Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors and all other information contained in this Annual Report on Form 10-K before purchasing our common stock. If any of the following risks actually occur, we may be unable to conduct our business as currently planned and our financial condition and results of operations could be seriously harmed. In addition, the trading price of our common stock could decline due to the occurrence of any of these risks, and you may lose all or part of your investment.
Risks Related to Our Business and the Industry in Which We Compete
We are an early development stage company. We have not yet commenced with the construction of our Downdraft Towers or the production of electricity.
The Company has a limited operating history and has primarily engaged in operations relating to the development of its business plan. As a development stage entity, the Company is subject to many of the risks common to such enterprises, including the ability of the Company to implement its business plan, market acceptance of its proposed business, under-capitalization, cash shortages, limitations with respect to personnel, financing and other resources, and uncertainty of the Company’s ability to generate revenues. There can be no assurance that the Company’s activities will be successful or result in any revenues or profit for the Company, and the likelihood of the Company’s success must be considered in light of the stage in its development. To date, the Company has generated no revenue and has generated losses.
The Company believes it has engaged professionals and consultants experienced in the type of business contemplated by the Company; however, there can be no assurance that the predictions, opinions, analyses, or conclusions of such professionals will prove to be accurate. In addition, no assurance can be given that the Company will be able to consummate its business strategy and plans or those financial or other limitations may force the Company to modify, alter, significantly delay, or significantly impede the implementation of such plans or the Company’s ability to continue operations. If the Company is unable to successfully implement its business strategy and plans, investors may lose their entire investment in the Company.
Potential investors should also be aware of the difficulties normally encountered by new renewable energy companies. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the inception of the enterprise that we plan to undertake. These potential problems include, but are not limited to, raising capital to implement each of the HTR’s, unanticipated problems relating to construction, operation and distribution, and additional costs and expenses that may exceed current estimates.
Future financings will involve a dilution of the interests of the stockholders of the Company upon the issuance of additional shares of Common Stock or other securities.
We will need to engage in additional financings in the future. There can be no assurances that such financings will ever be completed, but any such financings will involve a dilution of the interests of our stockholders upon the issuance of additional shares of Common Stock or other securities. Attaining such additional financing may not be possible, or if additional capital may be otherwise available, the terms on which such capital may be available may not be commercially feasible or advantageous to existing shareholders. We expect to issue shares of our Common Stock and/or other securities in exchange for additional financing.
We anticipate significant future capital needs and the availability of future capital is uncertain.
The Company has experienced negative cash flows from operations since its inception. The Company will be required to spend substantial funds to continue research and development. It is estimated that the cost of permitting and constructing large HTR’s will be in excess of $2 billion and the cost of a green hydrogen plant will be in excess of $1.2 billion. In addition, we will need to raise funds for working capital purposes. The Company will need to raise additional capital. The Company anticipates the cost of smaller HTR’s will be less than half the cost of the large HTRs and will be co-located with AI data centers which will be funded by others. The Company anticipates that long term energy (off take agreements) for the supply of electricity required for the AI data centers will support and enable the needed financing for the smaller HTR. The Company’s capital requirements will depend on many factors, primarily relating to the problems, delays, expenses and complications frequently encountered by development stage companies; construction and permitting delays and related issues; the progress of the Company’s research and development programs; the costs and timing of seeking regulatory approvals of the Company’s products under development; the Company’s ability to obtain such regulatory approvals; costs in filing, , , and enforcing any patent and other intellectual property rights; the extent and terms of any research, manufacturing, marketing, or other arrangements; and changes in economic, regulatory, or competitive conditions or the Company’s planned business.
To satisfy its capital requirements, the Company may seek to raise funds in the public or private capital markets. The Company may seek additional funding through corporate collaborations and other financing vehicles. There can be no assurance that any such funding will be available to the Company, or if available, that it will be available on acceptable terms. If adequate funds are not available, the Company may be required to curtail significantly one or more of its research or development programs or it may be required to obtain funds through arrangements with future collaborative partners or others that may require the Company to relinquish rights to some or all of its technologies or products under development. If the Company is successful in obtaining additional financing, the terms of the financing may have the effect of diluting or adversely affecting the holdings or the rights of the holders of Common Stock.
We have a history of losses.
We expect to incur non-capitalized development costs and general and administrative expenses prior to the completion of construction and commencement of operation of our proposed projects. We cannot predict if we will ever achieve profitability and, if we do, we may not be able to sustain or increase our profitability. If we cannot achieve or maintain profitability, we may not be able to continue to absorb the resulting financial losses. If we continue to suffer financial losses, our business may be jeopardized and our shareholders may lose all of their investment in our shares.
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing and adversely affect our business, financial condition, and results of operations.
The report of our independent registered public accounting firm on our consolidated financial statements for the years ended December 31, 2024 and 2023 includes an explanatory paragraph stating that our recurring losses from operations, negative cash flows from operating activities, and accumulated deficit raise substantial doubt about our ability to continue as a going concern. A “going concern” opinion indicates that our auditors believe there is substantial doubt that we can continue as an ongoing business for the next 12 months and could signal to lenders, suppliers, customers, and other counterparties that our ability to continue as a viable business is uncertain.
Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. If we are unable to obtain sufficient additional funding or generate sufficient revenue to meet our operating expenses and other obligations as they come due, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital, restructure or refinance our indebtedness, or file for bankruptcy protection. We cannot assure you that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled debt service obligations, or that these actions would be permitted under the terms of our existing or future debt agreements. In the absence of sufficient financing or other resources, we may not be able to continue as a going concern, which could result in the liquidation of our assets at values significantly lower than those recorded in our financial statements, and investors could all or a significant portion of their investment in our securities.
Our ability to continue as a going concern will depend on our ability to successfully execute our business plan, including increasing revenues, reducing operating expenses, and securing additional financing on acceptable terms. However, there can be no assurance that we will be able to achieve these objectives, and the presence of the going concern qualification may make it more difficult or costly to raise additional capital, further exacerbating our liquidity challenges.
The Company’s strategies for development of the business might not be successful.
The Company is currently evaluating potential development strategies for the further development of HTR technology and implementation of the construction of HTR’s. It may take several years, if ever, for the Company to achieve cumulative positive cash flow. The Company could experience significant difficulties in executing its business plan, including: inability to successfully implement the Company’s business plan; changes in market conditions; inability to obtain necessary financing; delays in completion of the Company’s projects or their underlying technologies; inaccurate cost estimates; changes in government or political reform; or the Company may not benefit from the proposed projects as the Company expected. The Company’s inability to develop and market the Company’s HTR’s successfully and to generate positive cash flows from these operations in a timely manner would have a material effect on the Company’s ability to meet the Company’s working capital requirements.
We expect to rely upon strategic relationships in order to execute our business plan and the Company may not be able to consummate the strategic relationships necessary to execute its business plan.
The Company plans to enter into and rely on strategic relationships with other parties, in particular to acquire rights necessary to develop and build proposed HTR’s and to develop and build such projects. These strategic relationships could include licensing agreements, partnerships, joint ventures, or merger or acquisition activity. The Company believes that these relationships will be particularly important to the Company’s future growth and success due to the size and resources of the Company and the resources necessary to complete the Company’s proposed projects. The Company may, however, not be able to successfully identify potential strategic relationships.
Even if the Company does identify one or more potentially beneficial strategic relationships, it may not be able to consummate these relationships on favorable terms or at all, obtain the benefits it anticipates from such relationships or maintain such relationships. In addition, the dynamics of the Company’s relationships with possible strategic partners may require the Company to incur expenses or undertake activities it would not otherwise be inclined to undertake in order to fulfill the Company’s obligations to these partners or maintain the Company’s relationships.
To the extent the Company consummates strategic relationships; it may become reliant on the performance of independent third parties under such relationships. Moreover, certain potentially critical strategic relationships are only in the early stages of discussion and have not been officially agreed to and formalized. If strategic relationships are not identified, established or maintained, or are established or maintained on terms that become unfavorable, the Company’s business prospects may be limited, which could have a negative impact on the Company’s ability to execute the Company’s business plan, diminish the Company’s ability to conduct the Company’s operations and/or materially and adversely affect the Company’s business and financial results.
Project development or construction activities may not be successful and proposed projects may not receive required permits or construction may not proceed as planned.
The development and construction of our proposed projects will involve numerous risks. We may be required to spend significant sums for preliminary engineering, permitting, legal, and other expenses before we can determine whether a project is feasible, economically attractive or capable of being built. Success in developing a particular project is contingent upon, among other things: (i) negotiation of satisfactory engineering, procurement and construction agreements; (ii) receipt of required governmental permits and approvals, including the right to interconnect to the electric grid on economically acceptable terms; (iii) payment of interconnection and other deposits (some of which may be non-refundable); (iv) obtaining construction financing; and (v) timely implementation and satisfactory completion of construction.
Successful completion of a particular project may be adversely affected by numerous factors, including: (i) delays in obtaining required governmental permits and approvals with acceptable conditions; (ii) uncertainties relating to land costs for projects ; (iii) unforeseen engineering problems; (iv) construction delays and contractor performance shortfalls; (v) work stoppages; (vi) cost over-runs; (vii) equipment and materials supply; (viii) adverse weather conditions; and (ix) environmental and geological conditions.
The estimates and projections contained herein may not be realized.
Any estimates or projections have been prepared on the basis of assumptions and hypotheses, which the Company believes to be reasonable. However, no assurance can be given that the potential benefits described herein will prove to be available. Such assumptions are highly speculative and, while based on management’s best estimates of projected sales levels, operational costs, consumer preferences, and the Company’s general economic and competitive conditions in the industry, there can be no assurance that the Company will operate profitably or remain solvent. To date, the Company has not operated profitably and has a history of losses. If the Company’s plans prove unsuccessful, investors could lose all or part of their investment. There can be no assurance that the Company will be able to generate any revenue or profits.
Our business is subject to significant government regulation and, as a result, changes to such regulations may adversely affect our business.
Although independent and small power producers may generate electricity and engage in wholesale sales of energy without being subject to the full panoply of state and/or provincial and federal regulation to the same extent as a public utility company, our planned operations will nonetheless be subject to changes in government regulatory requirements, such as regulations related to the environment, zoning and permitting, financial incentives, taxation, competition, pricing, and FERC and state PUC regulations on competition. The operation of our proposed projects will be subject to regulation by various U.S. government agencies at the federal, state and municipal level.
There is always the risk of change in government policies and laws, including but not limited to laws and regulations relating to income, capital, sales, corporate or local taxes, and the removal of tax incentives. Changes in these regulations could have a negative impact on our potential profitability. Laws and tax policies may change and such changes may be favorable or unfavorable to the Company, which may result in the cancellation of proposed projects or reduce anticipated revenues and cash flow.
We may be unable to acquire or lease land and/or obtain the approvals, licenses and permits necessary to build and operate our proposed projects in a timely and cost effective manner, and regulatory agencies, local communities or labor unions may delay, prevent or increase the cost of construction and operation of our proposed projects.
In order to construct and operate our proposed projects, we need to acquire or lease land and obtain all necessary local, county, state and federal approvals, licenses and permits. We may be unable to acquire the land or lease interests needed, may not receive or retain the requisite approvals, permits and licenses or may encounter other problems which could delay or prevent us from successfully constructing and operating proposed projects.
Proposed projects may be located on or require access through public lands administered by federal and state agencies pursuant to competitive public leasing and right-of-way procedures and processes. The authorization for the use, construction and operation of our proposed projects and associated transmission facilities on federal, state and private lands will also require the assessment and evaluation of mineral rights, private rights-of-way and other easements; environmental, agricultural, cultural, recreational and aesthetic impacts; and the likely mitigation of adverse impacts to these and other resources and uses. The inability to obtain the required permits and, potentially, excessive delay in obtaining such permits due, for example, to litigation, could prevent us from successfully constructing and operating our proposed projects. Moreover, project approvals subject to project modifications and conditions, including mitigation requirements and costs, could affect the financial success of our proposed projects.
Our ability to manage our growth successfully is crucial to our future.
We are subject to a variety of risks associated with a growing business. Our ability to operate successfully in the future depends upon our ability to finance, develop, and construct future renewable energy projects, implement and improve the administration of financial and operating systems and controls, expand our technical capabilities and manage our relationships with landowners and contractors. Our failure to manage growth effectively could have a material adverse effect on our business or results of operations.
Notwithstanding the Recovery Act and other regulatory incentives, we may not be able to finance the development or the construction costs of building our planned projects.
We do not have sufficient funds from the cash flow of our operations to fully finance the development or the construction costs of building our proposed projects. Additional funds will be required to complete the development and construction of our proposed projects, to find and carry out the development of properties, and to pay the general and administrative costs of operating our business. Additional financing may not be available on acceptable terms, if at all. If we are unable to raise additional funds when needed, we may be required to delay development and construction of our proposed projects, reduce the scope of our proposed projects, and/or eliminate or sell some or all of our development projects, if any.
We may not be able to obtain access to the transmission lines necessary to deliver the power we plan to produce and sell.
We will depend on access to transmission facilities so that we may deliver power to purchasers. If existing transmission facilities do not have available transmission capacity, we would be required to pay for the upgrade of existing transmission facilities or to construct new ones. There can be no assurance that we will be able to secure access to transmission facilities at a reasonable cost, or at all. As a result, expected profitability on a proposed project may be lower than anticipated or, if we have no access to electricity transmission facilities, we may not be able to fulfill our obligations to deliver power or to construct the project or we may be required to pay liquidated damages.
Changes in interest rates and debt covenants and increases in turbine and generator prices and construction costs may result in our proposed projects not being economically feasible.
Increases in interest rates and changes in debt covenants may reduce the amounts that we can borrow, reduce the cash flow, if any, generated by our proposed projects, and increase the equity required to complete the construction of our proposed projects. The cost of wind turbines, generators and construction costs have increased significantly over the last four years. Further increases may increase the cost of our proposed projects to the point that such projects are not feasible given the prices utilities are willing to pay. There can be no assurance that we will be able to negotiate power purchase agreements with sufficiently profitable electricity prices in the future.
We may not be able to secure power purchase agreements.
We may not be able to secure power purchase agreements for our proposed projects. In the event that we do secure power purchase agreements, if we fail to construct our proposed projects in a timely manner, we may be in breach of our power purchase agreements and such agreements may be terminated.
Our smaller modular HTR may not achieve projected performance, cost, or operational timelines, and delays in commissioning or interconnection could materially and adversely affect our business, financial condition, results of operations, and prospects.
The Company’s smaller modular HydroThermal Reactor is estimated to cost less than $1.5 billion and is designed to be constructed in approximately 12 to 15 months. These cost and construction timeline estimates are based on current engineering designs, anticipated material and labor costs, and assumptions about regulatory and permitting processes, all of which are subject to significant uncertainty. Actual costs could substantially exceed our estimates due to factors including, but not limited to, increases in material, equipment, and labor costs, supply chain disruptions, unforeseen engineering or design challenges, and changes in applicable building codes, water permitting requirements, or other regulatory standards. Construction timelines may similarly be extended by adverse weather conditions, contractor performance shortfalls, work stoppages, permitting delays, or other unforeseen events.
The smaller HTR is projected to produce 150 MW to 200 MW of reliable power on a continuous 24/7/365 basis when connected to a co-located data center. However, we have not yet constructed or operated a smaller HTR at commercial scale, and there can be no assurance that the reactor will achieve these projected power output levels. Actual energy output will depend on site-specific meteorological conditions, the performance of key operating systems—including the water injection system, turbine and hydraulic pressure system, generator production system, and water collection and pumping system—and other factors that may differ materially from our current assumptions. Meteorological data collected during the development phase may differ from actual conditions encountered after the reactor is erected, and short-term variations in weather patterns could result in lower-than-anticipated energy production.
Although we anticipate that each smaller HTR will be immediately operational upon completion of construction through integrated testing of individual operating systems during the construction process, the timeline to full operational status could be affected by a number of factors. These factors include delays associated with final local inspections, interconnection testing with co-located facilities such as data centers or hydrogen production plants, and unforeseen commissioning challenges, any of which could add several months or longer to the projected timeline. The connection of the smaller HTR to a data center is expected to be performed by third parties, and we will have limited control over the timing, quality, or success of such interconnection work. If third-party interconnection is delayed or fails to meet technical requirements, the reactor may be unable to deliver power as planned, which could impair our ability to satisfy off-take agreements or generate anticipated revenues.
In addition, the smaller HTR is designed to maximize production during the coolest hours of the year and to support a base load required by data centers, which limits its optimal operating conditions to cooler and more damp climates. While the Company believes the smaller HTR can be adapted to a broader range of climates than the larger HTR, there can be no assurance that the reactor’s design will perform as expected across all targeted geographies. Any failure to achieve projected performance levels, cost targets, or operational timelines for the smaller HTR could result in forfeited deposits, lost revenue opportunities, breach of contractual commitments, reputational harm, and a material adverse effect on our business, financial condition, results of operations, and prospects.
Increased competition from large, well-capitalized companies in the renewable energy industry could materially and adversely affect our business, financial condition, results of operations, and prospects.
The renewable energy industry is highly competitive, and as renewable energy gains wider acceptance, competition may increase as large, well-capitalized companies enter the business. We face significant competition from large power project developers, including electric utilities and large independent power producers, that have greater project development, construction, financial, human resources, marketing, and management capabilities than the Company. These competitors have established track records of completing projects and may be able to acquire funding more easily to develop and construct projects. They also have established relationships with energy utilities, transmission companies, equipment suppliers, and plant contractors that may make our access to such parties more difficult. In addition to competition from other renewable energy industry participants, we face competition from traditional fossil fuel sources such as natural gas and coal, and other renewable energy sources such as solar, traditional wind, hydro, and geothermal.
Although KiNRG believes that its technological expertise and early entry into the downdraft renewable energy market will provide a degree of competitive protection, there can be no assurance that these advantages will be sufficient to compete effectively against larger, better-resourced competitors. Our HTR technology has not yet been commercially deployed, and established competitors may develop or acquire competing technologies, offer more favorable pricing, or leverage their existing customer relationships to secure off-take agreements or project financing ahead of us. Moreover, our limited operating history, early-stage development, and lack of a demonstrated commercial track record may place us at a competitive disadvantage when pursuing customers, partners, lenders, and investors. If we are unable to compete effectively, our ability to secure project sites, off-take agreements, financing, and market share could be materially impaired, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
We intend to rely on project financing to fund the construction of our HTRs, which is expected to be contingent upon our ability to enter into long-term off-take agreements, and we may be unable to obtain such financing or agreements on acceptable terms or at all.
The Company intends to pursue project financing to fund the construction of both its smaller and large downdraft renewable energy towers (collectively, the “HTRs”). Obtaining such project financing is expected to be contingent upon the Company entering into long-term power purchase agreements (also known as off-take agreements) with creditworthy customers for each project. These agreements would guarantee the purchase volume and price of the energy produced, thereby providing lenders with assurance that any debt associated with the project financing can be serviced and repaid. This method of financing is commonly used for renewable energy projects in the United States; however, there can be no assurance that we will be able to enter into such off-take agreements on favorable terms, or at all, due to factors such as market demand for our energy output, competition from other renewable energy sources, regulatory changes affecting energy markets, or perceptions of the viability and reliability of our downdraft technology.
Each HTR project will seek off-take agreements for its energy, and we anticipate that each project may involve different participants, counterparties, and financing structures. As a result, financing arrangements will need to be negotiated on a project-by-project basis, and there can be no assurance that suitable financing structures will be available for any given project. Even if we secure off-take agreements, project financing may not be available on acceptable terms, or at all. Lenders may require stringent conditions, including high interest rates, significant collateral, or equity contributions, which could increase our overall cost of capital. Economic conditions, such as rising interest rates, inflation, or disruptions in credit markets, could further limit access to financing.
If the Company is required to raise equity capital in connection with project financing, it intends to pursue equity investors for individual HTR projects and may seek assignments of proceeds from available investment tax credits (“ITCs”) or production tax credits (“PTCs”) under the U.S. Internal Revenue Code. However, the availability and value of these tax credits are subject to legislative changes, phase-outs, or elimination, and there is no guarantee that we will qualify for or effectively monetize them. Changes in tax policy, such as those potentially arising from shifts in U.S. federal administration or congressional priorities, could reduce or eliminate these incentives, making our projects less attractive to investors. There can be no assurance that project financing will be available on acceptable terms or at all, or that any required equity capital or tax credits will be obtainable, which could materially impact the Company’s ability to develop and construct its HTRs. If we are unable to obtain sufficient project financing or alternative capital, we may be forced to delay, scale back, or abandon HTR construction projects, which could result in forfeited deposits, lost revenue , to our reputation with partners and customers, and a material effect on our business, financial condition, results of operations, and prospects.
The operation of our proposed projects may be subject to equipment failure.
After the construction of our proposed projects, the electricity produced may be lower than anticipated because of equipment malfunction. Unscheduled maintenance can result in lower electricity production for several months or possibly longer depending on the nature of the outage, and correspondingly, in lower revenues.
Changes in weather patterns may affect our ability to operate our proposed projects.
Meteorological data we collect during the development phase of a proposed project may differ from actual results achieved after the project is erected. While long-term precipitation patterns have not varied significantly, short-term patterns, either on a seasonal or on a year-to-year basis may vary substantially. These variations may result in lower revenues and higher operating losses.
Environmental damage on our properties may cause us to incur significant financial expenses.
Environmental damage may result from the development and operation of our proposed projects. The construction of our proposed initial HTR involves, among other things, land excavation and the installation of concrete foundations. Equipment can be a source of environmental concern, including noise pollution, damage to the soil as a result of oil spillage, and peril to certain migratory birds and animals that live, feed on, fly over, or cross the property. In addition, environmental regulators may impose restrictions on our operations, which would limit our ability to obtain the appropriate zoning or conditional use permits for our project. We may also be assessed significant financial penalties for any environmental damage caused on properties that are leased, and we may be unable to sell properties that are owned. Financial losses and liabilities that may result from environmental damage could affect our ability to continue to do business.
Larger developers have greater resources and expertise in developing and constructing renewable energy projects.
We face significant competition from large power project developers, including electric utilities and large independent power producers that have greater project development, construction, financial, human resources, marketing and management capabilities than the Company. They have a track record of completing projects and may be able to acquire funding more easily to develop and construct projects. They have also established relationships with energy utilities, transmission companies, turbine suppliers, and plant contractors that may make our access to such parties more difficult.
Renewable energy must compete with traditional fossil fuel sources.
In addition to competition from other industry participants, we face competition from fossil fuel sources such as natural gas and coal, and other renewable energy sources such as solar, traditional wind, hydro and geothermal. The competition depends on the resources available within the specific markets. Although the cost to produce clean, reliable, renewable energy is becoming more competitive with traditional fossil fuel sources, it generally remains more expensive to produce, and the reliability of its supply is less consistent than traditional fossil fuel. However, deregulation, legislative mandates for renewable energy, and consumer preference for environmentally more benign energy sources are becoming important factors in increasing the development of alternative energy projects.
The wind and solar energy industry in California is highly competitive since wind and solar play an integral role in the electricity portfolio in California.
KiNRG is investigating the feasibility of locating an HTR in California. Since wind and solar play an integral role in the electricity portfolio in California and wind energy require a significant amount of land resource, the wind and solar energy industry in California is highly competitive. Wind and solar developers compete for leased and owned land with favorable wind characteristics, limited supply of turbines and contractors, and for purchasers and available transmission capacity. There is no guarantee that we will be able to acquire the significant land resources needed to develop projects in California.
Our ability to hire and retain qualified personnel and contractors will be an important factor in the success of our business. Our failure to hire and retain qualified personnel may result in our inability to manage and implement our plans for expansion and growth.
Competition for qualified personnel in the renewable energy industry is significant. To manage growth effectively, we must continue to implement and improve our management systems and to recruit and train new personnel. We may not be able to continue to attract and retain the qualified personnel necessary to carry on our business. If we are unable to retain or hire additional qualified personnel as required, we may not be able to adequately manage and implement our plans for expansion and growth.
The market in which we operate is rapidly evolving and we may not be able to maintain our profitability.
As a result of the emerging nature of the markets in which we plan to compete and the rapidly evolving nature of our industry, it is particularly difficult for us to forecast our revenues or earnings accurately. Our current and future expense levels are based largely on our investment plans and estimates of future revenues and are, to a large extent, fixed. We may not be able to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues relative to our planned expenditures would have an immediate adverse effect on our business, results of operations and financial condition.
We depend on key personnel, the loss of which could have a material adverse effect on us.
Our performance depends substantially on the continued services and on the performance of our senior management and other key personnel. Our ability to retain and motivate these and other officers and employees is fundamental to our performance. The unexpected loss of services of one or more of these individuals could have a material adverse effect on us. We are not protected by a material amount of key-person or similar life insurance covering our executive officers and other directors. We have entered into employment agreements with our executive officers, but the non-compete period with respect to certain executive officers could, in some circumstances in the event of their termination of employment with the Company, end prior to the employment term set forth in their employment agreements.
Certain legal proceedings and regulatory matters could adversely impact our results of operations.
We may be subject from time to time to various claims involving alleged breach of contract claims, intellectual property and other related claims, and other litigations. Certain of these lawsuits and claims, if decided adversely to us or settled by us, could result in material liability to the Company or have a negative impact on the Company’s reputation or relations with its employees, customers, licensees or other third parties. In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings could result in substantial costs and may require that the Company devotes substantial time and resources to defend itself. Further, changes in governmental regulations in the U.S. could have an adverse impact on our results of operations.
The Company’s insurance coverage may not be adequate.
If the Company was held liable for amounts exceeding the limits of its insurance coverage in place at any given time or for claims outside the scope of that coverage, its business, results of operations and financial conditions could be materially and adversely affected.
Our business is subject to extensive governmental regulation that could reduce our profitability, limit our growth, or increase competition.
Our planned businesses are subject to extensive federal, state and foreign governmental regulation and supervision, which could reduce our potential profitability or limit our potential growth by increasing the costs of regulatory compliance, limiting or restricting the products or services we plan to sell or the methods by which we plan to sell our products and services, or subjecting our businesses to the possibility of regulatory actions or proceedings.
In all jurisdictions the applicable laws and regulations are subject to amendment or interpretation by regulatory authorities. Generally, such authorities are vested with relatively broad discretion to grant, renew and revoke licenses and approvals and to implement regulations. Accordingly, we may be precluded or temporarily suspended from carrying on some or all of our planned activities or otherwise fined or penalized in a given jurisdiction. No assurances can be given that our business will be allowed to be, or continue to be, conducted in any given jurisdiction as we plan.
Competition resulting from these developments could cause the supply of, and demand for, our planned products and services to change, which could adversely affect our results of operations and financial condition.
Our planned operations will expose us to various international risks that could adversely affect our business.
We are seeking to reach agreements for the provision of key aspects of our business with foreign operators. Accordingly, we may become subject to legal, economic and market risks associated with operating in foreign countries, including:
the general economic and political conditions existing in those countries;
devaluations and fluctuations in currency exchange rates;
imposition of limitations on conversion of foreign currencies or remittance of dividends and other payments by foreign subsidiaries;
imposition or increase of withholding and other taxes on remittances and other payments by subsidiaries;
hyperinflation in certain foreign countries;
imposition or increase of investment and other restrictions by foreign governments;
longer payment cycles;
greater difficulties in accounts receivable collection; and
the requirement of complying with a wide variety of foreign laws.
Our ability to conduct business in foreign countries may be affected by legal, regulatory, political and economic risks.
Our ability to conduct business in foreign countries is subject to risks associated with international operations. These include:
the burdens of complying with a variety of foreign laws and regulations;
unexpected changes in regulatory requirements; and
new tariffs or other barriers in some international markets.
We are also subject to general political and economic risks in connection with our international operations, including:
political instability and terrorist attacks;
changes in diplomatic and trade relationships; and
general economic fluctuations in specific countries or markets.
We cannot predict whether quotas, duties, taxes, or other similar restrictions will be imposed by the U.S. or foreign countries upon our business in the future, or what effect any of these actions would have on our business, financial condition or results of operations. Changes in regulatory, geopolitical, social or economic policies and other factors may have a material adverse effect on our business in the future or may require us to significantly modify our current business practices.
The occurrence of natural or man-made disasters could adversely affect our financial condition and results of operations.
We are exposed to various risks arising out of natural disasters, including earthquakes, hurricanes, fires, floods and tornadoes, and pandemic health events such as COVID, as well as man-made disasters, including acts of terrorism and military actions. The continued threat of terrorism and ongoing military actions may cause significant volatility in global financial markets, and a natural or man-made disaster could trigger an economic downturn in the areas directly or indirectly affected by the disaster. These consequences could, among other things, result in a decline in business and increased claims from those areas. Disasters also could disrupt public and private infrastructure, including communications and financial services, which could disrupt our normal business operations.
Our inability to successfully recover should we experience a disaster or other business continuity problem could cause material financial loss, loss of human capital, regulatory actions, reputational harm or legal liability.
Should we experience a local or regional disaster or other business continuity problem, such as an earthquake, hurricane, terrorist attack, pandemic, security breach, power loss, telecommunications failure or other natural or man-made disaster, our continued success will depend, in part, on the availability of our personnel, our office facilities, and the proper functioning of our computer, telecommunication and other related systems and operations.
Our operations are dependent upon our ability to protect our technology infrastructure against damage from business continuity events that could have a significant disruptive effect on our operations. We could potentially lose operation of our projects or experience material adverse interruptions to our operations or delivery of services to our clients in a disaster recovery scenario.
We plan to regularly assess and take steps to improve upon our existing business continuity plans and key management succession. However, a disaster on a significant scale or affecting certain of our key operating areas within or across regions, or our inability to successfully recover should we experience a disaster or other business continuity problem, could materially interrupt our business operations and cause material financial loss, loss of human capital, regulatory actions, reputational harm, damaged client relationships or legal liability.
Assertions by a third party that the Company infringes its intellectual property could result in costly and time-consuming litigation, expensive licenses or the inability to operate as planned.
The energy and technology industries are characterized by the existence of a large number of patents, copyrights, trademarks and trade secrets and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. There is a possibility of intellectual property rights claims against the Company. The Company’s technologies may not be able to withstand third-party claims or rights restricting their use. Companies, organizations or individuals, including the Company’s competitors, may hold or obtain patents or other proprietary rights that would prevent, limit or interfere with the Company’s ability to provide the Company’s services or develop new products or services, which could make it more difficult for the Company to operate the Company’s business. Any litigation or claims, whether or not valid, could be time-consuming, expensive to or settle and could the Company’s managements’ attention and financial resources. If the Company is determined to have upon a third party’s intellectual property rights, the Company may be required to pay substantial , stop using technology found to be in of a third party’s rights or seek to obtain a license from the holder of the intellectual property right, which license may not be available on reasonable terms, or at all, and may significantly increase the Company’s operating expenses or may require the Company to restrict the Company’s business activities in one or more respects.
The Company may also be required to develop alternative non-infringing technology that could require significant effort and expense or may not be feasible. In the event of a successful claim of infringement against the Company and the Company’s failure or inability to obtain a license to the infringed technology, the Company’s business and results of operations could be harmed.
The Company’s business will be adversely affected if the Company is unable to protect its intellectual property rights from unauthorized use or infringement by third parties.
The Company intends to rely on a combination of trademark, patent, trade secret and copyright law, license agreements and contractual restrictions, including confidentiality agreements, invention assignment agreements and non-disclosure agreements with employees, contractors and suppliers, to protect the Company’s proprietary rights, all of which provide only limited protection. The Company believes its intellectual property rights are valuable, and any inability to protect them could reduce the value of the Company’s products, services and brand. Various events outside of the Company’s control pose a threat to the Company’s intellectual property rights as well as to the Company’s products and services. The efforts the Company has taken to protect its proprietary rights may not be sufficient or effective, may not be enforceable or may be capable of being effectively circumvented.
Any significant impairment of the Company’s intellectual property rights could harm the Company’s business or the Company’s ability to compete. Also, protecting the Company’s intellectual property rights is costly and time consuming. The Company also seeks to maintain certain intellectual property as trade secrets. The secrecy could be compromised by outside parties, or by the Company’s employees, which would cause the Company to lose the competitive advantage resulting from these trade secrets.
Risks Related to Ownership of our Common Stock
We are a “smaller reporting company” and we have elected to comply with certain reduced reporting and disclosure requirements which could make its common stock less attractive to investors.
We are a “smaller reporting company,” as defined in the Regulation S-K of the Securities Act of 1933, as amended, which allows us to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not smaller reporting companies, including (1) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, and (2) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. In addition, as an emerging growth company, we are only required to provide two years of audited financial statements in this document. As a result of these reduced reporting and disclosure requirements our financial statements may not be comparable to SEC registrants not classified as emerging growth companies.
We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until we are no longer a “smaller reporting company”. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal controls in the future.
Investors may find our common stock less attractive as a result of our election to utilize these exemptions, which could result in a less active trading market for our common stock and/or the market price of our common stock may be more volatile.
A sale or perceived sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
All of our executive officers and directors and certain of our stockholders and warrant holders have agreed not to sell shares of our common stock for a period of 180 days following the effectiveness of our Registration Statement on Form 10, subject to extension under specified circumstances. Common stock subject to these lock-up agreements will become eligible for sale in the public market upon expiration of these lock-up agreements, subject to limitations imposed by Rule 144 under the Securities Act of 1933, as amended. If our stockholders sell substantial amounts of our common stock in the public market, the market price of our common stock could fall. Moreover, the perceived risk of this potential dilution could cause stockholders to attempt to sell their shares and investors to short our common stock. These sales also may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
Market and economic conditions may negatively impact our business, financial condition and share price.
Concerns over medical epidemics, energy costs, geopolitical issues, the U.S. mortgage market and a deteriorating real estate market, unstable global credit markets and financial conditions, and volatile oil prices have led to periods of significant economic instability, diminished liquidity and credit availability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower global economic growth, increased unemployment rates, and increased credit defaults in recent years. Our general business strategy may be adversely affected by any such economic downturns (including the current downturn related to the current COVID-19 pandemic), volatile business environments and continued or economic and market conditions. If these conditions continue to or do not , it may make any necessary debt or equity financing more to complete, more , and more dilutive. to secure any necessary financing in a timely manner and on terms could have a material effect on our growth strategy, financial performance, and share price and could require us to or development or commercialization plans.
If securities or industry analysts do not publish research or reports, or publish unfavorable research or reports about our business, our stock price and trading volume may decline.
The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us, our business, our markets and our competitors. We do not control these analysts. If securities analysts do not cover our common stock, the lack of research coverage may adversely affect the market price of our common stock. Furthermore, if one or more of the analysts who do cover us downgrade our stock or if those analysts issue other unfavorable commentary about us or our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fails to regularly publish reports on us, we could lose visibility in the market and interest in our stock could decrease, which in turn could cause our stock price or trading volume to decline and may also impair our ability to expand our business with existing customers and attract new customers.
Because certain of our stockholders control a significant number of shares of our common stock, they may have effective control over actions requiring stockholder approval.
Our directors, executive officers, and their respective affiliates, will beneficially own approximately 46.3% of our outstanding shares of common stock. As a result, these stockholders, acting together, could have the ability to have significant control over the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these stockholders, acting together, would have the ability to control the management and affairs of our company. Accordingly, this concentration of ownership might harm the market price of our common stock by:
delaying, deferring or preventing a change in corporate control;
impeding a merger, consolidation, takeover or other business combination involving us; or
discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.
Our share price may be volatile, and you may lose all or part of your investment.
The executive officers, directors, and their respective affiliated entities will in the aggregate beneficially own approximately 46.3% of our outstanding common stock. As a result, these stockholders, acting together, could have significant control over matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions. Corporate actions might be taken even if other stockholders oppose them. This concentration of ownership might also have the effect of delaying or preventing a corporate transaction that other stockholders may view as beneficial.
We do not intend to pay dividends for the foreseeable future, which could reduce the attractiveness of our stock to some investors.
We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases. In addition, we may incur debt financing to further finance our operations, the governing documents of which may contain restrictions on our ability to pay dividends.
Provisions in our articles of incorporation and bylaws and Nevada law may discourage, delay or prevent a change of control of our company and, therefore, may depress the trading price of our stock.
Our articles of incorporation and bylaws contain provisions that may discourage, delay or prevent a change of control that our stockholders may consider favorable. These provisions:
authorize the issuance of “blank check” preferred stock that our board of directors could issue to increase the number of outstanding shares to discourage a takeover attempt;
prohibit stockholder action to elect or remove directors by majority written consent;
provide that the board of directors is expressly authorized to make, alter or repeal our bylaws;
prohibit our stockholders from calling a special meeting of stockholders; and
establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
We may be subject to securities litigation, which is expensive and could divert management attention.
In the past companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could seriously hurt our business. Any adverse determination in litigation could also subject us to significant liabilities.
If we fail to comply with the rules under the Sarbanes-Oxley Act of 2002 related to accounting controls and procedures in the future, or, if we discover additional material weaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be more difficult. Our management determined that our disclosure controls and procedures and internal controls were ineffective as of December 31, 2025 and 2024 and if they continue to be ineffective could result in material misstatements in our financial statements.
If we fail to comply with the rules under the Sarbanes-Oxley Act related to disclosure controls and procedures in the future, or, if we discover material weaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be more difficult. Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting. In connection with the audit of our consolidated financial statements for the years ended December 31, 2025 and 2024, our management concluded that the Company had material weaknesses in its internal controls because we did not have adequately designed internal controls to ensure the timely preparation and review of the accounting for certain complex, non-routine transactions by those with appropriate technical expertise, which was necessary to provide reasonable assurance that the Company’s consolidated financial statements and related disclosures would be prepared in accordance with generally accepted accounting principles in the United States of America. In addition, we did not have adequately designed and documented financial close and management review controls to properly detect and prevent certain accounting and disclosures in the financial statements and related footnotes. We intend to invest as soon as practicable in resources to create a larger finance function with additional personnel to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a of management’s time and attention from revenue-generating activities to compliance activities. If additional material or significant are discovered or if we otherwise to and maintain the adequacy of our internal control, we may not be to ensure that we can conclude on an ongoing basis that we have internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, internal controls are necessary for us to produce reliable financial reports and are important to helping prevent financial . If we cannot provide reliable financial reports or prevent , our business and operating results could be , investors could confidence in our reported financial information, and the trading price of our common stock could drop significantly.
We may not qualify for OTC Market inclusion, and therefore you may be unable to sell your shares.
We believe that our common stock will become eligible for quotation on the OTC Market. No assurances can be given, however, that this eligibility will be granted. OTC Market eligible securities include securities not listed on a registered national securities exchange in the United States and that are also required to file reports pursuant to Section 13 or 15(d) of the Securities Act of 1933, as amended (the “Securities Act”), and require that the company be current in its periodic securities reporting obligations.
Among other matters, in order for our common stock to become OTC Market eligible, a broker/dealer member of the Financial Industry Regulatory Authority (“FINRA”), must file a Form 211 with FINRA and commit to make a market in our securities once the Form 211 is approved by FINRA. As of the date of this Annual Report on Form 10-K, a Form 211 has not been filed with FINRA by any broker/dealer. If for any reason our common stock does not become eligible for quotation on the OTC Market or a public trading market does not develop, purchasers of shares of our common stock may have difficulty selling their shares should they desire to do so. If we are unable to satisfy the requirements for quotation on the OTC Market, any quotation of our common stock would be conducted in the “Pink Sheets” market. As a result, a purchaser of our common stock may find it more difficult to dispose of, or to obtain accurate quotations as to the price of their shares.
Our common stock may be considered a “penny stock,” and thereby be subject to additional sale and trading regulations that may make it more difficult to sell. Further, if our common stock is considered a “penny stock,” the protection provided by the federal securities laws relating to forward looking statements would not apply to us.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The OTC Market does not meet such requirements and if the price of our common stock is less than $5.00, our common stock may be deemed a penny stock. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that prior to effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares once our common stock is publicly traded.
Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, we may not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading. Such an action could hurt our financial condition.
FINRA sales practice requirements may also limit your ability to buy and sell our common stock, which could depress the price of our shares.
FINRA rules require broker-dealers to have reasonable grounds for believing that an investment is suitable for a customer before recommending that investment to the customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status and investment objectives, among other things. Under interpretations of these rules, FINRA believes that there is a high probability such speculative low-priced securities will not be suitable for at least some customers. Thus, FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our shares once publicly traded, have an adverse effect on the market for our shares, and thereby depress our share price.
