ITEM 1A. RISK FACTORS
Our business is subject to numerous risks and uncertainties. These risks represent challenges to the successful implementation of our strategy and to the growth and future profitability of our business. These risks include, but are not limited to, the following:
We are in the early stages of our operations;
We have a history of operating losses and our management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the fiscal years ended December 31, 2025 and 2024;
Our current cash resources will not allow us to become profitable and will only allow us to fund operations for a limited period of time;
We will need additional capital to fund our operations, which, if obtained, could result in substantial dilution or significant debt service obligations. We may not be able to obtain additional capital on commercially reasonable terms, which could adversely affect our liquidity and financial position;
Global pandemics may adversely impact our business and financial condition;
Our growth depends upon the continued growth in demand for end-products utilizing rechargeable storage batteries, particularly electric vehicles;
Adverse conditions in the economy and volatility and disruption of financial markets can negatively impact our prospective customers, and downturns in our prospective customers’ end-markets could adversely affect our prospective sales and profitability;
Our research and development efforts may not succeed, and our competitors may develop more effective or successful products;
Cobalt and copper prices can be volatile, especially due to changes in supply;
We face competition in our business;
Our planned production development efforts are complex projects that will require significant capital expenditures and are subject to significant risks and uncertainties;
We may make future acquisitions which may be difficult to integrate, divert management and financial resources and result in unanticipated costs;
The development and adoption of new battery technologies that rely on inputs other than cobalt compounds could significantly impact our prospects and future revenues;
We have substantial international operations, and the risks of doing business in foreign countries could adversely affect our business, financial condition and results of operations;
Our planned cobalt and copper extraction and planned production operations in Chile will expose us to specific political, financial and operational risks;
Our planned operations will be subject to hazards and other disruptions, which could adversely affect our reputation and results of operations;
We may not satisfy prospective customers’ or governments’ quality standards, and we could be subject to damages based on claims brought against us or lose customers as a result of the failure of our planned products to meet certain quality standards;
Fluctuations in the price of energy and certain raw materials, and our inability to obtain raw materials and products under contract sourcing arrangements, could have an adverse effect on the margins of our planned products, our business, financial condition and our results of operations;
Our success depends upon our ability to attract and retain key employees and the identification and development of talent to succeed senior management;
Some of our employees may be unionized or could be employed subject to local laws that are less favorable to employers than the laws of the United States;
Our business and operations could suffer in the event of cybersecurity breaches or disruptions to our information technology environment;
Theft of our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations;
We have not established “proven” or “probable” reserves, as defined by the SEC under Industry Guide 7, through the completion of a feasibility study for the minerals that we intend to produce;
Our reliance on third-party contractors and consultants to conduct our exploration and development projects exposes us to risks;
A shortage of equipment and supplies and/or the time it takes such items to arrive at our projects could adversely affect our ability to operate our business;
Mining development and processing operations pose inherent risks and costs that may negatively impact our business;
Failure to adequately manage our growth may seriously harm our business;
If we cannot maintain our corporate culture as we grow, we could lose the innovation, teamwork and focus that contribute crucially to our business;
Our future operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations;
The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members;
Our business and financial results may be adversely affected by various legal and regulatory proceedings;
We, our future operations, planned facilities, prospective products and raw materials are subject to environmental, health and safety laws and regulations, and costs to comply with, and liabilities related to, these laws and regulations could adversely affect our business;
Environmental regulations could require us to make significant expenditures or expose us to potential liability;
We are subject to numerous governmental permits that are difficult to obtain and we may not be able to obtain or renew all of the permits we require, or such permits may not be timely obtained or renewed;
An active trading market for our common stock may not develop and you may not be able to resell your shares at or above the price which you paid; and
Our stock price may be volatile.
Our ability to secure and maintain adequate water rights and comply with water-use and water-quality regulations may materially affect our operations.
We may be subject to significant liabilities associated with tailings, waste-rock management, or legacy environmental conditions at or near our project sites.
We may be required to engage in formal consultation processes with Indigenous or local communities, and failure to do so could result in delays, legal challenges, or reputational harm.
Our participation in ESG assurance frameworks may expose us to additional scrutiny, costs, and reputational risks
Risks Related to Our Business and Industry
We are in the early stages of our operations.
We were incorporated on December 4, 2017 and have had limited operations to date. We have not received revenue from our operations since the date of incorporation. As we are in the early stages of our operating history, it is difficult for an investor to make a determination as to the possible success or failure of our business. We are subject to all of the risks associated with a start-up company in the cobalt production business, including the risks set forth herein.
We have a history of operating losses and our management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the fiscal years ended December 31, 2025 and 2024.
For the fiscal years ended December 31, 2025 and 2024, we reported net losses of $3,263,140 and $882,574, respectively, however, $1,881,082 of the 2025 loss was related to a one-time, non-cash charge for impairment of mining concessions, and negative cash flow from operating activities of $1,146,473 and $718,275, respectively. As of December 31, 2025, we had an aggregate accumulated deficit of $36,645,952. We expect our operating expenses to significantly increase over the next several years as we expand our operations and infrastructure, both domestically and internationally, and hire additional personnel. We anticipate that we will continue to report losses and negative cash flow. Our management has concluded that our historical recurring losses from operations and negative cash flows from operations as well as our dependence on private equity and other financings raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going in its audit report for the fiscal years ended December 31, 2025 and 2024.
Our audited financial statements included elsewhere in this Annual Report on Form 10-K do not include any adjustments that might result from the outcome of this uncertainty. These adjustments would likely include substantial impairment of the carrying amount of our assets and potential contingent liabilities that may arise if we are unable to fulfill various operational commitments. In addition, the value of our securities would be greatly impaired. Our ability to continue as a going concern is dependent upon generating sufficient cash flow from operations at some point in the future and obtaining additional capital and financing. If our ability to generate cash flow from operations is delayed or reduced and we are unable to raise additional funding from other sources, we may be unable to continue in business. For further discussion about our ability to continue as a going concern and our plan for future liquidity, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Ability to Continue as a Going .”
Our current cash resources will not allow us to become profitable and will only allow us to fund operations for a limited period of time.
We anticipate that our expenses over the next twelve (12) months will be approximately $4,848,000 for the full implementation of our business plan including exploration, investment in net smelter royalties, research and development expenses, general & administrative expenses, and working capital and general corporate purposes, including the costs associated with any potential uplisting to a national securities exchange and registration of a public offering. There can be no assurance that we will pursue an uplisting, nor any assurance that if we do, it will be successful. Any such effort would require us to meet initial listing standards, which may include minimum stock price, stockholders’ equity, distribution requirements, and corporate governance standards. Failure to qualify for listing or delays in doing so will result in higher costs and may affect our ability to continue our operations. We can also provide no assurance that we can secure additional capital and/or if we are able to, if they will have favorable terms. Based on our current cash on hand, we may be delayed or forced to cease operations within 12 months unless we are to raise approximately $2,400,000.
We will need additional capital to fund our operations, which, if obtained, could result in substantial dilution or significant debt service obligations. We may not be able to obtain additional capital on commercially reasonable terms, which could adversely affect our liquidity and financial position.
On December 31, 2025, we had a cash balance of approximately $2,772,082, a working capital surplus of approximately $2,793,881, and an accumulated deficit of approximately $36,645,952. In June 2025, we received $83,502 of cash from additional issuances of Series B Convertible Preferred Stock at $0.45 per share. Then in December 2025, we received an additional $3,000,000 of cash from issuances of common stock at $0.50 per share, which after reduction for direct and incremental costs of $247,500 associated with the raise, equated to $2,752,500 of net proceeds. Even if we are able to generate substantial revenues and reduce operating expenses, we may need to raise additional capital. In order to continue operating, we may need to obtain additional financing, either through borrowings, private offerings, public offerings, or some type of business combination, such as a merger, or buyout, and there can be no assurance that we will be successful in such pursuits. We may be unable to acquire the additional funding necessary to continue operating. Accordingly, if we are unable to generate adequate cash from operations, and if we are unable to find sources of funding, it may be necessary for us to sell one or more lines of business or all or a portion of our assets, enter into a business combination, or reduce or eliminate operations. These possibilities, to the extent available, may be on terms that result in significant dilution to our shareholders or that result in our shareholders all of their investment.
If we are able to raise additional capital, we do not know what the terms of any such capital raising would be. In addition, any future sale of our equity securities would dilute the ownership and control of your shares and could be at prices substantially below prices at which our shares currently trade. If we are unable to raise capital it could require us to significantly curtail or terminate our operations. We may seek to increase our cash reserves through the sale of additional equity or debt securities. The sale of convertible debt securities, or additional equity securities could result in additional and potentially substantial dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity. In addition, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. Any failure to raise additional funds on favorable terms could have a material adverse effect on our liquidity and financial condition.
Global pandemics may adversely impact our business and financial condition.
Global pandemics have caused, and may continue to cause, disruptions in regional economies and the world economy and financial and commodity markets in general. For example, the transmission of COVID-19 and efforts to contain its spread resulted in international, national and local border closings, travel restrictions, significant disruptions to business operations, supply chains and customer activity and demand, service cancellations, workforce reductions and other changes, significant challenges in healthcare service provision and delivery, mandated closures and quarantines, as well as considerable general concern and uncertainty, all of which negatively affected the economic environment. The full extent of the impact of future global pandemics on the economy is not known at this time and it is not known what measures will be implemented by governmental authorities in the future and how long these measures, or the measures currently in effect, will be in place. For instance, the COVID-19 global pandemic and efforts to reduce its spread led to a significant decline of economic activity and significant and in global markets. Additionally, it the capital markets world-wide and prices of materials, including cobalt prices. We cannot predict the timing and duration of future global pandemics or the impact of government regulations that might be imposed in response to such global pandemics; nonetheless, any such pandemics may have a material effect on our business, financial position, results of operations and cash flows.
Risks Related to Our Growth Strategy and Our Markets
Our growth depends upon the continued growth in demand for end-products utilizing rechargeable storage batteries, particularly electric vehicles.
We anticipate producing cobalt and copper concentrates and/or intermediates for application in a diverse range of end-products, including electric vehicle batteries and for a wide variety of industrial, pharmaceutical, aerospace, electronic and polymer applications. Our growth is largely dependent upon the continued adoption by consumers of products utilizing rechargeable storage batteries, particularly electric vehicles, which contain cobalt and copper compounds which we plan to produce. If the market for products utilizing rechargeable storage batteries, particularly electric vehicles, does not develop as we expect, or develops more slowly than we expect, our business, prospects, financial condition and results of operations will be affected. The market for electric vehicles is relatively new, rapidly evolving, and could be affected positively or negatively by numerous external factors, such as:
governmental laws, rules and regulations (including, without limitation, any court or executive orders);
tax and economic incentives, charges or fees (including, without limitation, any tax deductions, credits, or tariffs);
rates of consumer adoption, which is driven in part by perceptions about electric vehicle features (such as range per charge, battery cycle continuity, autonomous functionality and audio-video integration), quality, safety, performance, cost, and post-purchase value stability and resale opportunity;
competition, including from other types of alternative fuel vehicles, plug-in hybrid electric vehicles, and high fuel-economy internal combustion engine vehicles; and
volatility in the cost of oil and gasoline.
Adverse conditions in the economy and volatility and disruption of financial markets can negatively impact our prospective customers, and downturns in our prospective customers’ end-markets could adversely affect our prospective sales and profitability.
We anticipate producing cobalt and copper concentrates and/or intermediates for application in a diverse range of end-products, including electric vehicle batteries and for a wide variety of industrial, pharmaceutical, aerospace, electronic and polymer applications. Deterioration in the global economy or in the specific industries in which our prospective customers compete could adversely affect the demand for our prospective customers’ products, which, in turn, could negatively affect our prospective sales and profitability. Many of our prospective customers’ end-markets are cyclical in nature or are subject to secular downturns. Therefore, we anticipate cyclical or secular end-market downturns may result in diminished demand for our prospective cobalt and copper compounds and cause a decline in average selling prices.
Our research and development efforts may not succeed, and our competitors may develop more effective or successful products.
The industries and the end markets into which we sell our planned products experience regular technological change and product improvement. Our ability to compete successfully depends in part upon our ability to maintain a superior technological capability and to continue to identify, develop and commercialize new and innovative cobalt and copper concentrates and/or intermediates for use in our prospective customers’ products in the electric vehicle, aerospace and other sectors. There is no assurance that our research and development efforts will be successful or that any newly developed products will pass our prospective customers’ qualification processes or achieve market-wide acceptance. If we fail to keep pace with evolving technological innovations in our prospective customers’ end markets, our business, financial condition and results of operations could be adversely affected. In addition, existing or potential competitors may develop products which are similar or superior to our planned products or are more competitively priced. If our product launching efforts are , our financial condition and results of operations may be affected.
Cobalt and copper prices can be volatile, especially due to changes in supply.
The prices of cobalt have been, and may continue to be, volatile. In the future, we seek to manage volatility through the sale of cobalt concentrates and/or intermediates and by entering into long-term contracts with our customers; however, such efforts may not be successful. We expect that prices for the cobalt and copper concentrates and/or intermediates we plan to manufacture will continue to be influenced by various factors, including worldwide supply and demand as well as the business strategies of major producers. As discussed earlier in the “Industry Supply, Demand and Pricing Dynamics” section, we expect cobalt’s fundamentals to improve as supply growth slows and demand from lithium-ion batteries and metal alloys remains strong, although there is a high degree of uncertainty about the status of new cobalt production capacity expansion projects being developed by current and potential competitors. Further declines in cobalt prices could have a material adverse effect on our business, financial condition and results of operations. The pricing for copper may also be volatile. This volatility may become more as demands within the lithium-ion battery channels increase, further constraining sources of copper from countries and producers meeting the requirements for important environmental objectives.
We face competition in our business.
We expect to compete globally against a number of other cobalt and copper producers. Competition is based on several key criteria, including technological capabilities, service, product performance and quality, sustainability factors and price. Some of our competitors are larger than we are and may have greater financial resources. These competitors may also be able to maintain greater operating and financial flexibility. If we fail to compete effectively, we may be unable to retain or expand our market share, which could have a material adverse effect on our business, results of operations and financial condition.
Our planned production development efforts are complex projects that will require significant capital expenditures and are subject to significant risks and uncertainties.
In order to meet growing and forecasted demands for cobalt compounds, particularly in the EV space, we are planning substantial capital projects, including a new plant intended to be built between 2027 and 2028 aiming to produce at least 2.4 kMT per day by the end of 2029 and in subsequent years throughout the life of the mine. These planned projects are complex undertakings, and there can be no assurance that we will be able to complete these projects within our projected budget and schedule or that we will be able to achieve the anticipated benefits from them. Unforeseen technical or construction difficulties could increase the cost of these planned projects, delay the projects or render them infeasible. Any significant delay in the completion of the planned projects or increased costs could have an adverse effect on our business, financial condition and results of operations.
We may make future acquisitions which may be difficult to integrate, divert management and financial resources and result in unanticipated costs.
As part of our continuing business strategy, we may make acquisitions of, or investments in, mining concessions, companies or technologies that complement our current products, enhance our market coverage, technical capabilities or production capacity, or offer growth opportunities. While we are actively pursuing several adjacent acquisition opportunities in the La Cobaltera project area and broader San Juan district and would also give consideration to other acquisition opportunities, such as the NeoRe rare earth elements project in Southern Chile, even if outside the adjacent area or the core district, we do not have concrete timetables for these plans, however, they may occur within the current calendar year or soon after. We cannot be certain that we will be able to identify suitable acquisition or investment candidates for sale at reasonable prices or be able to close on such opportunities, if they exist.
Future acquisitions could pose numerous risks to our operations, including difficulty integrating the acquired mining concessions, operations, products, technologies or personnel; substantial unanticipated integration costs; diversion of significant management attention and financial resources from our existing operations; a failure to realize the potential cost savings or other financial benefits and/or the strategic benefits of the acquisitions; and the incurrence of liabilities from the acquired businesses for environmental matters, infringement of intellectual property rights or other claims, and we may not be successful in seeking indemnification for such liabilities or claims. These and other risks relating to acquiring, integrating and operating acquired assets or companies could cause us not to realize the anticipated benefits from such activity and could have a material adverse effect on our business, financial condition and results of operations.
The development and adoption of new battery technologies that rely on inputs other than cobalt compounds could significantly impact our prospects and future revenues.
Rechargeable storage batteries rely on cobalt compounds as a critical input. The development and adoption of new battery technologies that rely on inputs other than cobalt compounds could significantly impact our prospects and future revenues. Many materials and technologies are being researched and developed with the goal of making batteries lighter, more efficient, faster charging and less expensive, and some of these could be less reliant on cobalt compounds. We cannot predict which new technologies may ultimately prove to be commercially viable and on what time horizon. Commercialized battery technologies that use less cobalt compounds could materially and/or adversely impact our prospects and future revenues.
Risks Related to Our Operations
We have substantial international operations, and the risks of doing business in foreign countries could adversely affect our business, financial condition and results of operations.
We conduct a substantial portion of our business outside the United States. For the years ended December 31, 2025 and December 31, 2024, approximately 23% and 11%, respectively, of our operational costs were denominated in a currency other than the U.S. Dollar (primarily the Chilean peso). Accordingly, our business is subject to risks related to foreign exchange as well as risks related to the differing legal, political, social and regulatory requirements and economic conditions of the many jurisdictions where we conduct business.
Changes in exchange rates between foreign currencies and the U.S. Dollar will affect the recorded levels of our assets, liabilities, net sales, cost of goods sold and operating margins and could result in exchange losses. Our results of operations may be adversely affected by any volatility in currency exchange rates and our ability to manage effectively our currency transaction and translation risks. The Chilean peso has generally declined in value over the past couple of years, however, the Chilean peso has generally increased in value since the beginning of 2025, similar to the period from July 2022 to July 2023, and we currently do not hedge foreign currency risks associated with the Chilean peso due to the limited availability and high cost of suitable derivative instruments.
In addition, it may be more difficult for us to enforce agreements or collect receivables through foreign legal systems. There is a risk that foreign governments may nationalize private enterprises in certain countries where we operate. In certain countries or regions, terrorist activities and the response to such activities may threaten our operations more than in the United States. Social and cultural norms in certain countries may not support compliance with our corporate policies including those that require compliance with substantive laws and regulations. Also, changes in general economic and political conditions in countries where we operate are a risk to our financial performance and future growth. Our sales depend on international trade and moves to impose tariffs and other trade barriers, as is happening in various countries including the United States, could negatively affect our sales and have a material adverse effect on our business, financial condition and results of operations.
We and our subsidiaries are also subject to rules and regulations related to anti-bribery, anti-corruption (such as the Foreign Corrupt Practices Act), anti-money laundering, trade sanctions and export controls. Subject to any possible enforcement actions or inquiries, compliance with such laws may be costly and violations of such laws may carry substantial penalties.
As we continue to operate our business internationally, our success will depend, in part, on our ability to anticipate and effectively manage these and other related risks. There can be no assurance that the consequences of these and other factors relating to our international operations will not have an adverse effect on our business, financial condition or results of operations.
Our planned cobalt and copper extraction and planned production operations in Chile will expose us to specific political, financial and operational risks.
Our current exploration operations and planned production and extraction operations in Chile will expose us to the following risks, and the occurrence of any of these risks could have a material adverse effect on our business, financial condition or results of operations:
Political and financial risks that are typical of developing countries, including: high rates of inflation; risk of expropriation and nationalization or changes in or nullification of concession rights; changes in taxation policies; restrictions on foreign exchange and repatriation; labor unrest; social activism; and changing political norms, currency controls and governmental regulations that favor or require us to award contracts in, employ citizens of, or purchase supplies from, Chile. In particular, changes in mining or investment policies or shifts in political attitude in Chile concerning mining may adversely affect our planned operations or profitability. There can be no assurance that future governments of Chile will not impose greater state control of cobalt resources or take other actions that are adverse to us. Within the past seven years, Chile has faced sluggish growth, primarily based on dependence on commodity exports (such as copper), fluctuating inflation, concerns over income equality and recent political instability. To date, we have not experienced any inflationary pressures that have materially impacted our operations.
Risks associated with the loss or depletion of mineral deposits. Our primary source for cobalt and copper for our exploration activities are the owned mining concessions. In order to maintain our exploration capabilities, and for future production and extraction capabilities, we will need to replace or supplement our cobalt resources there in the event our access is disrupted or lost, whether due to a natural disaster, depletion or otherwise. Due to the current trend of growth in the cobalt industry, there is no assurance that we will be able to discover or acquire new and valuable cobalt and copper resources, or that the actual planned production results will match the expected results.
Risks of certain natural disasters. Our cobalt and copper exploration and planned production facilities will be located in a seismically active region in northwest Chile. A major earthquake could have adverse consequences for our operations and for general infrastructure, such as roads, rail, and access to goods in Chile.
Our planned operations will be subject to hazards and other disruptions, which could adversely affect our reputation and results of operations.
We plan to conduct cobalt production operations in Chile and plan to own, operate and/or contract with large-scale manufacturing facilities in the United States, Chile and/or other countries holding strategic advantages, such as free-trade agreement affiliation, environmental impact minimization and other factors, for downstream processing of our cobalt and copper concentrates and/or intermediates. Our operating results will be dependent in part on the continued operation of the various planned production facilities and the ability to manufacture products on schedule. Interruptions at these planned facilities may materially reduce the productivity and profitability of a particular planned manufacturing facility, or our business as a whole, during and after the period of such operational difficulties. Our operations and those of our contract manufacturers will be subject to hazards inherent in cobalt production and manufacturing and the related storage and transportation of raw materials, products such as wastes. These potential hazards include explosions, fires, severe weather and natural disasters, including earthquakes, mechanical failure, , supplier , labor or other labor (including widespread labor in Chile), information technology systems , in our supply chain or manufacturing and distribution operations, transportation , chemical spills, discharges or releases of toxic or substances or gases, shipment of contaminated or off-specification product to customers, storage tank leaks, other environmental risks, or other sudden in business operations beyond our control as a result of events such as acts of , terrorism or war, civil or political , natural , pandemic situations and large scale power . Some of these may cause to or of property and equipment or personal and of life and may result in of operations or the of affected facilities, which could have a material effect on our business, financial condition and results of operations.
We may not satisfy prospective customers’ or governments’ quality standards, and we could be subject to damages based on claims brought against us or lose customers as a result of the failure of our planned products to meet certain quality standards.
Since our planned products will be derived from natural resources, they may contain inorganic impurities that may not meet certain customer or government quality standards. As a result, we may not be able to sell our planned products if we cannot meet such requirements. In addition, customers may impose stricter quality standards on our planned products or governments may enact stricter regulations for the distribution or use of our planned products. Failure to meet such standards could materially and/or adversely affect our business, financial condition and results of operations if we are unable to sell our planned products in one or more markets or to important customers in such markets. In addition, the cost of our planned production may increase to meet any newly imposed or enacted standards.
We anticipate warranting to our prospective customers that our planned products conform to mutually agreed product specifications. If a product fails to meet warranted quality specifications, a customer could seek a replacement, the refund of the purchase price or damages for costs incurred as a result of the product failing to meet the specification. In addition, because we anticipate that many of our planned products will be integrated into our prospective customers’ products, such as in rechargeable batteries in automobiles, we may be requested to participate in, or fund in whole or in part the costs of, a product recall conducted by a customer, even though we generally seek to limit our liability for such matters in contracts with our prospective customers.
In addition, we anticipate utilizing third parties to produce a portion of our cobalt compounds. We endeavor to contract with third-party manufacturers that we believe will be able to meet our delivery schedule and other requirements. Nevertheless, we may not be able to monitor the performance of these third parties as directly and efficiently as we do our own planned production facilities. As a result, we will be exposed to the risk that our third-party providers may fail to perform their contractual obligations, which may in turn adversely affect our business, financial condition and results of operations.
As with all quality control systems, any failure or deterioration of our quality control systems could result in defects in our projects or products, which in turn may subject us to contractual, product liability and other claims. Any such claims, regardless of whether they are ultimately successful, could cause us to incur significant costs, harm our business reputation and result in significant disruption to our operations. Furthermore, if any such claims were ultimately successful, we could be required to pay substantial monetary damages or penalties, which could have a material adverse effect on our reputation, business, financial condition and results of operations.
Fluctuations in the price of energy and certain raw materials, and our inability to obtain raw materials and products under contract sourcing arrangements, could have an adverse effect on the margins of our planned products, our business, financial condition and our results of operations.
The long-term profitability of our future operations will be, in part, related to our ability to continue to economically and reliably obtain resources, including energy, raw materials, and finished products. Our raw material and energy costs could be volatile and may increase significantly. We may enter into long-term contracts for most of our planned products and these contracts are often at fixed prices or otherwise do not permit us to pass on increased costs in sale prices immediately or at all. To the extent we are unable to obtain such resources or to pass on increases in the prices of energy and raw materials to our customers, our financial condition and results of operations could be materially and/or adversely affected. In addition, we expect to source a significant portion of our intermediate and finished products through contract manufacturing arrangements. An inability to obtain these products or execute under these arrangements would adversely impact our ability to sell products and could have an adverse effect on our business, financial condition and results of operations.
We depend on our senior management team and the loss of one or more key personnel may impair our ability to grow our business.
Our success depends in part upon the continued services of our key executive officers as well as other key personnel. We do not have employment agreements with most of our executive officers or other key personnel that require them to continue to work for us for any specified period and, therefore, they may terminate employment with us at any time with no advance notice. The replacement of our senior management team or other key personnel likely would involve significant time and costs, and the loss of these employees may significantly delay or prevent the achievement of our business objectives.
Our success depends upon our ability to attract and retain key employees and the identification and development of talent to succeed senior management.
Our success depends on our ability to attract and retain key personnel, and we rely heavily on our senior management team. The inability to recruit and retain key personnel, including personnel with technical skills, or the unexpected loss of such personnel may adversely affect our operations. In addition, because of our reliance on our senior management team, our future success depends, in part, on our ability to identify and develop or recruit talent to succeed our senior management and other key positions throughout the organization. If we fail to identify and develop or recruit successors, we are at risk of being harmed by the departures of these key employees.
Some of our employees may be unionized or could be employed subject to local laws that are less favorable to employers than the laws of the United States.
As of March 31, 2026, we had two full-time employees and three part-time employees. A number of our future employees will be employed in countries in which employment laws provide greater bargaining or other rights to employees than the laws of the United States. Such employment rights will require us to work collaboratively with the legal representatives of the employees to effect any changes to labor arrangements. For example, most employees in Chile are represented by a union that must approve any changes in conditions of employment, including salaries and benefits and staff changes, and may impede efforts to restructure our workforce. Other similar companies have had to negotiate wage increases for employees with the union because of inflation in South American countries and Chilean Cobalt may have to do so in the future, which is typical for all companies with unions in Chile.
Our business and operations could suffer in the event of cybersecurity breaches or disruptions to our information technology environment.
As with all enterprise information systems, our information technology systems could be penetrated by outside parties intent on extracting information, corrupting information, or disrupting business processes. Our systems, which contain critical information about our business (including intellectual property and confidential information of our customers, vendors and employees), have in the past been, and likely will in the future be, subject to unauthorized access attempts. Unauthorized access could disrupt our business operations and could result in failures or interruptions in our computer systems and in the loss of assets (including our intellectual property and confidential business information), which could harm our competitive position, reduce the value of our investment in research and development and other strategic initiatives or otherwise have a material adverse effect on our business, financial condition or results of operations. In addition, of our security measures or the , disclosure, or dissemination of proprietary information or sensitive or confidential information about us, our employees, our vendors, or our customers, could result in , of various data privacy regulations in some jurisdictions, and also potentially result in liability to us. This could our reputation, or otherwise our business, financial condition, or results of operations, and the devotion of additional resources to the security of our information technology systems in the future could significantly increase the cost of doing business.
Theft of our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.
Protection of our proprietary processes, methods, formulations, and compounds, the incorporation of such formulations and compounds into various products and other technology is important to our business. Although our existing processes and future products may not be protected or protectable by patents, we generally rely on the intellectual property laws of the United States and certain other countries in which our planned products will be produced or sold, as well as licenses and nondisclosure and confidentiality agreements, to protect our intellectual property rights. Additionally, the patent, trade secret and trademark laws of some countries, or their enforcement, may not protect our intellectual property rights to the same extent as the laws of the United States. Failure to protect our intellectual property rights may result in the loss of valuable proprietary technologies. If patents are issued to us, those patents may not provide meaningful protection against competitors or against competitive technologies. We cannot assure you that our intellectual property rights will not be challenged, invalidated, or rendered unenforceable.
From time to time, we may license or otherwise obtain certain intellectual property rights from third-parties and we endeavor to do so on terms favorable to us. However, we may not be able to license or otherwise obtain intellectual property rights on such terms or at all, which could have a material adverse effect on our ability to create a competitive advantage and create innovative solutions for our customers, which will adversely affect our net sales and our relationships with our customers.
With respect to unpatented proprietary manufacturing expertise, continuing technological innovation and other trade secrets necessary to develop and maintain our competitive position, while we generally enter into confidentiality agreements with our employees and third parties to protect our intellectual property, we cannot assure you that our confidentiality agreements will not be breached, that they will provide meaningful protection for our trade secrets and proprietary manufacturing expertise or that adequate remedies will be available in the event of an unauthorized use or disclosure of our trade secrets or manufacturing expertise. In addition, our trade secrets and know-how may be improperly obtained by other means, such as a breach of our information technology security systems or direct theft.
If we fail to successfully enforce our intellectual property rights, our competitive position could suffer. We may also be required to spend significant resources to monitor and police our intellectual property rights. Similarly, if we were to infringe on the intellectual property rights of others, our competitive position could suffer. Furthermore, other companies may duplicate or reverse engineer our technologies or design around our patents.
In some instances, litigation may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties that our planned products infringe their intellectual property rights. Any litigation or claims brought by or against us, whether with or without merit, could result in substantial costs to us and divert the attention of our management, which could harm our business and results of operations. In addition, any intellectual property litigation or claims against us could result in the loss or compromise of our intellectual property and proprietary rights, subject us to significant liabilities, require us to seek licenses on unfavorable terms, prevent us from manufacturing or selling certain products or require us to redesign certain products, any of which could our business and results of operations.
We have not established “proven” or “probable” reserves, as defined by the SEC under Industry Guide 7, through the completion of a feasibility study for the minerals that we intend to produce.
We have not yet established proven or probable reserves, as defined by the SEC under Industry Guide 7, through the completion of a “final” or “bankable” feasibility study for any of the minerals that we intend to produce. Until we have established proven or probable reserves, there may be greater inherent uncertainty as to whether or not mineralized material can be economically obtained as originally planned and anticipated. Because we do not have any proven or probable reserves, there can be no assurance that a commercially viable deposit exists to support our production capacity in the future, which could have a material adverse effect on our business, financial condition and future results of operations.
Our reliance on third-party contractors and consultants to conduct our exploration and development projects exposes us to risks.
In connection with the exploration and development of our projects, we contract and engage third party contractors and consultants to assist with aspects of such projects. As a result, we are subject to a number of risks, some of which are outside our control, including:
negotiating agreements with contractors and consultants on acceptable terms;
the inability to replace a contractor or consultant and their operating equipment in the event that either party terminates the agreement;
reduced control over those aspects of exploration or development operations which are the responsibility of the contractor or consultant;
failure of a contractor or consultant to perform under their agreement or disputes relative to their performance;
interruption of exploration or development operations or increased costs in the event that a contractor or consultant ceases their business due to insolvency or other unforeseen events;
failure of a contractor or consultant to comply with applicable legal and regulatory requirements, to the extent they are responsible for such compliance; and
problems of a contractor or consultant with managing their workforce, labor unrest or other employment issues.
In addition, we may incur liability to third parties as a result of the actions of our contractors or consultants. The occurrence of one or more of these risks could increase our costs, interrupt or delay our exploration or development activities or our ability to access our ores, and adversely affect our liquidity, results of operations and financial position.
A shortage of equipment and supplies and/or the time it takes such items to arrive at our projects could adversely affect our ability to operate our business.
We are dependent on various supplies and equipment to engage in exploration and development activities. The shortage of such supplies, equipment and parts and/or the time it takes such items to arrive at our project sites could have a material adverse effect on our ability to explore and develop those projects. Such shortages could also result in increased costs and cause delays in exploration and development projects.
Mining development and processing operations pose inherent risks and costs that may negatively impact our business.
Mining development and processing operations involve many hazards and uncertainties, including, among others:
metallurgical or other processing problems;
ground or slope failures;
industrial accidents;
unusual and unexpected rock formations or water conditions;
environmental contamination or leakage;
flooding and periodic interruptions due to inclement or hazardous weather conditions or other acts of nature;
fires;
seismic activity;
pandemics adversely affecting the availability of workforces and supplies;
mechanical equipment failure and facility performance problems; and
availability of skilled labor, critical materials, equipment, reagents, and consumable items.
These occurrences could result in damage to, or destruction of, our properties or planned production facilities, personal injury or death, environmental damage, delays in future mining or processing, increased future production costs, asset write downs, monetary losses and legal liability, any of which could have a material adverse effect on our future development plans and ability to raise additional capital.
Failure to adequately manage our growth may seriously harm our business.
We plan to grow our business as rapidly as possible. If we do not effectively manage our future growth, the quality of our anticipated cobalt and copper concentrates and/or intermediates may suffer, which could negatively affect our reputation and demand for our prospective cobalt and copper concentrates and/or intermediates. Our growth may place a significant strain on our managerial, administrative, operational, and financial resources and our infrastructure. Our future success will depend, in part, upon the ability of our senior management to manage growth effectively. This will require us to, among other things:
implement additional management information systems;
further develop our operating, administrative, legal, financial, and accounting systems and controls;
hire additional personnel;
develop additional levels of management within our Company;
locate additional office space;
maintain close coordination among our engineering, operations, legal, finance, sales and marketing, and client service and support organizations; and
manage our expanding international operations.
Moreover, if we generate sales for the first time and if our sales increase, we may be required to concurrently deploy our product infrastructure at multiple additional locations or provide increased levels of customization. As a result, we may lack the resources to deploy our planned products on a timely and cost-effective basis. Failure to accomplish any of these requirements could impair our ability to deliver our cobalt and copper concentrates and/or intermediates in a timely fashion, fulfill existing client commitments, or attract and retain new clients.
If we cannot maintain our corporate culture as we grow, we could lose the innovation, teamwork and focus that contribute crucially to our business.
We believe that a critical component of our success is our corporate culture, which we believe fosters innovation, encourages teamwork, cultivates creativity and promotes focus on execution. We have invested substantial time, energy and resources in building a highly collaborative team that works together effectively in a non-hierarchical environment designed to promote openness, honesty, mutual respect and pursuit of common goals. As we start to develop the infrastructure of a public company and grow, we may find it difficult to maintain these valuable aspects of our corporate culture. Any failure to preserve our culture could negatively impact our future success, including our ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives.
Our future operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations.
Our future revenue and operating results could vary significantly from quarter to quarter and year to year due to a variety of factors, many of which are outside our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful. In addition to other risk factors discussed in this “Risk Factors” section, factors that may contribute to the variability of our quarterly and annual results include:
costs associated with defending any litigation, including intellectual property infringement litigation;
our ability to pursue, and the timing of, entry into new geographic or content markets and, if pursued, our management of this expansion;
the impact of general economic conditions on our revenue and expenses; and
changes in government regulation affecting our business.
If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may decline.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Further, we are required to report any changes in internal controls on a quarterly basis. In addition, we would be required to furnish a report by management on the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We will design, implement, and test the internal controls over financial reporting required to comply with these obligations. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of its internal control over financial reporting when required, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of the common stock could be negatively affected. We also could become subject to investigations by the stock exchange on which the securities are listed, the Commission, or other regulatory authorities, which could require additional financial and management resources.
The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members.
In addition to the costs of compliance with having our shares listed on the OTCQB of the OTC Markets, there are substantial penalties that could be imposed upon us if we fail to comply with all regulatory requirements. As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be from other business , which could affect our business and operating results. Although we have already hired additional employees to comply with these requirements, we may need to hire more employees in the future or engage outside consultants, which will increase our costs and expenses.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. For example, the concept of impact Materiality, related to a company’s reporting for impacts on the economy, environment and people, will eventually create a double materiality standard, when combined with financial materiality, which could cause risks emanating from the level of overall required disclosures, for which Chilean Cobalt would expect to mitigate based on its proactive approach to sustainability and its alignment with emerging leading global standards. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings us and our business may be affected.
However, for as long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.”
We also expect that being a public company and adhering to these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
As a result of disclosure of information in this Annual Report on Form 10-K and in filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and operating results.
We are an emerging growth company and subject to less rigorous public reporting requirements and cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are a public reporting company under the Exchange Act, and must publicly report on an ongoing basis as an “emerging growth company” (as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we remain an “emerging growth company”, we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not “emerging growth companies”, including but not limited to:
not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
taking advantage of extensions of time to comply with certain new or revised financial accounting standards;
being permitted to comply with reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and
being exempt from the requirement to hold a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We could be an emerging growth company for up to five years, circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700 million, if we issue $1 billion or more in non-convertible debt during a three-year period, or if our annual gross revenues exceed $1 billion. We would cease to be an emerging growth company on the last day of the fiscal year following the date of the fifth anniversary of our first sale of common equity securities under an effective registration statement or a fiscal year in which we have $1 billion in gross revenues. Finally, at any time we may choose to opt-out of the emerging growth company reporting requirements. If we choose to opt out, we will be unable to opt back in to being an emerging growth company.
We are required to file periodic reports with the Securities and Exchange Commission (the “SEC”) pursuant to the Exchange Act and the rules and regulations promulgated thereunder.
We cannot predict if investors will find our common stock less attractive because we may rely on the emerging growth company and smaller reporting company exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We are a smaller reporting company and will be exempt from certain disclosure requirements, which could make our common stock less attractive to potential investors.
Rule 12b-2 of the Exchange Act defines a “smaller reporting company” as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that:
had a public float of less than $75 million as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity; or
in the case of an initial registration statement under the Securities Act, or the Exchange Act of 1934, as amended, which we refer to as the Exchange Act, for shares of its common equity, had a public float of less than $75 million as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated public offering price of the shares; or
in the case of an issuer whose public float as calculated under paragraph (1) or (2) of this definition was zero, had annual revenues of less than $50 million during the most recently completed fiscal year for which audited financial statements are available.
As a smaller reporting company, we are not required and may not include a Compensation Discussion and Analysis section in our proxy statements; we will provide only two years of financial statements; and we need not provide the table of selected financial data. We also will have other “scaled” disclosure requirements that are less comprehensive than issuers that are not smaller reporting companies which could make our common stock less attractive to potential investors, which could make it more difficult for our stockholders to sell their shares.
As a result of becoming a public company, we are obligated to develop and maintain proper and effective internal control over financial reporting. We may not complete our analysis of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in us and, as a result, the value of our common stock .
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting, as well as a statement that our independent registered public accounting firm has issued an opinion on our internal control over financial reporting.
We are in the very early stages of the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective.
If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the SEC.
We are required to disclose changes made in our internal control and procedures on a quarterly basis. However, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the later of the year following our first annual report required to be filed with the SEC, or the date we are no longer an “emerging growth company” as defined in the JOBS Act if we take advantage of the exemptions contained in the JOBS Act.
Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until the later of the year following our first annual report required to be filed with the SEC, or the date we are no longer an “emerging growth company.” At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating. Our remediation efforts may not enable us to avoid a material weakness in the future.
As an emerging growth company, our auditor is not required to attest to the effectiveness of our internal controls.
Our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting while we are an emerging growth company. This means that the effectiveness of our financial operations may differ from our peer companies in that they may be required to obtain independent registered public accounting firm attestations as to the effectiveness of their internal controls over financial reporting and we are not. While our management will be required to attest to internal control over financial reporting and we will be required to detail changes to our internal controls on a quarterly basis, we cannot provide assurance that the independent registered public accounting firm’s review process in assessing the effectiveness of our internal controls over financial reporting, if obtained, would not find one or more material weaknesses or significant deficiencies. Further, once we cease to be an emerging growth company, we will be subject to independent registered public accounting firm attestation regarding the effectiveness of our internal controls over financial reporting. Even if management finds such controls to be effective, our independent registered public accounting firm may decline to attest to the effectiveness of such internal controls and issue a qualified report.
Members of our board of directors and our executive officers will have other business interests and obligations to other entities.
Neither our directors nor our executive officers will be required to manage the Company as their sole and exclusive function and they may have other business interests and may engage in other activities in addition to those relating to us, provided that such activities do not compete with our business or otherwise breach their agreements with us. We are dependent on our directors and executive officers to successfully operate our Company. Their other business interests and activities could divert time and attention from operating our business.
Our business could be adversely affected by natural disasters, public health crises, political crises or other unexpected events for which we may not be sufficiently insured.
Natural disasters and other adverse weather and climate conditions, pandemics, public health crises, political crises, terrorist attacks, war and other political instability or other unexpected events could disrupt our operations, damage one or more of our locations, or prevent short- or long-term access to one or more of our locations. Our projects are located in the vicinity of disaster zones, including flood and earthquake zones in Chile. Such locations may be the target of terrorist or other attacks. Although we believe we are adequately insured with respect to all of our consolidated operations, there are certain types of losses that we do not insure against because they are either uninsurable or not insurable on commercially reasonable terms. Should an uninsured event or a in excess of our insured limits occur, we could some or all of the capital invested in, and anticipated future revenues from, the affected locations, and we may nevertheless continue to be subject to obligations related to those locations.
Risks Related to Environmental Factors
We, our future operations, planned facilities, prospective products and raw materials are subject to environmental, health and safety laws and regulations, and costs to comply with, and liabilities related to, these laws and regulations could adversely affect our business.
We are subject to extensive federal, state, local, and foreign environmental and safety laws, regulations, directives, rules and ordinances concerning, among other things, employee health and safety, the composition of our planned products, the discharge of pollutants into the air and water, the management and disposal of hazardous substances and wastes, the usage and availability of water, the cleanup of contaminated properties (including the federal Comprehensive Environmental Response, Compensation and Liability Act, commonly known as CERCLA or Superfund, in the U.S., and similar foreign and state laws) and the reclamation of our future mine extraction operations and certain other assets at the end of their useful life. In addition, our future production facilities will require numerous operating permits. Due to the nature of these requirements and changes in our planned operations, we may incur substantial capital and operating costs, which may have a material adverse effect on our results of operations. We currently do not have any production facilities in place as these are all in the future planning stages at this time and accordingly, we have not yet started the permit process in respect to such planned production facilities.
We may also incur substantial costs, including fines, damages, criminal or civil sanctions and remediation costs, or experience interruptions in our operations, for violations arising under these laws and regulations or permit requirements. In addition, we may be required to either modify existing or obtain new permits to meet our capacity expansion plans. We may be unable to modify or obtain such permits or if we can, it may be costly to do so. Furthermore, environmental, health and safety laws and regulations are subject to change and have become increasingly stringent in recent years. Future environmental, health and safety laws and regulations could require us to alter our production processes, acquire pollution abatement or remediation equipment, modify our planned products or incur other expenses, which could harm our business and results of operations.
If we violate environmental, health and safety laws or regulations, in addition to being required to correct such violations, we can be held liable in administrative, civil or criminal proceedings for substantial fines and other sanctions could be imposed that could disrupt or limit our operations. Liabilities associated with the investigation and cleanup of hazardous substances, as well as personal injury, property damages or natural resource damages arising from the release of, or exposure to, such hazardous substances, may be imposed without regard to violations of laws or regulations or other fault, and may also be imposed jointly and severally. Such liabilities may also be imposed on many different entities, including, for example, current and prior property owners or operators, as well as entities that arranged for the disposal of the substances.
Environmental regulations could require us to make significant expenditures or expose us to potential liability.
To the extent we become subject to environmental liabilities, the payment of such liabilities or the costs that we may incur, including costs to remedy environmental pollution, would reduce funds otherwise available to us and could have a material adverse effect on our financial condition, results of operations, and liquidity. If we are unable to fully remedy an environmental violation or release of hazardous substances, we might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy or corrective action. The environmental standards that may ultimately be imposed at a mine site can vary and may impact the cost of remediation. Actual remedial costs may exceed the financial accruals that have been made for such remediation. Additionally, the timing of the remedial costs may be materially different from the current remediation plan. The potential exposure may be significant and could have an adverse effect on our financial condition and results of operations.
Moreover, governmental authorities and private parties may bring lawsuits based upon damage to property or natural resources and injury to persons resulting from the environmental, health and safety impacts of our past and current operations, which could lead to the imposition of substantial fines, remediation costs, penalties, injunctive relief and other civil and criminal sanctions. Substantial costs and liabilities, including those required to restore the environment after the closure of our projects, are inherent in our operations. We cannot provide any assurance that any such law, regulation, enforcement or private claim will not have a negative effect on our business, financial condition or results of operations.
Climate-related transition risks, including evolving regulatory, market and customer requirements, could materially increase our costs, restrict our access to markets, or impair the commercial viability of our future products.
In addition to physical climate risks, we may be adversely affected by transition risks associated with the global shift toward lower-carbon technologies and more stringent climate-related regulation. These risks include potential carbon-pricing mechanisms, mandatory emissions-reporting requirements, restrictions on the carbon intensity of mineral production, and increased expectations from customers, lenders, and supply-chain partners regarding greenhouse-gas reductions, renewable-energy use, and responsible-sourcing practices. Our future operations may require significant capital investment to comply with such requirements, and failure to meet evolving expectations could limit our ability to sell products to key customers, access financing, or participate in certain supply chains. These transition risks may materially and adversely affect our business, prospects, financial condition, and results of operations.
Our ability to secure and maintain adequate water rights and comply with water-use and water-quality regulations may materially affect our operations.
Mining operations require significant water resources, and we may face competition from local communities, agriculture, or other industries. Regulatory constraints, drought conditions, or community opposition could limit our access to water. We may also be subject to stringent discharge and water-quality requirements. Inability to secure or maintain necessary water rights could materially affect our business.
We may be subject to significant liabilities associated with tailings, waste-rock management, or legacy environmental conditions at or near our project sites.
Mining operations generate tailings and waste rock that must be managed in compliance with evolving standards. We may also face liability for historic environmental conditions at the La Cobaltera site or surrounding areas, even if caused by prior operators. Tailings failures, instability, or regulatory changes could result in substantial remediation costs, penalties, or operational restrictions.
Our operations may be adversely affected by energy-price volatility, grid reliability issues, or requirements to use renewable energy.
Mining and processing activities require significant energy inputs. Changes in energy markets, regulatory requirements, or grid reliability may materially affect our operations and costs.
The technical and environmental performance of potential processing technologies, including bioleaching, remains uncertain and may not be commercially viable at scale.
Pilot-scale results may not translate to commercial operations. Regulatory acceptance of new technologies may be limited, and environmental impacts may differ from expectations.
Risks Related to Social and Community Factors
We may face community opposition, social-license challenges, or obligations to consult with indigenous or local communities, any of which could delay or prevent project development.
Mining projects often face scrutiny from local communities, NGOs, and other stakeholders. Community concerns regarding environmental impacts, water use, land access, or cultural heritage could result in protests, legal challenges, or political pressure. Failure to obtain or maintain social license to operate could materially delay or prevent project advancement.
We may be required to engage in formal consultation processes with Indigenous or local communities, and failure to do so could result in delays, legal challenges, or reputational harm.
Mining activities in northern Chile, including in the Atacama Region where our La Cobaltera project is located, may affect Indigenous communities whose ancestral territories overlap or are in proximity to current and prospective mining concessions, including Colla and Diaguita communities recognized under Chilean law. Chile has ratified ILO Convention 169 and is subject to international standards regarding Indigenous rights, including consultation and, in some circumstances, free, prior and informed consent (FPIC). In practice, Indigenous communities in the Atacama Region have raised concerns about mining-related impacts on land, water, ecosystems, and cultural practices, and have challenged projects where they believe consultation has been inadequate or their rights have not been respected.
As our projects advance, we may be required to engage in formal consultation processes with Indigenous or local communities under Chilean environmental and Indigenous-rights frameworks, as well as to meet expectations embedded in ESG assurance standards such as IRMA and Digbee, which emphasize respect for Indigenous rights, culturally appropriate engagement, and documentation of consultation processes. Failure to identify potentially affected Indigenous communities, to conduct consultation processes that are viewed as legitimate, or to meet evolving expectations under these frameworks could result in delays, legal challenges, additional mitigation or compensation requirements, reputational harm, or the inability to secure or maintain necessary permits or commercial relationships.
We may face challenges in recruiting, training, and retaining a skilled workforce, and our reliance on contractors may expose us to additional safety and compliance risks.
Labor shortages, training gaps, or contractor non-compliance could result in safety incidents, regulatory violations, or operational delays.
We may be subject to emerging human-rights due-diligence laws that impose obligations on our operations and supply chain.
Failure to comply with emerging human-rights due-diligence laws could result in penalties, litigation, and/or loss of market access.
Risks Related to Governance, Regulatory and Financing Factors
Our business and financial results may be adversely affected by various legal and regulatory proceedings.
We are involved from time to time in legal and regulatory proceedings, which may be material in the future. The outcome of proceedings, lawsuits and claims may differ from our expectations, leading us to change estimates of liabilities and related insurance receivables.
Legal and regulatory proceedings, whether with or without merit, and associated internal investigations, may be time-consuming and expensive to prosecute, defend or conduct, divert management’s attention and other resources, inhibit our ability to sell our planned products, result in adverse judgments for damages, injunctive relief, penalties and fines, and otherwise negatively affect our business.
We are subject to numerous governmental permits that are difficult to obtain and we may not be able to obtain or renew all of the permits we require, or such permits may not be timely obtained or renewed.
In the ordinary course of business we are required to obtain and renew governmental permits for our current limited operations at our projects. We will also need additional governmental permits to accomplish our long-term plans to mine cobalt, copper and rare earth elements under plans yet to be developed. Obtaining or renewing the necessary governmental permits is a complex and time-consuming process involving costly undertakings by us. The duration and success of our efforts to obtain and renew permits are contingent upon many variables not within our control, including the interpretation of applicable requirements implemented by the permitting authority and intervention by third parties in any required environmental review. We may not be able to obtain or renew permits that are necessary on a timely basis or at all, and the cost to obtain or renew permits may exceed our estimates. Failure to comply with the terms of our permits may result in injunctions, fines, suspension or revocation of permits and other penalties. We can provide no assurance that we have been, or will at all times be, in full compliance with all of the terms of our permits or that we have all required permits. The costs and associated with compliance with these permits and with the permitting process could alter all or a portion of any mine plan we may propose in the future, or stop us from proceeding with the development of our projects or increase the costs of development or production, any or all of which may materially and/or affect our business, prospects, results of operations, financial condition and liquidity.
Evolving ESG-related regulations, responsible-sourcing requirements, and due-diligence expectations may impose significant costs on our business and could limit our ability to access certain markets or financing sources.
Global expectations for environmental, social, and governance (ESG) performance are evolving rapidly, and we may be required to comply with a growing number of responsible-sourcing, traceability, and due-diligence requirements imposed by regulators, investors, customers, and downstream supply-chain partners. Battery and electric-vehicle manufacturers increasingly require verified responsible-sourcing practices, independent ESG assurance, and detailed documentation of environmental and social impacts across the supply chain. These expectations continue to expand as the European Union implements new sustainability regulations, including the Corporate Sustainability Reporting Directive (CSRD) and the proposed Corporate Sustainability Due Diligence Directive (CSDDD), which may indirectly apply to us through our customers or commercial partners. Similar expectations are emerging in the United States, where changes in Congressional control or federal agency priorities could result in new disclosure requirements, enhanced enforcement, or expanded due-diligence obligations for critical-minerals supply chains.
In Chile, the incoming administration has indicated that it intends to review and potentially reform aspects of the country’s mining, environmental, and consultation frameworks, with a stated focus on improving regulatory predictability, streamlining administrative processes, and strengthening technical capacity. While the administration has emphasized support for mining investment, Chile remains subject to domestic and international obligations related to environmental protection, water governance, and Indigenous rights, including ILO Convention 169 and the requirements of the Environmental Impact Assessment System (SEIA). As a result, the scope, timing, and implementation of future regulatory changes remain uncertain and may affect the expectations placed on mining companies operating in the country.
In addition, ESG assurance frameworks such as IRMA and Digbee continue to update their standards, raising expectations for transparency, stakeholder engagement, and independent verification. Meeting these evolving requirements may require significant investment in systems, personnel, and third-party assessments. Failure to comply with these expectations, or to demonstrate credible progress toward them, could limit our ability to access certain markets, secure financing from institutional investors or government agencies, or maintain commercial relationships with downstream customers.
Failure to meet responsible-sourcing, traceability, or ESG-performance requirements imposed by customers or supply-chain partners could limit our ability to sell our future products.
Battery, magnet, and electric - vehicle manufacturers increasingly require verified responsible - sourcing practices, traceability systems, and independent ESG assurance from upstream suppliers. Many downstream customers now require documentation of environmental and social impacts, greenhouse - gas emissions, water use, community engagement, and human - rights due diligence across the supply chain. These expectations are being reinforced by new and emerging regulations, including the European Union ’ s Corporate Sustainability Reporting Directive (CSRD) and the proposed Corporate Sustainability Due Diligence Directive (CSDDD), which may indirectly apply to us through our customers or commercial partners. In the United States, changes in Congressional control or federal agency priorities could result in expanded disclosure obligations or enhanced enforcement related to critical - minerals sourcing, traceability, and ESG performance.
Responsible-sourcing and ESG-assurance frameworks such as IRMA and Digbee increasingly influence the expectations of downstream customers, investors, and supply-chain partners. The current versions of these frameworks already require detailed documentation of environmental and social impacts, traceability of materials, stakeholder-engagement processes, and independent verification of performance. As these standards continue to evolve, future updates may expand the scope or depth of required disclosures, introduce new performance metrics, or raise expectations for verification, community engagement, or environmental management. Meeting both current and future requirements may require significant investment in systems, personnel, monitoring, and third-party assessments. Failure to comply with these expectations, or to demonstrate credible progress toward them, could limit our ability to access certain markets, secure financing from institutional investors or government agencies, or maintain commercial relationships with downstream customers.
Unanticipated changes in our tax provisions, variability of our effective tax rate, the adoption of new tax legislation or exposure to additional tax liabilities could impact our financial performance.
We operate in multiple jurisdictions, which contributes to the volatility of our effective tax rate. Our future effective tax rates may be materially impacted by numerous items including: a future change in the composition of earnings from foreign and domestic tax jurisdictions; accounting for uncertain tax positions; business combinations; expiration of statutes of limitations or settlement of tax audits; changes in valuation allowances; and changes in tax law.
We are also subject to ongoing tax audits in various jurisdictions. Tax authorities may disagree with our intercompany charges, cross-jurisdictional transfer pricing or other matters, and may assess additional taxes as a result. There can be no assurance that we will accurately predict the outcomes of these audits, and the amounts ultimately paid upon resolution of audits could be materially different from the amounts previously included in our income tax expense and therefore could have a material impact on our tax provision, net income and cash flows. If these audits result in assessments different from amounts reserved, future financial results may include unfavorable adjustments to our tax liabilities.
Our participation in ESG assurance frameworks may expose us to additional scrutiny, costs, and reputational risks.
Poor scores, adverse findings, or failure to demonstrate progress could harm our reputation or limit access to financing. Participation in ESG assurance frameworks can entail annual costs for ratings and affiliation, independent assessments and other indirect costs for demonstrating compliance.
Our governance systems, ESG processes, and internal controls are still being developed and may not be sufficient to support future operational or regulatory requirements.
As a pre-operational company, many of our governance systems, ESG processes, and internal controls are still being developed and have not yet been tested under operational conditions. As regulatory expectations, responsible-sourcing requirements, and stakeholder expectations continue to evolve, we may be required to implement additional policies, procedures, monitoring systems, and internal controls to support future operational, regulatory, and reporting obligations. Investors, lenders, and downstream supply-chain partners increasingly expect mining companies to demonstrate mature governance practices, including documented risk-management systems, traceability and chain-of-custody controls, community-engagement processes, and independent ESG assurance.
ESG assurance frameworks such as IRMA and Digbee also influence expectations for governance maturity, and updates to these frameworks may expand the scope or depth of required disclosures, introduce new performance metrics, or raise expectations for verification, stakeholder engagement, or environmental and social management. Meeting these expectations may require significant investment in systems, personnel, and third-party assessments.
In addition, regulatory expectations in the United States and the European Union continue to evolve, including potential changes in federal agency priorities, Congressional oversight, and the implementation of EU sustainability regulations such as the Corporate Sustainability Reporting Directive (CSRD) and the proposed Corporate Sustainability Due Diligence Directive (CSDDD). In Chile, the incoming administration has indicated that it intends to review aspects of the country’s mining, environmental, and consultation frameworks, creating uncertainty regarding future governance and compliance requirements. As a result, our current systems and processes may not be sufficient to meet future operational, regulatory, or stakeholder expectations, which could delay project advancement, increase compliance costs, or limit our ability to access certain markets or financing sources.
ESG-related concerns may delay or limit our ability to obtain financing or increase our cost of capital.
Lenders, including U.S. government financing agencies, may require extensive ESG diligence, independent assessments, or evidence of governance maturity. ESG diligence conducted by lenders or required as part of financing processes may identify gaps, areas for improvement, or additional expectations that could affect the availability, scope, or terms of financing. Any such findings could increase our cost of capital, delay financing decisions, or require us to pursue alternative sources of funding.
Changes in Chilean mining law, tax regimes, regulatory requirements, or political conditions could materially affect our operations.
Chile’s legal, regulatory, and political environment for mining is subject to change, and future reforms could materially affect our ability to advance our projects. The incoming administration has indicated that it intends to review aspects of the country’s mining, environmental, and consultation frameworks, with a stated focus on improving regulatory predictability, streamlining administrative processes, and strengthening technical capacity. While the administration has emphasized support for mining investment, the scope, timing, and implementation of potential reforms remain uncertain. Changes to mining law, environmental permitting requirements, water-governance rules, Indigenous consultation processes, or land-use regulations could increase compliance obligations, alter project timelines, or require additional engagement, documentation, or mitigation measures.
Chile’s mining tax regime has been the subject of significant debate in recent years, including the development and passage of a new royalty framework and ongoing discussion about whether further adjustments are needed to balance competitiveness and public revenue. Future changes to royalties, corporate tax rates, or sector-specific fiscal measures could affect project economics and materially impact our business.
In addition, Chile remains subject to domestic and international obligations related to environmental protection, water resources, and Indigenous rights, including ILO Convention 169 and the requirements of the Environmental Impact Assessment System (SEIA). Political transitions, shifts in legislative priorities, or changes in the composition of Congress could influence how these obligations are interpreted or enforced. As a result, our future operations may be affected by changes in law, regulation, or political conditions that increase costs, delay permitting, require modifications to project design, or limit our ability to obtain or maintain necessary approvals. Any such changes could materially and adversely affect our business, prospects, financial condition, and results of operations.
We may face risks related to transportation infrastructure, port capacity, fuel availability, or labor disruptions that could delay or increase the cost of delivering our products.
Our ability to transport materials from our project sites to customers depends on regional and international logistics systems that are outside our control. In northern Chile, mining companies rely heavily on limited transportation corridors, including road networks that may be affected by weather events, maintenance constraints, or congestion. If we export through the Port of Huasco or other regional ports, our operations could be affected by port-capacity limitations, berth availability, equipment outages, or labor disruptions involving port operators, stevedores, or customs personnel. Fuel availability and price volatility in Chile or along international shipping routes could also increase transportation costs.
Shipments to North America may transit the Panama Canal, which has experienced periodic restrictions due to drought conditions, vessel-traffic congestion, and operational constraints. Any future limitations on canal capacity, draft restrictions, or transit delays could increase shipping times or costs, or require rerouting through longer and more expensive alternatives. Global shipping markets are also subject to disruptions caused by geopolitical tensions, changes in maritime insurance requirements, piracy risks, or congestion at major transshipment hubs.
Labor actions affecting trucking, rail, port operations, or maritime transport—whether in Chile, at the Panama Canal, or at receiving ports—could delay deliveries or increase logistics costs. Climate-related events, including heavy rainfall, flooding, landslides, or coastal storms, may also disrupt transportation infrastructure or port operations. Any of these factors could materially delay or increase the cost of delivering our products to customers and could adversely affect our business, financial condition, or results of operations.
Risks Related to Ownership of Our Common Stock and Lack of Liquidity
An active trading market for our common stock may not develop and you may not be able to resell your shares at or above the price that you paid.
As of the present time, there has been a steadily growing public market, but certainly not a liquid and active trading market for shares of our common stock. In the absence of an active trading market for our common stock, investors may not be able to sell their common stock at or above the price that you paid or at the time that they would like to sell.
The OTCQB, as with other public markets, has from time-to-time experienced significant price and volume fluctuations. As a result, the market price of shares of our common stock may be similarly volatile, and holders of shares of our common stock may from time to time experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. The price of shares of our common stock could be subject to wide fluctuations in response to a number of factors, including those listed in this “Risk Factors” section of this Annual Report on Form 10-K.
No assurance can be given that the market price of shares of our common stock will not fluctuate or decline significantly in the future or that stockholders will be able to sell their shares when desired on favorable terms, or at all.
Our stock price may be volatile.
The market price of our common stock has exhibited and is likely to continue exhibiting volatile behavior. The market price could fluctuate widely in price in response to various potential factors, many of which will be beyond our control, including the following:
services by the Company or its competitors;
additions or departures of key personnel;
our ability to execute its business plan;
operating results that fall below expectations;
loss of any strategic relationship;
industry developments;
economic and other external factors; and
period-to-period fluctuations in our financial results.
In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and/or adversely affect the market price of our common stock. In the past, certain companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
If securities or industry analysts do not publish research or reports about our business, or they publish negative reports about our business, our share 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, our market, and our competitors. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares or publish negative views on us or our shares, our share price would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
Our common stock is currently deemed to be “penny stock”, which makes it more difficult for investors to sell their shares .
Our common stock is and will be subject to the “penny stock” rules adopted under section 15(g) of the Exchange Act. The penny stock rules apply to companies whose common stock is not listed on the Nasdaq Stock Market or other national securities exchange and trades at less than $5.00 per share or that have tangible net worth of less than $5,000,000 ($2,000,000 if we have been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our securities.
FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. The FINRA requirements may make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity in our common stock. As a result, fewer broker-dealers may be willing to make a market in our common stock, reducing a stockholder’s ability to resell shares of our common stock.
Our securities holders may face significant restrictions on the resale of our securities due to state “Blue Sky” laws.
Each state has its own securities laws, often called “blue sky” laws, which (i) limit sales of securities to a state’s residents unless the securities are registered in that state or qualify for an exemption from registration, and (ii) govern the reporting requirements for broker-dealers doing business directly or indirectly in the state. Before a security is sold in a state, there must be a registration in place to cover the transaction, or the transaction must be exempt from registration. The applicable broker must be registered in that state. We do not know whether our common stock will be registered or exempt from registration under the laws of any state. With our securities being currently quoted on the OTCQB, a determination regarding registration must be made by those broker-dealers, if any, who agree to serve as the market-makers for our common stock. There may be significant state blue sky law restrictions on the ability of investors to sell, and on purchasers to buy, our common stock. You should therefore consider the resale market for our common stock to be limited, as you may be unable to resell your common stock without the significant expense of state registration or qualification.
Substantial future sales of shares of our common stock could cause the market price of our common stock to decline.
The market price of shares of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers and significant stockholders, a large number of shares of our common stock becoming available for sale or the perception in the market that holders of a large number of shares intend to sell their shares.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors 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 investments.
Stockholders may be diluted significantly through our efforts to obtain financing and satisfy obligations through issuance of additional shares of our common stock.
We have no committed source of financing. Wherever possible, we may attempt to use non-cash consideration to satisfy obligations or obtain financing. Our board of directors has authority, without action or vote of the stockholders, to issue all or part of the authorized but unissued classes of stock. In addition, if a trading market develops for our common stock, we may attempt to raise capital by selling shares of our common stock, possibly at a discount to market. These actions would result in dilution of the ownership interests of existing stockholders and may further dilute the common stock book value, and that dilution may be material.
If we fail to maintain effective internal control over financial reporting, the price of our securities may be adversely affected.
Our internal control over financial reporting may have weaknesses and conditions that could require correction or remediation, the disclosure of which may have an adverse impact on the price of our common stock. We are required to establish and maintain appropriate internal control over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition or results of operations. In addition, management’s assessment of internal control over financial reporting may identify weaknesses and conditions that need to be addressed in our internal control over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal control over financial reporting may have an adverse impact on the price of our common stock.
Shares eligible for future sale may adversely affect the market.
From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations. Pursuant to Rule 144, non-affiliate stockholders may sell freely after six months, subject only to the current public information requirement. Affiliates may sell after six months, subject to the Rule 144 volume, manner of sale (for equity securities), current public information, and notice requirements. Of the approximately 56,409,930 shares of our common stock outstanding as of March 31, 2026, 34,600,975 shares could be presently tradable without restriction. Given the likely limited trading of our common stock, resale of even a small number of shares of our common stock pursuant to Rule 144 or an effective registration statement may adversely affect the market price of our common stock.
Because we may not be subject to compliance with rules requiring the adoption of certain corporate governance measures, our stockholders have limited protection against interested director transactions, conflicts of interest and similar matters.
The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, the New York Stock Exchange and the Nasdaq Stock Market, as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities that are listed on those exchanges or the Nasdaq Stock Market. Because we are not presently required to comply with many of the corporate governance provisions, we have not yet adopted these measures.
We do not currently have independent audit or compensation committees, although all directors currently constitute our audit committee. As a result, our officers and directors have the ability, among other things, to determine their own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest, if any, and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations.
We intend to comply with all corporate governance measures relating to director independence as and when required. However, we may find it very difficult or be unable to attract and retain qualified officers, directors and members of board committees required to provide for our effective management as a result of Sarbanes-Oxley Act of 2002. The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may make it more costly or deter qualified individuals from accepting these roles.
Our Articles of Incorporation and our bylaws provide that the state and federal courts of the State of Nevada will be the sole and exclusive forum for substantially all disputes between us and our shareholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Section 19 our Articles of Incorporation and Section 7.4 of our bylaws, provide that, unless we consent in writing to the selection of an alternative forum, the state and federal courts of the State of Nevada will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or our stockholders, (iii) an action asserting a claim arising pursuant to any provision of the NRS, or (iv) any action asserting a claim governed by the internal affairs doctrine. Additionally, pursuant to Section 19 our Articles of Incorporation and Section 7.4 of our bylaws, the prevailing parties of any such actions will be entitled to recover from the other party reasonable attorneys’ fees, costs and expenses incurred in connection with the prosecution or defense of such action. However, these forum clauses will not apply to claims which are vested in the exclusive jurisdiction of a court or forum other than state and federal courts in the State of Nevada. For instance, these exclusive forum provisions will not apply to actions arising under federal securities laws, including suits brought to enforce any liability or duty created by the Securities Act, the Exchange Act, or the rules and regulations thereunder. These provisions will not apply to suits brought to enforce a duty or liability created by the Exchange Act. It is possible that a court of law could rule that these choice of forum provisions are inapplicable or unenforceable if in a proceeding or otherwise. Therefore, these forum provisions will not relieve us of our duty to comply with the federal securities laws and the rules and regulations thereunder, and shareholders will not be deemed to have waived our compliance with these laws, rules and regulations. These forum provisions may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing for with us or our directors, officers or other employees, which may lawsuits us or our directors, officers or other employees. In addition, shareholders who do bring a claim in the state or federal court in the State of Nevada could face additional costs in pursuing any such claim, particularly if they do not reside in or near Nevada. The state or federal court of the State of Nevada may also reach different judgments or results than would other courts, including courts where a shareholder would otherwise choose to bring the action, and such judgments or results may be more to us than to our shareholders. However, the enforceability of similar forum provisions in other companies’ articles of incorporation and bylaws have been in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings. If a court were to find these forum provisions to be inapplicable or unenforceable in an action, we might incur additional costs associated with resolving such action in other jurisdictions.
