as those of third parties, to develop new products and services, host and manage our services, store data and process transactions.

Any material disruption or slowdown of our systems or those of third parties upon whom we depend could cause outages or delays in our services, particularly in the form of interruption of services delivered by our website, which could harm our brand and adversely affect our operating results.

Our failure to implement adequate cybersecurity protections could subject us to claims for any breach of security, particularly if it results in disclosure of information relating to our customers.

If changes in technology cause our information technology systems, or those of third parties whom we depend upon, to become obsolete, or if our or their information systems are inadequate to handle our growth, we could lose users, and our business and operating results could be adversely affected.

Risks Related to Our Corporate Structure and Ownership of Our Securities

A small number of holders control a majority of our voting power through a class of preferred stock carrying disproportionate voting rights.

At June 30, 2026, four shares of Series AA Convertible Preferred Stock were outstanding.

The Series AA Convertible Preferred Stock, voting as a class, is entitled in the aggregate to 51% of the votes on any matter submitted to a shareholder vote, regardless of the number of shares of common stock outstanding.

As of October 13, 2026, PT Smart Green Technologies, an affiliate of the Company by virtue of its ownership interest, held three of the four outstanding Series AA Convertible Preferred Stock shares and beneficially owned 620,000,000 shares of our common stock (approximately 48.8% of the shares outstanding), including 120,000,000 shares purchased in August 2026 (see Note 16 – Subsequent Events).

As a result, PT Smart Green Technologies controls a substantial majority of our aggregate voting power and can control the outcome of matters submitted to a shareholder vote, including the election of directors, amendments to our charter documents, and approval of mergers and other significant corporate transactions, without regard to the votes of other common shareholders.

This concentration of voting power may discourage, delay, or prevent a change in control of the Company that other shareholders may consider favorable, and may reduce the influence that holders of our common stock would otherwise have over matters submitted to a shareholder vote.

Our largest shareholder is a foreign company, and investments in us by foreign persons may be subject to review by the Committee on Foreign Investment in the United States.

PT Smart Green Technologies, an Indonesian company controlled by Dr.

Niclas Adler, owns approximately 48.8% of our outstanding common stock and three of the four outstanding shares of our Series AA Convertible Preferred Stock.

Because we are a U.S.

business engaged in cybersecurity technology, investments in the Company by foreign persons may be subject to review by the Committee on Foreign Investment in the United States (“CFIUS”), which has authority to review, and in some cases to require mitigation of or to unwind, transactions by which a foreign person acquires control of, or certain rights in, a U.S.

Adler is not a U.S.

national, and no filing has been made with CFIUS with respect to PT Smart Green Technologies’ investments in the Company.

A CFIUS review, or the imposition of mitigation measures, could delay or prevent future financings or strategic transactions, limit the rights of PT Smart Green Technologies, or otherwise adversely affect us and the market for our common stock.

We have certain provisions in our Articles of Incorporation and Bylaws, and there are other provisions under Florida law, that may serve to make a takeover of our Company more difficult.

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Our officers and directors control, either directly or indirectly, a substantial portion of our voting securities.

As of June 30, 2025, our executive officer and directors beneficially owns 140,625,781 shares of Common Stock, or approximately 38% of our outstanding shares of Common Stock.

In addition, our executive officer owns the only issued and outstanding share of Series AA Convertible Preferred Stock which entitles him to 51% of the Common votes on any matter requiring a shareholder vote.

Therefore, our management may significantly affect the outcome of all corporate actions and decisions for an indefinite period of time including the election of directors, amendment of charter documents and approval of mergers and other significant corporate transactions.

Our common stock is quoted in the over the counter market on the OTCID.

As of October 13, 2026, our executive officers and directors beneficially owned 119,686,562 shares of Common Stock, or approximately 9.4% of our outstanding Common Stock.

In addition, our Chief Financial Officer owned one of the four outstanding Series AA Convertible Preferred Stock shares.

Because the Series AA Preferred Stock is entitled, as a class, to 51% of the votes on matters submitted to stockholders, our executive officers and directors controlled approximately 17.4% of total voting power.

PT Smart Green Technologies, which held the other three Series AA shares and 620,000,000 Common Stock shares, controlled approximately 62.2% of total voting power.

Accordingly, PT Smart Green Technologies can significantly affect the outcome of corporate actions and decisions, including the election of directors, amendments to charter documents, and approval of mergers and other significant corporate transactions.

Our Series D Convertible Preferred Stock, and any additional preferred stock we may issue, could result in substantial dilution to holders of our common stock.

As of June 30, 2026, 1,444,859 shares of Series D Convertible Preferred Stock were outstanding.

Each share is convertible at a fixed conversion price of $0.05 per share of common stock, resulting in the potential issuance of approximately 28,897,180 shares of common stock before giving effect to accrued dividends.

The Series D carries a 3% cumulative dividend that may be settled in additional shares of Series D Preferred Stock at the Company’s option.

Accrued but undeclared dividends totaled $8,907 as of June 30, 2026.

On September 21, 2026, we issued an additional 35,000 shares of Series D Convertible Preferred Stock in exchange for four convertible notes payable, increasing the number of Series D shares outstanding to 1,479,859 and the number of shares of common stock issuable upon their conversion to approximately 29,597,180, before giving effect to accrued dividends (see Note 16 – Subsequent Events).

The conversion price is subject to broad-based weighted-average anti-dilution adjustment.

Any future issuance of equity at a price below $0.05 per share will reduce the conversion price and increase the number of common shares issuable upon conversion.

In addition, the Company has authorized blank-check preferred stock that the Board may designate and issue without further shareholder approval.

On September 11, 2026, the Board approved a 1-for-1,500 reverse split of our common stock and a reduction of authorized common stock to 2,000,000 shares.

The approval is outstanding and pending effectiveness.

It has not been executed.

Share counts in this Annual Report are pre-split.

A reverse split of this magnitude would materially reduce the number of outstanding shares and could adversely affect the liquidity of our common stock.

Our common stock is quoted in the over the counter market on the OTC ID Quotation System (“OTCID”).

Our common stock is quoted on the OTCID.

OTCID offers a quotation service to companies that are unable to list their securities on an exchange or for companies, such as ours, whose securities are not eligible for quotation on the OTC Bulletin Board.

The requirements for quotation on the OTCID are considerably lower and less regulated than those of the OTC Bulletin Board or an exchange.

As an SEC reporting company, the Company satisfies and exceeds the minimal current information standard of the OTCID.

Because our common stock is quoted on the OTCID, it is possible that fewer brokers or dealers would be interested in making a market in our common stock which could adversely impacts its liquidity.

The requirements for quotation on the OTCID are considerably lower and less regulated than those of the OTCQX or OTCQB markets or a national securities exchange.

See also the penny stock risk factor below.

The tradability of our common stock is limited under the penny stock regulations which may cause the holders of our common stock difficulty should they wish to sell their shares.

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Developments in our industry or target markets.

General market conditions including factors unrelated to our operating performances

General market conditions including factors unrelated to our operating performance.

Recently, the stock market, in general, has experienced extreme price and volume fluctuations.

Continued market fluctuations could result in extreme market volatility in the price of our shares of common stock which could cause a decline in the value of our shares.

We have identified a material weakness in our internal control over financial reporting.

This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

As described elsewhere in this Annual Report, we identified a material weakness in our internal control over financial reporting related to functional controls and segregation of duties.

As a result of this material weakness, our management concluded that our internal control over financial reporting was not effective as of June 30, 2025.

Any failure to maintain such internal control could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis, which could result in a material adverse effect on our business.

If our financial statements are not accurate, investors may not have a complete understanding of our operations.

Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by OTC Markets, the SEC or other regulatory authorities.

In addition, we would likely incur additional accounting, legal and other costs in connection with any remediation steps.

Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

To respond to this material weakness, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting.

While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate our research and understanding of the nuances of the complex accounting standards that apply to our financial statements.

We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls.

In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.

Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes Oxley Act could prevent us from producing reliable financial reports or identifying fraud.

In addition, current and potential stockholders could lose confidence in our financial reporting, which could have an adverse effect on our stock price.

We are subject to Section 404 of the Sarbanes-Oxley Act.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud, and a lack of effective controls could preclude us from accomplishing these critical functions.

We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting.

Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2025, and concluded that our internal controls and procedures were not effective.

We have identified material weaknesses in our internal control over financial reporting, and our disclosure controls and procedures were not effective.

As of June 30, 2026, our management concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective because of the material weaknesses described in Item 9A, including the absence of formal written policies and procedures, the absence of independent directors and an independent audit committee, inadequate segregation of duties, and deficiencies in controls over the review of reported equity issuances.

These material weaknesses could adversely affect our ability to report our results of operations and financial condition accurately and on a timely basis or to prevent or detect fraud, and could cause current and potential stockholders to lose confidence in our financial reporting.

Management and the Board of Directors have approved the remediation plan described in Item 9A;

however, there can be no assurance that the plan will be completed on the contemplated timeline, that it will remediate the material weaknesses, or that additional material weaknesses will not be identified in the future.

Our debt and equity extinguishment transactions are numerous, individually negotiated, and complex, and errors in accounting for them may not be prevented or detected on a timely basis.

During fiscal 2026 we completed a large number of individually negotiated debt-for-equity exchanges, cash settlements at a discount, and warrant cancellations, each requiring separate analysis under ASC 470-50, ASC 405-20, and related guidance, and each affecting our gain on extinguishment of debt, additional paid-in capital, and earnings per share in different ways depending on whether a counterparty was a related party.

This complexity, combined with the material weakness described above, increases the risk that individual transactions could be misstated, omitted, or misclassified in our financial statements, and that such errors may not be prevented or detected in a timely manner.

If such errors are later identified, we could be required to restate previously issued financial statements.

Our Chief Financial Officer, who prepares and signs our periodic reports, is also a related party to several of the transactions those reports describe.

Mark Lucky, our Chief Financial Officer, is a holder of Series AA Convertible Preferred Stock and Series D Convertible Preferred Stock, a beneficial owner of Common Stock, and a counterparty to the related-party advances, equitization, and Series D exchange transactions described in Note 12 and Item 13.

Lucky is also responsible for preparing and certifying our financial statements and Exchange Act reports, this dual role could create an actual or perceived conflict of interest in the identification, review, and disclosure of related-party transactions, and there can be no assurance that this arrangement will not adversely affect the reliability of our financial reporting until the segregation-of-duties remediation described above is completed.

Cybersecurity Risks

Cyberattacks are a growing geopolitical risk, becoming larger, more frequent, more intricate and more relentless.

These attacks represent a significant threat to individual organizations and their ability to conduct daily operations.

We rely on accounting, financial, and operational management information systems to conduct our operations.

Any disruption in these systems could adversely affect our ability to conduct our business.

Furthermore, as part of our normal business activities, we collect and store common confidential information about customers, employees, vendors, and suppliers.

This information is entitled to protection under a number of regulatory regimes.

Any failure to maintain the security of the data, including the penetration of our network security and the misappropriation of confidential and personal information, could result in business disruption, damage to our reputation, financial obligations to third parties, fines, penalties, regulatory proceedings and private litigation with potentially large costs.

This scenario may also result in a deterioration of customer confidence in us and potentially other competitive disadvantages.

As such, a cyberattack could have a material adverse impact on our financial condition and results of operations.

While we devote resources to implement and maintain security measures to protect our systems and data, these measures cannot provide absolute security against a cyberattack.

In such an event, any insurance coverage we maintain may be inadequate to cover claims, costs, and liabilities relating to cybersecurity incidents.

Risks Related to Operations Outside of the United States

We are subject to economic, political and other risks of doing business globally and in emerging markets.

We will be a multi-national business and our business strategies may involve expanding or developing our business in emerging market regions, including South America, Central America, the Middle East and Africa.

Due to the international nature of our business, we are exposed to various risks of international operations, including:

Our business strategy includes providing data center design services in emerging markets, including Côte d’Ivoire and Benin in West Africa under our contract with Cybastion, and may involve expanding or developing our business in other emerging market regions.

To the extent we conduct business internationally, we are exposed to various risks of international operations, including:

inflation and hyperinflation and adverse economic effects resulting from governmental attempts to control inflation, such as the imposition of wage and price controls and higher interest rates;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors