Item 1A. RISK FACTORS
Investing in our securities involves significant risks, including the potential loss of all or part of your investment. These risks could materially affect our business, financial condition and results of operations and cause a decline in the market price of our common stock. You should carefully consider all of the risks described in this Annual Report, in addition to the other information contained in this Annual Report, before you make an investment in our securities. In addition to other matters identified or described by us from time to time in filings with the SEC, there are several important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or results that are reflected from time to time in any forward-looking statement.
Summary Risk Factors
The following is a summary of the principal risks that could adversely affect our business, operations and financial results. Such risks are discussed more fully below and include, but are not limited to, risks related to:
Our history of losses and our ability to achieve and/or sustain profitability in the future and management’s conclusion that there is substantial doubt about our ability to continue as a going concern;
Significant fluctuations in our operating results, and the resulting difficulty in predicting our operating results;
Our future growth being dependent upon demand for our products and services;
Our ability to compete successfully against current and future competitors;
Volatility of demand in our industries;
Our sales cycle, which can be long and unpredictable, which may make it difficult to project when, if at all, we will obtain new customers and generate revenue from those customers;
Our ability to keep pace with technological advances and dependence on advances in technology by other companies;
Our ability to predict the size of the markets for our current and future products;
The continuing emergence of the market for heavy-lift drones and the failure of this market to scale as expected;
Our ability to reduce and adequately control the costs and expenses associated with operating our business, including our material and production costs;
Our ability to manage our anticipated growth effectively, which will affect our ability to execute our business plan, maintain high levels of service and adequately address competitive challenges;
Unfavorable conditions in the global economy, inflation and high interest rates and capital market liquidity issues;
Our dependence on our Chief Executive Officer and management team, retaining and attracting qualified management, key employees and technical personnel and expanding our sales and marketing capabilities;
Our management team’s limited experience in operating as a public company;
Forecasts of market growth that may prove to be inaccurate, and our ability to grow our business at similar rates or at all;
Our acquisition of complementary business and technologies may disrupt our operations and adversely affect our operating results, and we may not achieve the anticipated benefits of such acquisitions;
The increased competitive, operational, legal and regulatory risks posed by the expansion of our business strategy into the AI infrastructure market;
A product safety failure, quality issue or other failure affecting our or our customers’ or suppliers’ products or systems, which could seriously harm our business;
Our dependence on third parties to deliver raw materials, parts, components and services in adequate quantity in a timely manner and at reasonable prices, quality levels, and volumes acceptable to us;
The possibility that the facilities or operations of our third-party providers could be damaged or adversely affected as a result of disasters or unpredictable events;
Our dependence on information technology and the possibility that any breakdown, interruption or breach of our information technology systems could subject us to liability or interrupt the operation of our business;
Harm to our brand image that could result from the failure of our suppliers to use ethical business practices and comply with applicable laws and regulations;
The success of our strategic relationships with third parties, our ability to identify and form adequate strategic relationships in the future and the failure to realize or the delayed realization of anticipated benefits from such relationships;
The ability of our suppliers to scale their zero-emission vehicle manufacturing and assembling processes effectively and quickly from low volume production to high volume production;
Our exposure to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims;
The possibility of being compelled to undertake product recalls;
Table of Contents
The adequacy of our warranty reserves to cover future warranty claims;
The adequacy of our insurance strategy to protect us from all business risks;
Our ability to design, develop, market and sell other product offerings that address additional market opportunities;
The availability and amounts of government subsidies and incentives and the application of regulations that encourage conversion to EVs;
The dependence of our medical supplies segment on a single customer;
Our exposure to substantial regulations and unfavorable changes in such regulations;
Vehicle dealer and distribution laws, which could adversely affect our ability to sell our commercial zero-emission EVs;
Environmental laws and regulations that could impose substantial costs upon us and cause delays in opening our sales, service and assembly facilities;
Failure to protect our intellectual property rights, which could impair our ability to protect our proprietary technology;
Our exposure to claims of infringement of another party’s intellectual property rights;
The availability of additional capital on acceptable terms, if at all, to support business growth;
Our ability to maintain effective internal control over financial reporting and effective disclosure controls and procedures;
Our ability to maintain compliance with Nasdaq continued listing requirements and to rectify any deficiencies;
Our ability to utilize a significant portion of our net operating loss or research and development tax credit carryforwards;
Volatility in the price of our common stock, which could result in substantial losses for our stockholders;
Securities or industry analysts not publishing research or publishing inaccurate or unfavorable research about our business;
Our ability to meet our publicly announced guidance or other expectations about our business;
Our intent to not pay dividends for the foreseeable future; and
Provisions in our charter documents and under Delaware law that could discourage a takeover that stockholders may consider favorable.
Table of Contents
Risks Related to Our Business
We have a history of losses and we may not achieve and/or sustain profitability in the future.
For the years ended December 31, 2025 and 2024, we incurred net losses of $39.1 million and $8.8 million, respectively. The 2025 net loss included approximately $13.4 million of non-cash goodwill impairment charges and impairment of intangibles. As of December 31, 2025, we had negative working capital of approximately $9.8 million and an accumulated deficit of approximately $112.6 million. To date, we have financed our operations primarily through capital raises from issuing common stock. We may not achieve profitability in the future as we anticipate that our operating expenses will increase significantly in the foreseeable future as we:
make investments required to move our operations to our new corporate headquarters and manufacturing facility in Houston, Texas;
successfully develop and commercially market new products and services;
design, develop and manufacture our light to medium to heavy-duty fleet vehicles and their components;
acquire and maintain market share in our EVs and drones segments;
achieve and manage growth in our operations;
keep pace with technological developments;
timely address the increasingly sophisticated needs of our customers, including as a result of changes in government regulation related to our products and services;
increase our sales and marketing to acquire new customers; and
increase our general and administrative functions to support our growing operations.
These efforts may prove more expensive than we currently anticipate and we may not succeed in increasing our revenue sufficiently to offset these higher costs. Even if we are successful in generating revenue and increasing our customer base, we may not become profitable in the future or may be unable to maintain any profitability achieved if we fail to increase our revenue and manage our operating expenses or if we incur unanticipated liabilities. Even if our revenue increases, we may not be able to sustain the rate of revenue growth. Revenue growth may be slower than anticipated or revenue may decline for a number of reasons, including continued problems accessing various incentive programs to assist our customers with their purchase of our vehicles, recent elimination of certain federal and state incentive programs, lack of demand for our products and services, increasing competition, lengthening sales cycles, decelerating growth of, or declines in, our overall market, or our failure to capitalize on growth opportunities or to introduce new offerings. Any failure by us to achieve and maintain revenue or profitability could cause the price of our common stock to decline.
Management has concluded that there is substantial doubt about our ability to continue as a going concern.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As of December 31, 2025, we had cash and cash equivalents of $0.4 million and negative working capital of $9.8 million. To date, we have financed our operations primarily through capital raises from issuing common stock. We believe that our existing cash and cash equivalents may not be sufficient to allow us to operate for the next 12 months due to our current and potential liabilities. We may need to raise additional capital through equity or debt issuances. There can be no assurance that any required future financing can be successfully completed on a timely basis or on terms acceptable to us. Based on these circumstances, management has determined there is substantial doubt about our ability to continue as a going concern.
The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations.
We may experience quarterly fluctuations in our operating results due to a number of factors, many of which are outside our control, which make our future results difficult to predict and could cause our operating results to fall below expectations.
Additionally we expect our period-to-period operating results to vary based on our operating costs, which we anticipate will increase significantly in future periods as we, among other things, develop and commercially market new products and services, open new design, sales and service facilities, hire additional personnel, increase our travel and operational budgets, increase our facility costs, hire and train service personnel, increase our sales and marketing activities, and increase our general and administrative functions to support our growing operations. As a result comparing our operating results, on a period-to-period basis may not be meaningful. You should not consider our past results in any projected growth rate or as indicative of our future performance. We have limited ability to forecast our future revenue, costs and expenses and, as a result, our operating results may from time to time fall below our estimates.
In addition, recent changes to our business model as a result of the Maddox Acquisition (as defined under Item 8, Part II of this Annual Report), the addition of our drone segment and the introduction of our initiative to develop high-performance, energy-integrated AI compute infrastructure make it difficult to evaluate our current business and our future prospects. We have limited insight into other trends that may emerge and affect our business. Our operating results may not meet expectations of equity research analysts or investors. If any of this occurs, the trading price of our common stock could decline, either suddenly or over time.
Our future growth is dependent upon demand for our products and services in markets that are rapidly evolving.
Our growth is highly dependent upon the market acceptance of, and we are subject to an elevated risk of any reduced demand for, our products and services, including the commercial adoption of zero-emission trucks and other fleet vehicles and heavy lift drones. We are also developing, but have not yet commercialized, our high-performance, energy-integrated AI compute infrastructure. If any of these markets does not develop as we expect or develops slower than expected, our business, prospects, financial condition and operating results will be harmed, and we may need to raise additional capital. Each of these markets is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, frequent new technological and product announcements and changing consumer demands and behaviors. Factors that may influence the market acceptance of our products include:
perceptions about product quality, safety design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of any product ;
perceptions about the limitations in the technology in our products;
Table of Contents
perceptions about product safety in general, in particular safety issues that may be attributed to the use of advanced technology;
for our EVs, the availability of alternative fuel vehicles, including competitive vehicles and improvements in the fuel economy of the internal combustion engine may cause a slow-down in the demand to switch to zero-emission electric vehicles;
the availability of service for our products;
for our EVs, the environmental consciousness of owners of diesel- and gasoline-powered buses, truck and other fleet vehicles;
for our EVs, changes in the cost of oil and gasoline and perceptions about and the actual cost of alternative fuel;
government regulations and the availability of incentives for our EVs and a change in the administration and the legislation and regulations of federal and state governments applicable to our products;
access to charging stations for our EVs, standardization of electric vehicle charging systems and perceptions about convenience and cost to charge an electric vehicle;
the availability of rebates to purchase and operate EVs or future regulation requiring increased use of zero-emission or hybrid vehicles; and
macroeconomic factors such as, among other things, inflation and high interest rates which could diminish our ability to access the capital markets for funding our business.
To the extent that we are not able to build our products in accordance with customer expectations, our future sales could be harmed.
We may also become subject to regulations that require us to alter the design of our products, which could negatively impact consumer interest in our products.
The influence of any of the factors described above may cause current or potential customers not to purchase our electric vehicles or heavy lift drones, as applicable, which would materially adversely affect our business, operating results, financial condition and prospects.
We may not be able to compete successfully against current and future competitors.
The market for commercial zero-emission EVs is rapidly evolving and characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, frequent new vehicle announcements and changing consumer demands and behaviors.
Similarly, the UAV and drone industry is highly competitive and rapidly evolving, particularly in the areas of defense, public safety, industrial inspection, and autonomous logistics. Once we begin distributing our heavy-lift, industrial-grade drone platforms designed for agricultural, fire suppression, and forestry applications, we will compete with both legacy agricultural drone companies and newer drone-focused entrants. We expect this competition to intensify as regulatory pathways for UAVs and drones become more defined and commercial drone applications expand globally.
Most of our existing and potential competitors have substantially greater financial resources, more extensive engineering, manufacturing, marketing and customer service and support capabilities, longer operating histories and greater name recognition than we do. They may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products. Particular to our drone segment, our competitors may be able to provide customers with different or greater capabilities or benefits than we can provide in areas such as technical qualifications, past contract performance, geographic presence, price and the availability of key professional personnel, including those with security clearances. Virtually all of our competitors have more extensive customer bases and broader customer and industry relationships than we do. Our competitors may be in a stronger position to respond quickly to new technologies and may be able to design, develop, market and sell their products more effectively. As a result, our competitors may be able to compete more aggressively and sustain that competitive advantage over a longer period of time than we can. Each of these competitors has the potential to capture market share in our target market, which could have an adverse effect on our position in our industry and on our business and operating results. In order to secure contracts successfully when competing with larger, well-financed companies, we may be forced to agree to contractual terms that provide for lower aggregate payments to us over the life of the contract, which could adversely affect our margins.
We expect competition in the EVs industry to intensify in the future in light of anticipated increased demand for alternative fuel vehicles , continued globalization , and consolidation in the worldwide automotive industry as well as recent elimination of certain federal and state incentives for EVs. Increased competition may lead to lower vehicle unit sales and increased inventory, which may result in further downward price pressure which may materially and adversely affect our business, financial condition, operating results and prospects. There can be no assurances that we will be able to compete successfully in our markets. If our competitors introduce new products or services that compete with or surpass the quality, price or performance of our products or services, we may be unable to satisfy existing customers or attract new customers at the prices and levels that would allow us to generate attractive rates of return on our investment. A disruptive technology advancement in the EV or drone industry by a competitor could adversely affect the sales of our products.
Table of Contents
Demand in our industries is volatile, which may materially and adversely affect our business, prospects, operating results and financial condition.
The markets in which we currently compete and plan to compete in the future have been subject to considerable volatility in demand in recent periods. We have fewer financial resources than more established market participants have to withstand changes in the market and disruptions in demand. Volatility in demand may lead to lower sales of our products and increased inventory, which may result in further downward price pressure and adversely affect our business, prospects, financial condition and operating results. These effects may have a more pronounced impact on our business given our relatively smaller scale and financial resources as compared to many incumbent providers.
Our sales cycle can be long and unpredictable and require considerable time and expense before executing a customer agreement, which may make it difficult to project when, if at all, we will obtain new customers and generate revenue from those customers.
The sales cycle for our business, from initial contact with a potential lead to contract execution and implementation, typically takes significant time and is difficult to predict. Our sales cycle, in some cases, has lasted nine months or more. Our sales efforts involve educating our customers about the use, capabilities and benefits of our products and services. Some of our customers undertake a significant evaluation process that frequently involves not only our products and services but also the offerings of our competitors. This process can be costly and time-consuming. In addition, once a customer is inclined to purchase our products, their ability, in most cases, to issue a purchase order is dependent on being granted funding towards the purchase. It is very difficult for us or our customers to predict the timing of the release of such funding, or if they will receive at all. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these new customers. As part of our sales cycle, we may incur significant expenses before executing a definitive agreement with a prospective customer and before we are able to generate any revenue from such agreement. The substantial time and money spent on our sales efforts may not generate significant revenue. If conditions in the marketplace generally or with a specific prospective customer change negatively, it is possible that no definitive agreement will be executed, and we will be unable to recover any of these expenses. If we are not successful in targeting, supporting and streamlining our sales processes, our ability to grow our business, and our operating results and financial condition may be adversely affected. If our sales cycles lengthen, our future revenue could be lower than expected, which would have an adverse impact on our consolidated operating results and could cause our stock price to decline.
We may not be able to keep pace with technological advances and we depend on advances in technology by other companies
Significant developments in alternative technologies, such as advanced diesel, ethanol and other renewable fuels, fuel cells or compressed natural gas, or improvements in the fuel economy of the internal combustion engine, may materially and adversely affect our business and prospects in ways we do not currently anticipate. For example, compressed natural gas or propane, which are abundant and relatively inexpensive in North America, may emerge as consumers’ preference.
In addition, the drone industry continues to undergo significant changes, primarily due to technological developments. Because of the rapid growth and advancement of technology, shifting consumer tastes and the popularity and availability of other forms of activities, it is impossible to predict the overall effect these factors could have on potential revenue from, and profitability of, the broader drone industry. The development of specialized software and hardware is a costly, complex and time-consuming process, and investments in product development often involve a long wait until a return, if any, can be achieved on such investment. We might face difficulties or delays in the development process that will result in our inability to timely offer products that satisfy the market, which might allow competing products to emerge during the development and certification process.
It is impossible to predict the overall effect these factors could have on our ability to compete effectively in a changing market, and if we are not able to keep pace with these technological advances or to react to changes in customer preferences, then our revenues, profitability and results of operations may be materially adversely affected. However, if we struggle to adapt to an industry-shifting technological advancement or competitor offerings that render our products relatively less attractive or obsolete, it could have a material adverse effect on our business.
Further, we rely on and will continue to rely on components of our products that are developed and produced by other companies over which we have limited control. The commercial success of certain of our planned future products will depend in part on advances in these and other technologies by other companies, and our ability to procure them from such third parties in a timely manner and on economically feasible terms.
The demand for commercial zero-emission EVs depends, in part, on the continuation of current trends resulting from historical dependence on fossil fuels. Extended periods of low diesel or other petroleum-based fuel prices could adversely affect demand for vehicles that utilize our technology, which could adversely affect our business, prospects, financial condition and operating results.
We believe that much of the present and projected demand for commercial zero-emission EVs results from concerns about volatility in the cost of petroleum-based fuel, the dependency of the United States on oil from unstable or hostile countries, government regulations and economic incentives promoting fuel efficiency and alternative forms of energy, as well as the belief that poor air quality and climate change results in part from the burning of fossil fuels. If the cost of petroleum-based fuel decreased significantly, or the long-term supply of oil in the United States improved, the government may eliminate or modify its regulations or economic incentives related to fuel efficiency and alternative forms of energy, as we have seen with the impact of the recent presidential administration. If there is a change in the perception that the burning of fossil fuels does not negatively impact the environment, the demand for commercial zero-emission EVs could be reduced, and our business and revenue may be harmed. Diesel and other petroleum- based fuel prices have been extremely volatile, and we believe this continuing volatility will persist. Lower diesel or other petroleum-based fuel prices over extended periods of time may lower the current perception in government and the private sector that cheaper, more readily available energy alternatives should be developed and produced. If diesel or other petroleum-based fuel prices remain at deflated levels for extended periods of time, the demand for commercial EVs may decrease, which could have an adverse effect on our business, prospects, financial condition and operating results.
Table of Contents
The sizes of the markets for our current and future drone products or AI data compute infrastructure may be smaller than we estimate .
Our addressable market projections for heavy lift drones and AI data compute infrastructure are based on internal models and third-party data. While we believe our assumptions are sound, market conditions, regulatory changes, or customer adoption may diverge from these assumptions. If the actual demand, pricing structure, or target applications for our products fall short of expectations, this could materially impair our growth, financial performance, and operational results.
The market for heavy-lift drones is still emerging and may not scale as expected .
The heavy-lift drone sector, especially in agricultural and forestry applications, is evolving rapidly. The speed and scale of adoption will depend heavily on regulatory frameworks (e.g., the FAA and the European Union Aviation Safety Agency (“EASA”)), operational proof points, and customer confidence in our drone solutions. If this market develops more slowly than anticipated, or if drone-based operations face resistance due to safety, reliability, or cost concerns, our growth may be constrained.
We may not be able to reduce and adequately control the costs and expenses associated with operating our business, including our material and production costs.
If we are unable to reduce and/or maintain a sufficiently low level of cost for designing, manufacturing, marketing, selling, distributing and servicing our products relative to their selling prices, our operating results, gross margins, business and prospects could be materially and adversely impacted. We have made, and will be required to continue to make, significant investments in the design, manufacture, and sales of our products
For example, we incur significant costs related to procuring the materials and components required to build our EVs. As a result, without including the impact of government or other subsidies, incentives, or tariffs, our costs and therefore the purchase prices for our commercial zero-emission electric vehicles currently are higher than the purchase prices for gas or diesel-fueled vehicles with comparable features.
Additionally, in the future we may be required to incur substantial marketing costs and expenses to promote our products, even though our marketing expenses to date have been relatively limited. If we are unable to keep our operating costs aligned with the level of revenues we generate, our operating results, business and prospects will be harmed. Many of the factors that impact our operating costs are beyond our control. For example, global demand from all manufacturers of zero-emission vehicles for the same resources could create shortages and drive the costs of our raw materials and certain components, such as lithium-ion battery cells, to a higher level and reduce profit or create or increase losses. Indeed, if the popularity of zero-emission EVs exceeds current expectations without significant expansion in battery cell production capacity and advancements in battery cell technology, shortages could occur which would result in increased material and component parts costs to us and could also negatively impact our ability to meet production requirements if the batteries were simply not available.
If we fail to manage our anticipated growth effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately.
We have expanded our operations, including through the addition of our drone segment and medical supplies segment and the expansion of our business strategy to include AI data compute infrastructure, in the last several years and anticipate that further expansion will be required to achieve our business objectives. The growth and expansion of our business, combined with the requirements of being a public company, places a continuous and significant strain on our management, operational and financial resources. Our future operating results depend largely on our ability to manage this expansion and growth successfully. Risks that we face in undertaking this expansion include:
establishing sufficient sales, service and service facilities in a timely manner;
forecasting production and revenue;
hiring and training new personnel as our operations scale and as we begin to commercialize our drone solutions and AI data compute infrastructure;
controlling expenses and investments in anticipation of expanded operations;
implementing and enhancing administrative infrastructure, systems and processes; and
addressing new markets.
We may in the future hire a significant number of additional personnel as we expand our current and future product offerings, the timing of which will depend on the success of our sales efforts. Because our products utilize specialized technology, individuals with sufficient training in such technology may not be available to hire, and we may need to expend significant time and expense in training the employees we hire. Competition for individuals with experience designing, manufacturing and servicing our products is intense, and we may not be able to attract, assimilate, train or retain additional highly qualified personnel in the future, which could seriously harm our business and prospects.
In this regard, we will be required to continue to improve our operational, financial and management controls and our reporting procedures and we may not be able to do so effectively. Further, to accommodate our expected growth we must continually improve and maintain our technology, systems and network infrastructure. We therefore may be unable to manage our expenses effectively in the future, which would negatively impact our gross margin or operating expenses in any particular quarter. If we fail to manage our anticipated growth and change in a manner that preserves the quality of our products and services and our ability to deliver in a timely manner, it will negatively affect our brand and reputation and harm our ability to retain and attract customers.
Public health crises and other global health pandemics, epidemics or disease outbreaks could adversely impact our business, results of operation and financial condition.
A significant public health crisis, pandemic or disease outbreak could adversely impact our business as well as those of our suppliers and customers. Any future significant public health crisis could adversely impact the global economy, our industries and the overall demand for our products. In addition, preventative or reactionary measures taken by governmental authorities may disrupt the ability of our employees, suppliers and other business partners to perform their respective functions and obligations relative to the conduct of our business. Our ability to predict and respond to future changes resulting from potential health crises is uncertain as are the ultimate potential impacts on our business. The extent to which a pandemic or similar significant health crises will impact our business in the future is uncertain. In addition, to the extent such significant health crises may adversely affect our business, financial condition, results of operations and cash flows, they may also have the effect of heightening many of the other risk factors in this section.
Table of Contents
Unfavorable conditions in the global economy, rising interest rates and capital market liquidity issues could limit our ability to grow our business and negatively affect our operating results.
Revenue growth and potential profitability of our business depend on the level of demand in the markets we serve. To the extent that weak economic conditions cause our customers and potential customers to freeze or reduce their capital expenditure or operational budgets, particularly those for zero-emission EVs, heavy-lift drones and AI data compute infrastructure, demand for our products and services may be negatively affected. Historically, economic downturns have resulted in overall reductions in these budgets and corresponding spending. If economic conditions deteriorate or do not materially improve, our customers and potential customers may elect to decrease their operational budgets or defer or reconsider product and service purchases, which would limit our ability to grow our business and negatively affect our operating results.
Our business depends on our Chief Executive Officer and management team, retaining and attracting qualified management, key employees and technical personnel and expanding our sales and marketing capabilities.
Our success depends upon the continued service of Mr. Phillip Oldridge, our Chief Executive Officer, as well as other members of our senior management team. It also depends on our ability to continue to attract and retain additional highly qualified management, technical, engineering, operating and sales and marketing personnel. We do not currently maintain key person life insurance policies on any of our employees. Our business also requires skilled technical, engineering, product and sales personnel, who are in high demand and are difficult to recruit and retain. As we continue to innovate and develop our products and services and develop our business, we will require personnel with expertise in these areas. There is increasing competition for talented individuals such as design engineers, manufacturing engineers, and other skilled employees with specialized knowledge in the markets that we serve. This competition affects both our ability to retain key employees and hire new ones. Key talent may leave us due to various factors, such as a very competitive labor market for talented individuals with appropriate industry experience and skills. Our success depends upon our ability to hire new employees in a timely manner and retain current employees. Additionally, we compete with both mature and prosperous companies that have far greater financial resources than we do and start-ups and emerging companies that promise short-term growth opportunities. The loss of any of our key members of management or other highly skilled employees or an inability to attract, retain and motivate additional highly skilled employees required for the planned development and expansion of our business could delay or prevent the achievement of our business objectives and could materially harm our business.
Our management has limited experience with operating a public company. If we fail to manage our growth effectively, we may not be able to develop, produce, make or sell our products or services successfully.
Most of our executive officers have limited experience in the management of a publicly traded company. Management may not successfully or effectively manage a public company that is subject to significant regulatory oversight and reporting obligations under federal securities laws. Management’s limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of our executive officers’ time may be devoted to these activities, which will result in less time being devoted to the management and growth of the Company. Any failure to manage our growth effectively could materially and adversely affect our business, prospects, operating results and financial condition.
Additionally, we may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting required of public companies in the U.S. The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company in the U.S. may require costs greater than expected. Competition for individuals with this experience is intense, and we may not be able to attract, integrate, train, motivate or retain additional highly qualified personnel. The failure to attract, integrate, train, motivate and retain these additional employees could seriously harm our business, prospects, financial condition and operating results.
The forecasts of market growth may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, our business may not grow at similar rates, if at all.
Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates, which may not prove to be accurate. Forecasts relating to the expected growth in zero-emission EVs, electric drivetrain systems and conversions, heavy-lift drones, AI data compute infrastructure and other markets may prove to be inaccurate. Even if these markets experience the forecasted growth, we may not grow our business at similar rates, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties.
We may selectively pursue acquisitions of complementary businesses and technologies, which could divert capital and our management ’ s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and adversely affect our operating results.
We may selectively pursue acquisitions of complementary businesses and technologies that we believe could complement or expand our applications, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential future acquisitions may divert the attention of management and cause us to incur expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.
Table of Contents
In addition, we have limited experience with acquiring other businesses or technologies. If we acquire businesses or technologies, we may not be able to integrate the acquired personnel, operations and technologies successfully, or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including:
inability to integrate or benefit from acquired technologies or services in a profitable manner;
unanticipated costs or liabilities associated with the acquisition;
incurrence of acquisition-related costs;
difficulty integrating the accounting systems, operations and personnel of the acquired business;
difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business;
difficulty converting the customers of the acquired business onto our applications and contract terms, including disparities in the revenue, licensing, support or professional services model of the acquired company;
diversion of management’s attention from other business concerns;
adverse effects to our existing business relationships with business partners and customers as a result of the acquisition;
the potential loss of key employees;
use of resources that are needed in other parts of our business; and
use of substantial portions of our available cash to consummate the acquisition.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to record impairment charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations.
Acquisitions could also result in dilutive issuances of equity securities and/or the incurrence of debt, which could adversely affect our operating results. We may also unknowingly inherit liabilities from acquired businesses or assets that arise after the acquisition and that are not adequately covered by indemnities. In addition, if an acquired business fails to meet our expectations, our operating results, business and financial position may suffer.
Expansion of our business strategy into the AI infrastructure market could increase competitive, operational, legal and regulatory risks to our business in ways we cannot predict.
At the beginning of 2026, we announced a partnership with Azio AI Corporation (“Azio”), an AI infrastructure provider, to pilot a joint immersion-cooled energy infrastructure for AI data centers. As we continue to enter the AI data center market, competitive, operational, legal and regulatory risks may be exacerbated as there is substantial uncertainty about the extent to which AI will result in changes that come with risks that we may not be able to anticipate, prevent, mitigate or remediate.
Through the expansion of our business to include AI data compute infrastructure, we will face new sources of competition and new customer relationships, and our competitors may be larger, have longer operating histories and significantly greater resources than we do. As a result, there can be no assurance that any AI data compute infrastructure solutions we develop will be adopted by the market or be profitable or viable. Our limited experience with respect to the provision of AI data compute infrastructure solutions could limit our ability to successfully execute on this growth strategy or adapt to market changes. If we are unsuccessful in continuing to develop and offer AI data compute infrastructure, our business, results of operations and financial condition could be adversely affected. Further, an increased focus on AI data compute infrastructure could displace or reduce our existing operations related to EVs, medical supplies and drones, which may adversely affect our business, results of operations and financial condition.
Our investments in developing and offering AI data compute infrastructure may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns or other complications that could adversely affect our business, reputation, results of operations or financial condition. The increasing focus on the risks and strategic importance of certain AI or machine learning technologies has already resulted in regulatory restrictions that target products and services capable of enabling or facilitating AI and machine learning and may in the future result in additional restrictions impacting any infrastructure solutions we may develop. Complying with multiple evolving laws, rules and regulations from different jurisdictions related to such new solutions could increase our cost of doing business or may change the way that we operate in certain jurisdictions. We may not be able to adequately anticipate or respond to these evolving laws and regulations, and we may need to expend additional resources to adjust our products in certain jurisdictions if applicable legal frameworks are inconsistent across jurisdictions.
For example, in April 2023, the U.S. Federal Trade Commission, Department of Justice, Consumer Financial Protection Bureau and Equal Employment Opportunity Commission issued a joint statement on AI, demonstrating their interest in monitoring the development and use of automated systems and enforcement of their respective laws and regulations. In December 2025, the presidential administration issued an executive order aimed at challenging and preempting state AI laws that are inconsistent with federal policy with respect to AI regulation and calling for federal AI legislation.
Such future regulatory frameworks, as well as developing regulatory guidance and judicial decisions in this area, may affect our use of AI and our ability to provide and to improve our products, require additional compliance measures and changes to our operations and processes, result in increased compliance costs and potential increases in civil claims against us and could adversely affect our business, financial condition and results of operations.
Furthermore, concerns regarding third-party use of AI for purposes contrary to governmental and societal interests, including concerns relating to the misuse of AI applications, models, and solutions, could result in restrictions on AI products. Any such restrictions could reduce the demand for our intended AI data compute infrastructure, and negatively impact our business, financial condition and operating results, and damage our reputation.
It is also unclear how our strategy to provide infrastructure for customers developing and deploying AI applications could affect the applicability of these existing or proposed regulatory frameworks and other restrictions with respect to any solutions we may offer from time to time. However, it is possible that such regimes will impose obligations on infrastructure providers, such as us, to oversee, monitor or restrict the use of AI systems that are trained or deployed on their systems, and/or to ensure compliance with such regulatory frameworks and other restrictions. If our customers violate existing or proposed regulatory regimes or other restrictions, or if they use our services for unlawful, harmful or non-compliant purposes, we could be subject to regulatory investigations, regulatory fines, reputational damage or contractual liability for any such actions, even if we do not control the customer applications. Further, AI data compute customers increasingly are looking to pass through their regulatory obligations and other liabilities to their outsourced data center providers, and we may not be able to limit our liability or damages in the event of loss suffered by such customers whether as a result of our breach of an agreement or otherwise.
These competitive, operational, legal and regulatory risks are evolving and uncertain and could impact our business in ways we cannot predict. Any of the foregoing could limit our ability to offer, or grow our partnership in, AI data center infrastructure solutions and continue to grow our business, which could have a material adverse effect on prospects, results of operations and financial condition.
Risks Relating to the Design, Supply and Manufacturing of our Products
Due to the nature of our products and services, a product safety failure, quality issue or other failure affecting our or our customers ’ or suppliers ’ products or systems could seriously harm our business
Our products may not perform in a manner that is consistent with our customers’ expectations for a variety of reasons. If our products were to contain defects in design and manufacture that cause them not to perform as expected or that require repair, or experience any other failure to perform as expected, it could harm our reputation and result in delivery delays, product recalls, product liability claims, significant warranty and other expenses, which could have a material adverse impact on our ability to develop, market and sell our products. Technical, mechanical, quality, electronic, and other failures may occur from time to time, whether as a result of manufacturing or design defect, operational process, or production issue attributable to us, our customers, suppliers, partners, third-party integrators, or others. Product design changes and updates could also have associated cost and schedule impacts. In addition, our products could fail as a result of cyber-attacks, such as those that seize control and result in misuse or unintended use of our products, or other intentional acts. A product or system failure, or perceived failure, could lead to negative publicity, a diversion of management attention, and damage to our reputation that could reduce demand for our products and services. It could also result in product recalls and product liability and warranty claims (including claims related to the safety or reliability of our products) and related expenses, other service, repair and maintenance costs, labor and material costs, customer support costs, significant damages, and other costs, including fines and other remedies, and regulatory and environmental liabilities. For example, should we have a significant sale of either new vehicles or re-power conversion kits and a defect (from a supplier-purchased product or internally assembled components) were to be discovered after delivery that could not be corrected in a timely manner, we could suffer an adverse public relations event that harms the company in a way that it may not be able to recover from, or which turns out to be so costly as to cause a significant loss. We may also incur increased costs, delayed payments, reputational harm, or lost equipment or services revenue in connection with a significant issue with a third party’s product with which our products are integrated. Further, our insurance coverage may not be adequate to cover all related costs and we may not otherwise be fully indemnified for them. Any of the foregoing could have a material adverse effect on our competitive position, results of operations, financial condition, or liquidity.
Table of Contents
We are dependent on third parties to deliver raw materials, parts, components and services in adequate quantity in a timely manner and at reasonable prices, quality levels and volumes acceptable to us. Our business, prospects, financial condition and operating results could be adversely affected if we experience disruptions in our supply chain.
Our zero-emission EVs are assembled from components supplied by third parties. For example, we rely on third parties for batteries, traction motors, power electronics, connectors, cables, and metal fabrication for battery storage boxes. As a result, we are particularly dependent on those third parties to deliver raw materials, parts, components and services of adequate quality and quantity in a timely manner and at reasonable prices. Some components of our vehicles and drivetrain systems include materials such as copper, lithium, rare-earth and strategic metals that have historically experienced price volatility and supply interruptions. In addition, we do not currently maintain long-term agreements with our suppliers with guaranteed pricing because we cannot at this time guarantee them adequate volume, which exposes us to fluctuations in component, materials and equipment prices and availability.
There have been significant changes to U.S. trade policies, including tariffs affecting China, Canada and Mexico, and there continues to be significant discussion regarding other potential changes to U.S. trade policies, treaties and tariffs, including the potential for additional tariffs. In addition, retaliatory tariffs have been imposed, and additional retaliatory tariffs are likely. These changes have resulted in uncertain economic and political conditions that have made it difficult for us and our suppliers to accurately forecast and plan future business activities. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States. Any of these factors could depress economic activity and have a material adverse effect on the business and financial condition of our suppliers, which, in turn, would negatively impact us.
Furthermore, currency fluctuations weakening the U.S. dollar against foreign currencies may adversely affect our purchasing power for such raw materials, parts and components and manufacturing equipment from foreign suppliers. Substantial increases in the prices for such raw materials, components and equipment would increase our operating costs and could reduce our margins if we cannot recoup the increased costs through increased prices. We may not be able to recoup these increased costs by increasing the prices of our products.
In cases where we rely on a sole supplier for a component or system, if there is an interruption of supply or increased industry demand it may be difficult for us to substitute one supplier for another, increase the number of suppliers or change one component for another in a timely manner or at all. Additionally, many of our current suppliers are small companies that produce a limited number of specialized products. If any of these suppliers were to go out of business or be acquired by a competitor of ours or any other third party that decides to discontinue our supply relationship, we would need to find an alternative supplier, which we may not be able to do.
This limited supply chain exposes us to multiple potential sources of delivery failure or component shortages for the production of our zero-emission electric products. We may experience delays due to supply chain disruptions with respect to any of our zero-emission electric products we may produce. In addition, our currently ongoing transition from low to high volume production tooling for our zero-emission electric products may take longer than expected, which may adversely impact our short-term financial results.
Furthermore, if we experience significantly increased demand, or need to replace certain existing suppliers, there can be no assurance that additional supplies of component parts will be available when required on terms that are favorable to us, or that any supplier would allocate sufficient supplies to us in order to meet our requirements or fill our orders in a timely manner, or that we could engineer replacement components ourselves.
Changes in our supply chain may result in increased future costs. We have also experienced cost increases from certain of our suppliers in order to meet our quality targets and development timelines as well as due to design changes that we made, and we may experience similar cost increases in the future. Additionally, we are negotiating with existing suppliers for cost reductions, seeking new and less expensive suppliers for certain parts, and attempting to redesign certain parts to make them less expensive to produce. If we are unsuccessful in our efforts to control and reduce supplier costs, our operating results will suffer.
If we encounter unexpected difficulties with our current suppliers, and if we are unable to fill these needs from other suppliers, we could experience production delays, which could have a material adverse effect on our financial condition and operating results.
The inability of these suppliers to deliver, or their refusal to deliver, necessary raw materials, parts and components of our zero-emission drivetrain systems and services in a timely manner at prices, quality levels, and volumes acceptable to us would have a material adverse effect on our financial condition and operating results. Our business, prospects, financial condition and operating results could be adversely affected if we experience disruptions in our supply chain.
Table of Contents
The facilities or operations of our third-party providers could be damaged or adversely affected as a result of disasters or unpredictable events.
If major disasters such as earthquakes, tornadoes, fires, floods, hurricanes, wars, terrorist attacks, computer viruses, pandemics or other events occur, the production facilities of some of our third-party providers may be seriously damaged, or they may have to stop or delay production and shipment of our products. We may also experience downtime due to a third-party provider’s delay in production and shipment of our products due to, among other reasons, their inability to obtain supplies and materials. Either of these delays could have a material adverse impact on our business, operating results and financial condition.
We depend on information technology, and any breakdown, interruption or breach of our information technology systems could subject us to liability or interrupt the operation of our business, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We increasingly depend on information technology systems and infrastructure in connection with the conduct of our business. We must routinely update our information technology infrastructure and our various information technology systems throughout the organization may not continue to meet our current and future business needs. Furthermore, modification, upgrade or replacement of such systems may be costly. In addition, any breakdown, interruption, corruption or unauthorized access to or cyber-attack on these systems could create system disruptions, shutdowns or unauthorized disclosure of confidential information. While we attempt to take appropriate security and cyber-security measures to protect our data and information technology systems and to prevent such breakdowns and unauthorized breaches and cyber-attacks, these measures may not be successful and these breakdowns and breaches in, or attacks on, our systems and data may not be prevented. Such breakdowns, breaches or attacks may cause business interruption and could have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our common stock to decline, and we may suffer financial damage or other losses as a result of lost or misappropriated information.
If our suppliers fail to use ethical business practices and comply with applicable laws and regulations, our brand image could be harmed due to negative publicity.
We do not control our independent suppliers or their business practices and, as such, they may not comply with ethical or legal business practices, such as environmental responsibility, fair wage practices, appropriate sourcing of raw materials, and compliance with child labor laws, among others. A lack of demonstrated compliance could lead us to seek alternative suppliers, which could increase our costs and result in delayed delivery of our products, product shortages or other disruptions of our operations.
Violation of labor or other laws by our suppliers or the divergence of an independent supplier’s labor or other practices from those generally accepted as ethical in the U.S. or other markets in which we do business could also attract negative publicity for us and our brand. This could diminish the value of our brand image and reduce demand for our products and services if, as a result of such violation, we were to attract negative publicity. If we, or others in our industry, encounter similar problems in the future, it could harm our brand image, business, prospects, financial condition and operating results.
Our business success will depend in part on the success of our joint ventures, partnerships and other strategic relationships with third parties. We may not be able to identify adequate strategic relationship opportunities, or form strategic relationships, in the future. The anticipated benefits of potential strategic relationships may not be fully realized or take longer to realize than expected.
Our business success will depend in part on our ability to continue to successfully manage and enter into productive strategic relationships with third parties. For example, at the beginning of 2026, we announced a partnership with Azio to pilot a joint immersion-cooled energy infrastructure for AI data centers. This partnership is at a very early stage, as we have only commenced a pilot of the proposed infrastructure. The success of this partnership will depend, in part, on the successful development of the data center infrastructure, and we may not realize all of the anticipated benefits. Such development may be more difficult, time-consuming, or costly than expected and could result in increased costs, decreases in the amount of expected revenues, and diversion of management's time and energy, which could materially impact our business, operating results, financial condition, and prospects.
In February 2025, we engaged a U.S. drone manufacturer for the manufacture of a U.S.-made heavy-lift drone in accordance with our detailed specifications and, following delivery of the drone, for transfer of the associated intellectual property rights. This initial heavy-lift drone is purpose-built for the agricultural market, with advanced spraying and mapping functionality. As part of our business strategy, following delivery of the model drone, we intend to open our U.S. drone manufacturing facility and commence commercial sales, subject to regulatory approvals. Any delay or failure on the part of our U.S. drone manufacturer to perform, whether due to factors within its control or otherwise, may adversely affect our ability to commercialize and sell our heavy lift drones, thereby adversely affecting our growth and operational results.
The success of any partnership, joint venture or other strategic relationship will depend, in part, on the successful relationship between us and our business partners. A failure to successfully partner, or a failure to realize our expectations for the strategic relationship, including any contemplated exit strategy from such relationship, could materially impact our business, operating results, financial condition, and prospects. These strategic relationships could also be negatively impacted by inflation, supply chain issues, an inability to obtain financing on favorable terms or at all, an inability to market and sell the infrastructure to customers as planned, and development and construction delays.
We also depend on various third parties to provide critical parts for our process. For example, we currently maintain strategic relationships with key manufacturers of components we require for our zero-emission EVs. Maintaining and expanding our strategic relationships with third parties is critical to our continued success. Further, our relationships with these third parties are typically non-exclusive and do not prohibit the other party from working with our competitors. These relationships may not result in additional customers or enable us to generate significant revenue. Identifying suitable business partners and negotiating and documenting relationships with them require significant time and resources. If we are unsuccessful in establishing or maintaining our relationships with these third parties, our ability to successfully sell our products and services, compete in the marketplace or to grow our revenue could be impaired and our operating results would suffer.
While we may be able to establish alternate supply relationships or engineer replacement components for any single source components, we may be unable to do so in the short term, or at all, at prices or costs that are favorable to us. In particular, while we believe that we will be able to secure alternate sources of supply for most of our single sourced components in a relatively short time frame, qualifying alternate suppliers or developing our own replacements for certain highly customized components of our products may be time consuming, costly and may force us to make additional modifications to a product’s design, or at a minimum require us to delay delivery of orders.
We may not be able to identify or secure suitable business relationship opportunities in the future or to ensure that our competitors will not capitalize on such opportunities before we do.
Further, in the future, we may co-invest with other third parties through partnerships, joint ventures, or other entities. These joint ventures could result in our acquisition of non-controlling interests in, or shared responsibility for, managing the affairs of a partnership, joint venture, or other entity. We may be subject to additional risks, including:
we may not have the right to exercise sole decision-making authority regarding the partnership, joint venture, or other entity;
if our partners become bankrupt or fail to fund their share of required capital contributions, we may choose to or be required to contribute such capital;
our partners may have economic, tax, or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our interests or objectives;
our joint venture partners may take actions that are not within our control, which could require us to dispose of the joint venture asset or purchase the partner's interests or assets at an above-market price;
our joint venture partners may take actions unrelated to our business agreement but which reflect poorly on us because of our joint venture relationship;
disputes between us and our partners may result in litigation or arbitration that would increase our expenses and prevent our management from focusing their time and effort on our day-to-day business;
we may in certain circumstances be liable for the actions of our third-party partners or guarantee all or a portion of the joint venture's liabilities, which may require us to pay an amount greater than its investment in the joint venture;
we may need to change the structure of an established joint venture or create new complex structures to meet our business needs or the needs of our partners which could prove challenging; and
a joint venture partner's decision to exit the joint venture may not be at an opportune time for us or in our business interests.
Each of these factors may result in returns on these investments being less than we expect or in losses, and business, operating results, financial condition, and prospects may be adversely affected.
Table of Contents
Our suppliers must scale their zero-emission vehicle manufacturing and assembling processes effectively and quickly from low volume production to high volume production.
Our existing production model utilizing third parties may not be well suited for the high-volume production required to scale our business. We do not know whether we or our existing suppliers will be able to develop efficient, low-cost manufacturing and assembly capability and processes, and reliable sources of component supply that will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes required, to successfully develop our business. Any failure by us or our suppliers to develop such manufacturing and assembly processes and capabilities and reliable sources of component supply within our projected costs and timelines could have a material adverse effect on our business, prospects, operating results and financial condition.
The ability of our suppliers to scale their manufacturing and assembling processes is in part dependent on ours and their supply chain and on our collective ability to execute our decentralized production strategy. Even if we and our suppliers are successful in developing our high-volume manufacturing and assembly capability and processes, and reliable sources of component supply, we do not know whether we will be able to do so in a manner that avoids significant delays and cost overruns, including, as a result of factors beyond our control, such as problems with suppliers and vendors, in time to meet our commercialization schedules or to satisfy the requirements of customers. In addition, certain components we or our third-party suppliers integrate into may not be available on a consistent basis or in large quantities. Our business, prospects, financial condition and operating results could be adversely affected if we or our suppliers experience disruptions in our respective supply chains or if we or they cannot obtain materials of sufficient quality at reasonable prices.
The complexity in our business is expected to continue growing as we introduce new products and services. We have limited experience in simultaneously designing, testing, manufacturing, upgrading, adapting and selling our products as well as limited experience allocating our available resources among the design and production of our products. We are also planning to develop multiple new product lines simultaneously, which will increase the complexity and importance of our execution in establishing the processes, operations and procedures necessary for the commercialization, marketing, sale and distribution of these products. As we add complexity to our product line and introduce new products and services, we may experience unexpected delays.
If we and our suppliers are unable to scale our respective existing assembly processes and systems quickly while maintaining our current quality level, including supply chain constraints and the inability to manage complexity in our business, we may be unable to meet our customers’ vehicle quality and quantity requirements or our forecasted production schedule or lower our cost of sales. As a result, we may not be able to meet our customers’ delivery schedules and could face the loss of customers or be exposed to liability to customers to which we promised delivery, which could adversely affect our business, prospects, financial condition and operating results.
We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.
We may become subject to product liability claims, which could harm our business, prospects, operating results and financial condition if we are not able to successfully defend or insure against such claims. Our industries may experience significant product liability claims and we face inherent risk of exposure to claims in the event our products do not perform as expected or malfunction and personal injury or death results. A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about our products and business and inhibit or prevent commercialization of other future products, which would have a material adverse effect on our brand, business, prospects and operating results. We have product liability insurance on a claims-made basis for all our zero-emission products with appropriate annual limits. However, our insurance may not be sufficient to cover all potential product liability claims. Any lawsuit seeking significant monetary damages either in excess of our coverage, or outside of our coverage, may have a material adverse effect on our reputation, business and financial condition.
We may be compelled to undertake product recalls.
Any product recall in the future may result in adverse publicity, damage our brand and adversely affect our business, prospects, operating results and financial condition. We may at various times, voluntarily or involuntarily, initiate a recall if any of our products or components prove to be defective. Such recalls, voluntary or involuntary, involve significant expense and diversion of management attention and other resources, which would adversely affect our brand image in our target markets and could adversely affect our business, prospects, financial condition and results of operations.
Our warranty reserves may be insufficient to cover future warranty claims, which could adversely affect our financial performance.
If our warranty reserves are inadequate to cover future warranty claims on vehicles that utilize our technology, our business, prospects, financial condition and operating results could be materially and adversely affected. We provide a three-year warranty on parts and workmanship and a five-year warranty on powertrain and batteries with every zero-emission electric product. Most of our warranty offering, with the exception of workmanship, is covered by the component manufacturers’ warranty. In addition, customers have the opportunity to purchase an Extended Service Plan for the period after the end of the standard warranty to cover additional services for an additional three-year period or 100,000 miles, whichever comes first. The warranty is similar to other providers’ warranty programs and is intended to cover all parts and labor to repair defects in material or workmanship in the product. We plan to record and adjust warranty reserves based on changes in estimated costs and actual warranty costs. However, because we have only recently begun delivering our first zero-emission vehicles, and we have extremely limited operating experience with them, we therefore have little experience with warranty claims for these zero-emission vehicles or with estimating warranty reserves. We will monitor our warranty reserves based on our actual warranty claim experience. We may be required to provide for increases in warranty reserves in the future. Our future warranty reserves may not be sufficient to cover all claims or our limited experience with warranty claims may not adequately address the needs of our customers to their satisfaction.
Table of Contents
Our insurance strategy may not be adequate to protect us from all business risks.
We may be subject, in the ordinary course of business, to claims resulting from products liability, employment-related actions, class-action lawsuits, accidents, acts of God and other actions against us. Additionally, our insurance coverage may be insufficient to cover all existing and future claims against us. We may be compelled to expend significant time and resources defending any such claims, and a loss that is uninsured or which exceeds policy limits may require us to pay substantial amounts, which could adversely affect our financial condition and operating results.
If we are unable to design, develop, market and sell other product offerings that address additional market opportunities, our business, prospects and operating results will suffer.
We will need to address additional markets and expand our customer demographic in order to further grow our business. In particular, we have transitioned to target owners of trucks (all classes inclusive of 3–7) and vans between 10,000 pounds GVWR to 19,500 pounds GVWR, commercial fleets, including white fleets of school districts and other fleet users of these vehicles, including government entities. Successfully offering all EVs in this market requires delivering a vehicle with different characteristics than an ICE-powered vehicle at a price that is competitive with other similar vehicles. Because the markets are still growing in their acceptance of our products and demand for our products may be volatile, it is difficult to project increases in market acceptance and our ability to generate sales in volumes as we currently intend. Our failure to address additional market opportunities would harm our business, financial condition, operating results and prospects.
Our growth depends in part on the availability and amounts of government subsidies and incentives and the application of regulations that encourage conversion to EVs. These subsidies and incentives are limited and unpredictable and could expire or change to benefit competing technologies.
We believe that the availability of government subsidies, rebates, and economic incentives is currently a critical factor considered by our customers when purchasing our zero-emission systems or converting their existing vehicles to zero-emission-electric or hybrids, and that our growth depends in large part on the availability and amounts of these subsidies and economic incentives. Any unavailability, reduction, elimination or adverse application of government subsidies, rebates, and economic incentives because of administrative mistakes made by those in charge of the programs, budgetary challenges, expiration, policy changes, the reduced need for such subsidies, rebates, and incentives due to the perceived success of electric or hybrid vehicles or other reasons may result in the diminished price competitiveness of the alternative fuel vehicle industry generally and our zero-emission electric and hybrid vehicles in particular, especially prior to our ability to significantly reduce our costs. The elimination of certain regulations and programs that encourage sales of zero-emission electric and hybrid vehicles could adversely impact sales of our commercial zero-emission electric and hybrid vehicles, either currently or at any time in the future. In 2025, the presidential administration rescinded federal support for EVs, with agencies like the EPA and DOT moving to roll back emission standards, revoke California’s zero-emission waiver, and freeze funding for charging infrastructure. Through the One Big Beautiful Bill Act, the presidential administration terminated the IRA's $7,500 consumer EV tax credit for vehicles acquired after September 30, 2025, while also clawing back unspent IIJA funding for charging networks. If government subsidies and economic incentives to produce and purchase zero-emission EVs were no longer available to us or our customers, or the amounts of such subsidies and incentives were reduced or eliminated, it would have a negative impact on demand for our vehicles and our business, prospects, financial condition and operating results would be materially and adversely affected.
In addition, we anticipate that in the future there may be new opportunities for us to apply for grants, loans and other incentives from federal, state, local and foreign governments on our own behalf and on behalf of our customers. Our ability to obtain funds or incentives from government sources is subject to the availability of funds under applicable government programs and approval of our applications to participate in such programs.
The application process for these funds and other incentives is and will continue to be highly competitive, and there is no guarantee that we will obtain such funds or incentives
Table of Contents
Our decentralized assembly, sales and service model for our EVs business presents numerous challenges and we may not be able to execute on our plan to establish sales, service and assembly facilities in the urban areas we have targeted and our facilities in any of those markets may underperform relative to our expectations.
Our strategy of establishing sales, service, and assembly facilities for our zero-emission EVs in selected urban areas in the United States is substantially different from the prevailing centralized manufacturing and franchised distribution and service model used currently by our zero-emission manufacturing competitors. For example, we may not be able to utilize long established sales channels developed through a traditional franchise system to increase our sales volume, which may harm our business, prospects, financial condition and operating results. Moreover, we will be competing with companies with well established distribution channels. If we determine that our decentralized model is inadequate, opening our own sales, service and assembly facility in any market generally will be capital intensive and require, among other things, establishing a local order volume that is sufficient to support the facility, finding a suitable and available location, negotiating a satisfactory lease agreement for the facility, obtaining permits and approvals from local and state authorities (which, in the case of facilities to be opened in foreign countries, may require obtaining approvals from national governments), building out the facility to our specifications and hiring and training employees to assemble, sell and service our zero-emission EVs and converting existing vehicles to zero-emission EVs. If we decide we must open our own facilities, we plan to seek state and local government incentives to defray the costs of opening facilities in the markets we have selected, but we may not be successful in this effort, or the incentives may no longer be available or may not be as significant as we would like. As with any development project, the development and build-out of a facility will subject us to the risk of cost overruns and delays, which may be significant. Once our sales, service and assembly facilities are open for business, we will need to ensure that they maintain a high level of quality in order to satisfy customers and enhance the brand. Even if we are able to address all of the challenges discussed above, we have little experience in sales, service or assembly and our sales, service and assembly facilities in one or more markets may not adequately address customer service needs or be profitable and we may lose sales and our entire investment in such facilities, and therefore, damaging our reputation in the process. If we are unable to establish the local order volume we require in order to open new sales, service and assembly facilities or are unable to successfully assemble, sell, and service our zero-emission electric commercial vehicles adequately for customers and profitably operate these new facilities in our target markets, our business, prospects, financial condition and operating results may be adversely affected. If we do not adequately address our customers’ service needs, our brand and reputation will be adversely affected, which in turn could have a material and adverse impact on our business, financial condition, operating results and prospects.
In many of our zero-emission EVs we use battery packs composed of lithium-ion battery cells, which, if not appropriately managed and controlled, on rare occasions have been observed to catch fire or vent smoke and flames. If any such events occur in our commercial EVs , we could face liability for damage or injury, adverse publicity and a potential safety recall.
The battery packs in our manufactured vehicles use lithium-ion cells, which have been used for years in laptop computers, cell phones and EVs. On rare occasions, if not appropriately managed and controlled, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. Highly publicized incidents of laptop computers, cell phones, and Tesla, Inc.’s EVs bursting into flames have focused consumer attention on the safety of these cells. In addition, a limited number of side-impact tests carried out by NHTSA on non-commercial passenger vehicles containing lithium-ion batteries and thermal management systems containing liquid coolant have resulted in post-collision fires under certain conditions. Any failure of a competitor’s electric vehicle may cause indirect adverse publicity for us and our EVs. These events have raised questions about the suitability of lithium-ion cells for automotive applications. A field failure of our battery packs may occur, particularly if one of our manufactured or converted vehicles is involved in a collision, which could damage the vehicle or lead to personal injury or death and may subject us to lawsuits, product recalls, or redesign efforts, all of which would be time consuming and expensive. Furthermore, there is some risk of electrocution if individuals who attempt to repair battery packs on our manufactured or converted vehicles do not follow applicable maintenance and repair protocols. Any such damage or injury would likely lead to adverse publicity and potentially a safety recall. Any such adverse publicity or negative public perceptions regarding the suitability of lithium-ion cells for automotive applications or any future incident involving lithium-ion cells such as a vehicle or other fire, even if such incident does not involve vehicles that utilize our technology, could seriously harm our business, prospects, financial condition and operating results.
Our medical supplies segment is solely dependent on a single customer .
Our medical supplies segment derives all of its revenue from a single customer, Maddox Medical, of which Jason Maddox, our President and Interim Chief Financial Officer, is the founder and a stockholder, and Elgin Tracy, our Chief Operating Officer, is a stockholder. The loss of this customer or a significant amount of business from this customer would materially and adversely affect our results of operations until such time, if ever, as we are able to replace the lost business. We are also subject to the risks faced by Maddox Medical to the extent that such risks impede its ability to stay in business and make timely payments to us.
Risks Relating to the Legal and Regulatory Matters
We are subject to substantial regulations, which are evolving, and unfavorable changes or any failure by us to comply with these regulations could substantially harm our business and operating results.
Our zero-emission EVs, heavy lift drones, and certain of their components are subject to substantial regulation under international, federal, state and local laws. We may incur in the future increased costs in complying with these regulations. Regulations related to the EV industry, alternative and renewable energy and drones currently are evolving and we face risks associated with changes to these regulations or new regulations. These risks include the following:
changes to the regulations governing the assembly, transportation and disposal of lithium-ion batteries;
revisions in motor carrier safety laws in the United States to further enhance motor vehicle safety generally and to ensure that EVs achieve levels of safety commensurate with other cars, trucks, and buses could increase the costs associated with the component parts and the manufacture, assembly, and conversion of our drivetrain systems;
revisions in consumer protection laws to ensure that consumers are fully informed of the particular operational characteristics of vehicles could increase our costs associated with warning labels or other related customer information dissemination; and
dissolution of incentive structures for EV adoption resulting from the changes in federal policy with the introduction of a new presidential administration; and
our ability to meet certification requirements in the U.S. and abroad for our heavy lift drones.
Table of Contents
To the extent the laws governing our business and products change, some or all of our products may not comply with applicable international, federal, state or local laws, and certain of the competitive advantages of our products may be reduced or eliminated, which could have an adverse effect on our business. Furthermore, compliance with changing regulations could be burdensome, time consuming, and expensive. To the extent compliance with changes in regulations or new regulations is cost prohibitive, our business, prospects, financial condition and operating results will be adversely affected.
Our drones business is highly regulated and our ability to generate revenues and profit may be limited by regulatory restrictions and/or changes and the speed with which such restrictions and/or changes occur.
Drone manufacturers and operators are subject to extensive regulatory and legal requirements that involve significant compliance costs. The civil aviation authorities, including the FAA and the EASA, may issue regulations relating to the operation of drones that could require significant expenditures. Implementation of the requirements created by such regulations may result in increased costs for our customers and us. Additional laws, regulations, taxes and airport rates and charges have been proposed from time to time that could significantly increase the cost of our operations or reduce the demand for drones. If adopted, these measures could have the effect of reducing revenue and increasing costs. Moreover, the nature of and the speed with which these regulations are completed and implemented pose a risk for our financial performance and condition, timing of growth and overall potential. As a result, we cannot ensure that these and other laws or regulations enacted in the future will not have a negative impact on our business, financial condition, and results of operations.
Governments and regulatory agencies in the markets where we manufacture and sell drone products may enact additional regulations relating to product safety and consumer protection in the future and may also increase the penalties for failure to comply with product safety and consumer protection regulations. In addition, one or more of our customers might require changes in our products, such as the non-use of certain materials, in the future. Complying with any such additional regulations or requirements could impose increased costs on our business. Similarly, increased penalties for non-compliance could subject us to greater expenses in the event any of our products were found to not comply with such regulations. Such increased costs or penalties could have a negative impact on our business, financial condition, and results of operations.
Vehicle dealer and distribution laws could adversely affect our ability to sell our commercial zero-emission EVs.
Sales of our zero-emission EVs are and/or may be subject to international, state and local vehicle dealer and distribution laws. To the extent such laws prevent us from selling our vehicles to customers located in a particular jurisdiction or require us to retain a local dealer or distributor or establish and maintain a physical presence in a jurisdiction in order to sell vehicles in that jurisdiction, our business, prospects, financial condition and operating results could be adversely affected. We intend to contract with vehicle dealers to sell and/or service our vehicles, but we have no assurance at this time that we will successfully contract with vehicle dealers and distributors to sell and/or service our vehicles.
We are subject to various environmental laws and regulations that could impose substantial costs upon us and cause delays in opening our sales, service and assembly facilities.
We and our operations are subject to federal, state and/or local environmental laws and regulations, including laws relating to the use, handling, storage, transportation, disposal and human exposure to hazardous substances and wastes. Environmental and health and safety laws and regulations can be complex, and we expect that our business and operations may be affected by future amendments to such laws or other new environmental and health and safety laws which may require us to change our operations. These laws can give rise to liability for investigatory costs, administrative oversight costs, cleanup costs, property damage, bodily injury and fines and penalties. Capital and operating expenses needed to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties, third party damages, responsibilities to investigate and take corrective or remedial actions, suspension of production or a cessation of our operations.
Contamination at our facilities may result in liability for us under environmental laws and regulations, including, but not limited to the Comprehensive Environmental Response, Compensation and Liability Act, which can impose liability for the full amount of remediation-related costs without regard to fault, for the investigation and cleanup of contaminated soil and ground water, for building contamination and impacts to human health and for damages to natural resources. The costs of complying with environmental laws and regulations and any claims concerning noncompliance, or liability with respect to contamination in the future, could have a material adverse effect on our financial condition or operating results. We may face unexpected delays in obtaining the necessary permits and approvals required by environmental laws and regulations in connection with any planned manufacturing or operational facilities that could require significant time and financial resources and delay our ability to operate these facilities, which would adversely impact our business prospects and operating results.
We may be involved in leg al and administrative p roceedings that could result in su bstantia l liabilities.
We may be involved in legal proceedings, administrative proceedings, claims, and other litigation that arise in the ordinary course of business, such as title, royalty or contractual disputes, regulatory compliance matters and personal injury or property damage matters. In addition, we may become involved in securities class action litigation or shareholder litigation in connection with prior offerings of our common stock. Such proceedings are inherently uncertain, and their results cannot be predicted. Regardless of the outcome, such proceedings could have an adverse impact on us because of legal costs, diversion of management and other personnel and other factors. In addition, it is possible that a resolution of one or more such proceedings could result in liability, penalties or sanctions, as well as judgments, consent decrees or orders requiring a change in our business practices, which could materially and adversely affect our business, operating results and financial condition. Accruals for such liability, penalties or sanctions may be insufficient, and judgments and estimates to determine accruals or range of losses related to legal and other proceedings could change from one period to the next, and such changes could be material.
Our management determined that our disclosure controls were not effective as of December 31, 2025. If we are unable to maintain effective internal control over financial reporting and effective disclosure controls and procedures, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.
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 generally accepted accounting principles un the U.S. ("GAAP") Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on the internal control over financial reporting. Once we are no longer either a “smaller reporting company,” such report must be attested to by our independent registered public accounting firm.
Based on the evaluation required by Section 404 of the Sarbanes-Oxley Act, our management determined that our internal control over financial reporting was not effective as of December 31, 2025, primarily due to certain staff reductions and voluntary resignations we experienced beginning in the fourth quarter of 2020, through the closing of our acquisition of Envirotech Drive Systems, Inc. (“EVT") in March 2021 and continuing into 2025, during which we increased our reliance on outsourced accounting help. As a result of such changes, our management concluded that we were unable to maintain the levels of segregation of duties during such periods at the levels of prior periods, and that such changes to our disclosure controls and procedures significantly affected our internal control over financial reporting during the years ended December 31, 2021, 2022, 2023, 2024 and 2025.
Although we have yet to fully resolve such deficiencies as of the date of this Annual Report, we have engaged, and continue to seek the assistance of additional, experienced accounting professionals with relevant expertise to supplement our efforts and mitigate the negative effects of the above-described deficiencies in the effectiveness of our disclosure controls and procedures.
If we fail to detect errors on a timely basis, our financial statements may be materially misstated and if we are unable to comply with the requirements of Section 404 of the Sarbanes Oxley Act, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, if and when required, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.
Table of Contents
Risks Related to Intellectual Property
Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology.
Our success and ability to compete depend in part upon our intellectual property. We primarily rely on intellectual property laws, including trade secret, copyright, trademark and patent laws in the United States and abroad, and use contracts, confidentiality procedures, non-disclosure agreements, employee disclosure and invention assignment agreements and other contractual rights to protect our intellectual property. However, the steps we take to protect our intellectual property rights may be inadequate or we may be unable to secure intellectual property protection for all of our products and services.
If we are unable to protect our intellectual property, our competitors could use our intellectual property to market products, services or products and services similar to ours and our ability to compete effectively would be impaired. Moreover, others may independently develop technologies that are competitive to ours or infringe our intellectual property. Any of our intellectual property rights may be challenged by others or invalidated through administrative processes or litigation. The enforcement of our intellectual property rights depends on our legal actions against these infringers being successful, but these actions may not be successful, even when our rights have been infringed. In addition, we might be required to spend significant resources to monitor and protect our intellectual property rights, and our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Litigation to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management, whether or not it is resolved in our favor, and could ultimately result in the impairment or loss of portions of our intellectual property. Any patents issued in the future may not provide us with competitive advantages or may be successfully challenged by third parties.
Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Effective protection of our intellectual property may not be available to us in every country in which our products and services are available. The laws of some foreign countries may not be as protective of intellectual property rights as those in the U.S., and mechanisms for enforcement of intellectual property rights may be inadequate. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.
We could incur substantial costs as a result of any claim of infringement of another party ’ s intellectual property rights.
Companies, organizations or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that could prevent, limit or interfere with our ability to produce, use, develop or sell our products or components, which could make it more difficult for us to operate our business. Companies in our industry are increasingly bringing and becoming subject to suits alleging infringement of proprietary rights, particularly patent rights, and our competitors may hold patents or have pending patent applications, which could be related to our business. These risks have been amplified by the increase in third parties, or non-practicing entities, whose sole primary business is to assert such claims. We have not received in the past, but may receive in the future, notices that claim we or our customers using our products and services have misappropriated or misused other parties’ intellectual property rights. In those cases, we intend to investigate the validity of these claims and, if we believe these claims have merit, to respond through licensing or other appropriate actions. If we are sued by a third party that claims that our technology infringes its rights, the litigation could be expensive and could divert our management resources. We do not currently have an extensive patent portfolio of our own, which may limit the defenses available to us in any such litigation.
In addition, in many instances, we have agreed to indemnify our customers against certain claims that our products and services infringe the intellectual property rights of third parties. The results of any intellectual property litigation to which we might become a party, or for which we are required to provide indemnification, may require us to do one or more of the following:
cease offering or using technologies or producing, using, developing or selling vehicles or conversions that incorporate the challenged intellectual property;
make substantial payments for legal fees, settlement payments or other costs or damages;
obtain a license, which may not be available on reasonable terms or at all, to sell or use the relevant technology; or
redesign technology or vehicles that utilize our technology to avoid infringement.
If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement claims against us or any obligation to indemnify our customers for such claims, such payments or costs could have a material adverse effect upon our business and financial results. Furthermore, our business could be adversely affected by any significant disputes between us and our customers as to the applicability or scope of our indemnification obligation.
Table of Contents
Risks Related to our Financial Condition
W e may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all. If we cannot raise additional capital when needed, our operations and prospects will be negatively affected.
Our business is capital-intensive. We may need to raise additional capital in the short- and long-term to operate our business and scale our business, among other activities. We intend to continue to make investments to support our business growth and may require additional funds as we scale our operations and respond to the potential future business challenges, such as keeping pace with technological developments in order to remain competitive in our evolving industries, improving our operating infrastructure or acquiring complementary businesses and technologies. In addition, on February 12, 2025, we announced the relocation of our corporate headquarters and the establishment of a new 86,000 square foot facility in Houston, Texas. We opened our new corporate headquarters and manufacturing facility in 2025. Additional capital expenditures will be required to set up the infrastructure that is necessary to our operations.
We believe that our existing cash and cash equivalents may not be sufficient to allow us to operate for the next 12 months due to our current and potential liabilities, and we do not expect to be able to satisfy our cash requirements solely through product sales in the near future. We may need to raise additional capital through equity or debt issuances. We intend to employ various strategies to obtain the required funding for future operations, such as continuing to access capital through the A&R SEPA (as defined in Part II, Item 7 "Management's Discussion and Analysis of Financial Conditions and Results of Operations" of this Annual Report). Our access to advances under the A&R SEPA is also dependent on the market price of our common stock and the registration of sufficient shares to be sold under the A&R SEPA. In addition, we will also need to satisfy the closing conditions to the sale of the Second Closing Debentures (as defined in Part II, Item 7 "Management's Discussion and Analysis of Financial Conditions and Results of Operations" of this Annual Report), including the effectiveness of the Resale Registration Statement (as defined in Part II, Item 7 "Management's Discussion and Analysis of Financial Conditions and Results of Operations" of this Annual Report), before we are able to access this additional tranche of our Debenture financing.
If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders will suffer dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when and if we require it, our ability to continue to support our business growth, and to respond to business challenges would be significantly impaired and, we would have to significantly reduce our spending, delay or cancel our planned business activities or substantially change our corporate structure. As a result, we may be forced to curtail or discontinue our operations, which could materially and adversely affect our financial condition, results of operations, business and prospects. In addition, sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, including pursuant to the A&R SEPA, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities.
We are currently out of compliance with Nasdaq ’ s corporate governance requirements and if we fail to satisfy all such requirements, our common stock may be delisted from Nasdaq, which could have an adverse impact on the liquidity and market price of our common stock.
Our common stock is currently listed on the Nasdaq Capital Market, which has qualitative and quantitative continued listing requirements, including corporate governance requirements, public float requirements and a minimum closing bid price requirement. Due to the resignation of one of our directors effective as of our 2025 Annual Meeting of Stockholders, we no longer satisfy the requirements to maintain a majority of independent directors on our Board as required by Nasdaq Listing Rule 5605(b)(1) or to maintain an Audit Committee comprised of three independent directors meeting the additional requirements under Nasdaq Listing Rule 5605(c)(2)(A). We are relying on the cure period to regain compliance with these requirements provided in Nasdaq Listing Rules 5605(a)(1)(A) and 5605(c)(4).
We are in the process of identifying a new independent director to appoint to the Board to fill the vacancy created by this resignation, and we anticipate appointing such replacement director within the applicable cure period. However, there can be no assurance that we will do so.
If we do not regain compliance before the end of this cure period or if we fail to satisfy any of the other continued listing requirements, Nasdaq may take steps to delist our common stock. Delisting would likely have an adverse effect on the liquidity of our common stock, decrease the market price of our common stock, result in the potential loss of confidence by investors, suppliers, customers, and employees, and fewer business development opportunities, and adversely affect our ability to obtain financing for our continuing operations.
We may not be able to utilize a significant portion of o ur net o perating loss or research and development tax credit carryforwards, which could adversely affect our profitability.
As of December 31, 2025, we had federal and state net operating loss carryforwards (“NOLs”) due to prior period losses. Federal and state NOLs generated prior to 2018 have a 20-year carryforward and, if not utilized, will begin to expire in 2032. Similarly, state NOLs generated for tax years 2018 and after will also have a 20-year carryforward and, if not utilized, will begin to expire in 2038. These NOLs may go unused and be unavailable to offset future income tax liabilities, which could adversely affect our profitability.
Federal NOLs generated for tax years beginning with 2018 will carryforward indefinitely due to changes in the Coronavirus Aid, Relief and Economic Security ("CARES") Act of 2020. California tax law has not changed to conform to the new federal law on carryforward of NOLs generated in tax years beginning with 2018.
In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize NOL carryforwards or other tax attributes in any taxable year may be limited if we experience an “ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. As discussed elsewhere in this report, the acquisition of EVT resulted in their shareholders owning approximately 56% of the Company’s outstanding shares at the closing date of the acquisition, which is an ownership change under Section 382. As a result, the future utilization of the ADOMANI, Inc. NOL carryforwards will be limited to a number of factors, which have not been calculated at this time.
Following the completion of the our acquisition of EVT, we assessed our ability to use certain deferred tax benefits from net operating losses that were recorded by EVT in certain prior periods and determined that, in light of the uncertainty of generating future taxable income against which those losses can be offset in order to realize such benefits, recording a valuation allowance to reduce the deferred income tax assets to the amount that is more likely than not to be realized is appropriate. In making such determination, management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. The Company recognized a full valuation allowance for all deferred tax assets for the years ended December 31, 2025 and December 31, 2024.
In addition, future issuances of our stock could cause an “ownership change.” It is possible that any future ownership change could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our profitability.
Table of Contents
Our reported financial results may be adversely affected by changes in Generally Accepted Accounting Principles ("GAAP").
GAAP, as prescribed by the Financial Accounting Standards Board, is subject to interpretation by the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of a change.
Risks Related to the Ownership of Our Securities
The price of our common stock is and is likely to continue to be volatile and fluctuate substantially, which could result in substantial losses for our stockholders and may prevent you from reselling your shares at or above the price you paid for your shares.
The market price of our common stock is and is likely to remain volatile and may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:
overall performance of the equity markets;
the development and sustainability of an active trading market for our common stock;
our operating performance and the performance of other similar companies;
changes in the estimates of our operating results that we provide to the public, our failure to meet these projections or changes in recommendations by securities analysts that elect to follow our common stock;
press releases or other public announcements by us or others, including our filings with the SEC;
changes in the market perception of all-electric products and services generally or in the effectiveness of our products and services in particular;
announcements of technological innovations, new applications, features, functionality or enhancements to products, services or products and services by us or by our competitors;
announcements of acquisitions, strategic alliances or significant agreements by us or by our competitors;
announcements of customer additions and customer cancellations or delays in customer purchases;
announcements regarding litigation involving us;
recruitment or departure of key personnel;
changes in our capital structure, such as future issuances of debt or equity securities;
our entry into new markets;
regulatory developments in the United States or foreign countries;
the economy as a whole, market conditions in our industry, and the industries of our customers;
the expiration of market standoff or contractual lock-up agreements;
the size of our market float;
resales of our common stock under the A&R SEPA; and
any other factors discussed in this report.
Table of Contents
The market price and volume of our common stock could fluctuate, and in the past has fluctuated, relative to our limited public float. In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. These factors and fluctuations could have a material adverse effect on the market price of our common stock.
Future sales of our Common Stock could lower our stock price and dilute existing stockholders.
We may, in the future, sell additional shares of Common Stock in subsequent public or private offerings. We cannot predict the size or terms of future issuances of our Common Stock or the effect, if any, that future sales and issuances of shares of our Common Stock will have on the market price of our Common Stock. Sales of substantial amounts of our Common Stock, or the perception that such sales could occur, may adversely affect prevailing market prices for our Common Stock. In addition, these sales may be dilutive to existing stockholders.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, the trading price for our common stock would be negatively affected. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline.
We may fail to meet our publicly announced guidance or other expectations about our business, which would cause our stock price to decline.
We may provide guidance regarding our expected financial and business performance, such as projections regarding sales and production, as well as anticipated future revenues, gross margins, profitability and cash flows. Correctly identifying key factors affecting business conditions and predicting future events is inherently an uncertain process and our guidance may not ultimately be accurate. Our guidance is based on certain assumptions such as those relating to anticipated production and sales volumes and average sales prices, supplier and commodity costs, and planned cost reductions. If our guidance is not accurate or varies from actual results due to our inability to meet our assumptions or the impact on our financial performance that could occur as a result of various risks and uncertainties, the market value of our common stock could decline significantly.
We do not intend to pay dividends for the foreseeable future.
We have never declared nor paid cash dividends on our capital stock. 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. Consequently, stockholders must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.
Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:
authorize the issuance of “blank check” preferred stock that could be issued by our Board to defend against a takeover attempt;
establish a classified Board, as a result of which the successors to the directors whose terms have expired will be elected to serve from the time of election and qualification until the third annual meeting following their election;
require that directors only be removed from office for cause and only upon a supermajority stockholder vote;
provide that vacancies on the Board, including newly created directorships, may be filled only by a majority vote of directors then in office rather than by stockholders;
prevent stockholders from calling special meetings; and
prohibit stockholder action by written consent, requiring all actions to be taken at a meeting of the stockholders.
In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder becomes an “interested” stockholder. These provisions, alone or together, could have the effect of deterring or delaying changes in incumbent management, proxy contests or changes in control.
Table of Contents
