KNOREX going-concern warning follows 44% revenue drop and $7.7m deficit

KNOREX Ltd. (NYSE American: KNRX) has issued a required disclosure highlighting the going-concern paragraph contained in the audit report accompanying its delayed 2025 annual financial statements, drawing attention back to a business that ended last year with a US$7.7 million working-capital deficit, only US$129,104 of cash and a net loss almost twice its annual revenue. The August 21 announcement itself does not introduce a new accounting deterioration or amend the Form 20-F; KNOREX said the notice was required under Section 610(b) of the NYSE American Company Guide because the auditor’s report contained the explanatory going-concern language.

The financial conditions behind that paragraph are nevertheless substantial. KNOREX generated US$6.04 million of revenue in 2025, down 44.2% from US$10.82 million in 2024, while its net loss widened to approximately US$11.55 million from US$5.88 million. Net cash used in operating activities increased to about US$10.9 million, and cash and cash equivalents declined to US$129,104 at December 31 from US$824,728 a year earlier.

Those figures explain why the auditor highlighted substantial doubt about KNOREX’s ability to continue as a going concern. A going-concern paragraph does not mean the company has entered insolvency proceedings or will necessarily cease operations; it signals that financial conditions create material uncertainty over the company’s ability to meet obligations without successfully executing measures such as additional financing or improved operating performance.

Why did KNOREX revenue fall 44% in 2025?

The decline was overwhelmingly concentrated in the United States. U.S. revenue fell from approximately US$10.42 million in 2024 to US$5.00 million in 2025, a reduction of roughly US$5.42 million, while international revenue actually increased from about US$398,000 to US$1.04 million.

KNOREX attributed the U.S. contraction primarily to weaker demand from its largest customer, whose end clients were affected by new U.S. import tariffs that pressured their operations and advertising spending. The disclosure gives the company’s ad-tech revenue decline an unusual link to trade policy: tariffs affected customers further down the commercial chain, which then reduced the advertising expenditure flowing through KNOREX’s platform.

Customer concentration magnified that exposure. KNOREX’s five largest customers accounted for 74% of 2025 revenue, while the largest single customer represented approximately 40.6%. The comparable figures in 2024 were even higher at 86.2% and 73.3%, respectively.

Although the reduction in concentration is directionally positive, 40.6% of annual revenue from one customer remains significant. A material spending decision by a single account can therefore alter group-level revenue far more sharply than it would for a broadly diversified software company.

Gross margin did improve despite lower revenue, rising to 48.8% from 41.8%. That shows KNOREX reduced cost of revenue faster than sales declined, but the improvement was insufficient to offset its operating-cost base. Operating loss widened to US$9.39 million and adjusted EBITDA remained negative at approximately US$8.6 million.

How severe was KNOREX’s year-end liquidity position?

The US$129,104 year-end cash balance is the most striking figure, but it should not be interpreted as KNOREX’s current August 2026 cash position. The company has undertaken additional financing since December, meaning the 2025 balance-sheet number is a historical indicator of the conditions that produced the auditor’s opinion rather than a current liquidity snapshot.

At year-end, KNOREX had a US$7.7 million working-capital deficit, up from US$6.0 million a year earlier, and an accumulated deficit of approximately US$62.2 million. The company explicitly stated that those conditions raised substantial doubt about its ability to continue as a going concern and said continued operation would require access to equity, debt or other financing.

Operating cash consumption demonstrates the scale of the challenge. KNOREX used approximately US$10.9 million of cash in operations during 2025, roughly double the US$5.35 million used in 2024. Financing activities provided about US$11.45 million during the year, including gross proceeds from the company’s US$12 million initial public offering, showing how heavily external capital was already supporting operating requirements.

The contrast is stark: operating cash burn of roughly US$10.9 million during 2025 exceeded the company’s US$6.04 million of annual revenue by about 80%. That ratio cannot continue indefinitely without either significant operating improvement or repeated capital raising.

Has KNOREX raised additional capital since the 2025 year-end?

Yes, and that is important when interpreting the going-concern notice. In March 2026, KNOREX entered financing arrangements that included US$3 million of senior unsecured notes and a share purchase agreement under which investors could purchase up to US$50 million of newly issued Class A ordinary shares over time, subject to contractual conditions.

The US$3 million notes generated approximately US$2.7 million of net proceeds. KNOREX disclosed that about US$700,000 was used to repay existing indebtedness, with the remaining approximately US$2 million available for transaction costs and general corporate purposes.

The potential US$50 million equity facility is not equivalent to US$50 million already received in cash. It provides a mechanism through which KNOREX may issue shares to participating investors over time if relevant conditions are satisfied. To the extent it is used, the arrangement could provide liquidity but would also increase the number of shares outstanding and dilute existing shareholders.

That distinction is crucial because the going-concern assessment is fundamentally a funding question. KNOREX has created additional financing pathways since year-end, but the long-term solution cannot rely only on continually replacing operating cash burn with new securities if revenue and profitability do not improve.

Why is the August 21 disclosure appearing months after KNOREX’s filing deadline?

KNOREX had originally been required to file its 2025 Form 20-F by an extended deadline of May 15. After missing that deadline, NYSE Regulation notified the company on May 18 that it was not complying with NYSE American’s continued-listing requirements and placed it into an initial cure period running through November 15.

The annual report was ultimately filed on August 18, putting the audited financial statements and going-concern language into the public record. The August 21 release then served as the specific disclosure required by NYSE American because of the auditor’s explanatory paragraph.

That timing explains why investors should not read the August 21 announcement as a sudden new warning issued three days after otherwise healthy accounts. It is a procedural disclosure tied to financial conditions already contained in the annual report.

Those underlying conditions, however, remain commercially important: revenue fell 44%, losses almost doubled, operating cash burn reached approximately US$10.9 million and the business ended 2025 with a US$7.7 million working-capital deficit. KNOREX has subsequently opened new financing channels, but the larger question is whether those sources can provide enough time for its XPO advertising platform to rebuild revenue and reduce cash consumption before capital dependence creates further pressure on shareholders.