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YoY shift: Lean +
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.28pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.25pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.80pp
Lean +
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
default+10
conflict+3
unpaid+3
adverse+2
unable+2
Positive rising
achieve+1
effective+1
profitable+1
stable+1
gaining+1
Risk Factors (Item 1A)
13,201 words
ITEM 1A. RISK FACTORS
An investment in our securities involves a high degree of risk. In addition to the other information contained in this Annual Report on Form 10-K, prospective investors should carefully consider the following risks before investing in our securities. If any of the following risks actually occur, as well as other risks not currently known to us or that we currently consider immaterial, our business, operating results and financial condition could be materially adversely affected. As a result, the trading price of our common stock could decline, and you may lose all or part of your investment in our common stock. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. See “ Introductory Notes – Cautionary Note Regarding Forward-Looking Statements ” in this Annual Report on Form 10-K. In assessing the risks below, you should also refer to the other information contained in this Annual Report on Form 10-K, including the financial statements and the related notes, before deciding to purchase any of our securities.
Risks Relating to Macro Conditions and Our Financial Condition
We are in default under certain of our outstanding convertible promissory notes, which could result in acceleration of the indebtedness thereunder, enforcement of security interests, dilutive conversions of outstanding amounts into shares of our common stock, and other material consequences.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
default+3
reassessment+2
cautionary+1
against+1
claims+1
Positive rising
satisfy+2
gain+1
improved+1
favorable+1
advances+1
MD&A (Item 7)
3,444 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this report. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report, particularly in the sections titled Part II. Item 1A. “ Risk Factors ” and “ Introductory Notes – Cautionary Note Regarding Forward-Looking Statements ” .
Factors Affecting Our Performance
The primary factors affecting our results of operations include but not limited to:
General Macroeconomic Conditions
Our business is impacted by the global economic environment, employment levels, consumer confidence, government, and municipal spending. Global instability in securities markets, the Russian invasion of Ukraine, and war in the Middle East are among other factors that can impact our financial performance. In particular, changes in the U.S. economic climate can impact the demand of our products range. The industrial and manufacturing sectors are impacted by the overall economic environment as addressed in the risk factors. Tenders can be withdrawn and lead times for the manufacturing can be affected which can result in of orders if not delivered on time.
As of December 31, 2025, all eight of our outstanding convertible promissory notes have matured and the amounts due thereunder remain unpaid. These notes include: (i) a note in the original principal amount of $1,100,000, which matured on August 3, 2024; (ii) a note in the original principal amount of $200,000, which matured on March 17, 2025; (iii) a note in the original principal amount of $220,000, which matured on February 23, 2024; (iv) a note in the original principal amount of $550,000, which matured on December 16, 2023; (v) a note in the original principal amount of $35,000, which matured on or about August 6, 2024; (vi) a note in the original principal amount of $100,000, which matured on December 20, 2024; (vii) a note in the original principal amount of $71,500, which matured on February 21, 2025; and (viii) a note in the original principal amount of $405,000, which matured on July 4, 2025. Including accrued and unpaid interest, default interest, penalties, and other amounts that are owed, as of December 31, 2025, the total balance remaining under these notes was $2,561,240.
The failure to repay these notes at maturity constitutes an event of default under several of the notes and may constitute an event of default under all of them. The consequences of such defaults are material and include, among other things: (a) acceleration of the full outstanding principal amount plus accrued and unpaid interest; (b) accrual of default interest at elevated rates (ranging from 15% to 20% per annum, depending on the note); (c) in the case of the notes that matured on February 23, 2024 and February 21, 2025, the outstanding amount becoming immediately due and payable at 150% to 200% of the then-outstanding principal and accrued interest (not including default due only to non-payment of principal or interest when due); (d) in the case of the note that matured on August 6, 2024, assessment of a liquidateddamages charge equal to 25% of the outstanding balance; (e) in the case of the note that matured on June 30, 2025, the outstanding principal amount increasing to 110% of the amount then due plus default interest at 16% per annum, and the holder gaining the right to convert the default amount into shares of our common stock at a conversion price equal to 80% of the average of the four lowest volume weighted average prices over the preceding 20 trading days, with full-ratchet anti-dilution protection; and (f) in the case of all notes containing conversion features, the right of holders to convert outstanding amounts into shares of our common stock at conversion prices that may be substantially below the then-current market price, resulting in significant dilution to existing stockholders.
Additionally, the note that matured on June 30, 2025, is a senior secured obligation of the Company, and default thereunder could result in the lender enforcing its rights, which could materially impair our operations and the value of our assets. The related loan agreement also contains cross-default provisions triggered by defaults on other material agreements, potentially compounding the adverse effects described above.
Several of these notes also contain most-favored-nation provisions, anti-dilution protections, and beneficial ownership limitations that, in the aggregate, could further complicate our ability to restructure or refinance this indebtedness. There can be no assurance that we will be able to negotiate forbearance agreements, obtain waivers, refinance, or otherwise satisfy our obligations under these notes on terms acceptable to us, or at all. If the holders of these notes elect to exercise their remedies, including acceleration, conversion at discounted prices, or enforcement of security interests, such actions could have a material adverse effect on our business, financial condition, results of operations, and the market price of our common stock, and could raise substantial doubt about our ability to continue as a going concern.
We are dependent on Fusion Fuel and external financing to fund our operations and executive compensation, and there can be no assurance that such support will be available when needed.
We anticipate that Fusion Fuel, our parent company, will finance certain investments in connection with the operations of Al Shola Gas, our majority-owned subsidiary. We further anticipate that Fusion Fuel will provide all compensation required by our executive officers, other than our Chief Operating Officer and Managing Director Middle East. In addition, we plan to address cash flow deficits through borrowings and the sale of securities.
However, no assurance can be given that any such financing, executive compensation support, or additional capital will be available, if and when required. Fusion Fuel’s ability to finance our investments and fund executive compensation depends on its own financial condition and liquidity, which are subject to risks and uncertainties beyond our control. Similarly, our ability to raise capital through borrowings or securities sales may be constrained by adverse market conditions, deteriorating creditworthiness, regulatory limitations, or investor sentiment. If we are unable to obtain adequate financing or compensation support from Fusion Fuel, or to raise sufficient capital through borrowings or securities sales, we may be unable to fully fund our operations, retain key executive personnel, or execute our business plan. Any of these outcomes could have a material adverse effect on our business, financial condition, results of operations, and prospects.
We have a substantial amount of goodwill on our balance sheet. Future write-offs of goodwill may have the effect of decreasing our earnings or increasing our losses.
We have obtained growth through the acquisition of Al Shola Gas. Under existing accounting standards, we are required to periodically review goodwill assets for possible impairment. In the event that we are required to write down the value of any assets under these pronouncements, it may materially and adversely affect our operating results, financial condition, and the price of our common stock. The percentage of our goodwill compared to our total assets as of December 31, 2025, was 50.6%.
Our ability to generate the significant amount of cash needed to service our debt obligations and our ability to refinance all or a portion of our indebtedness or obtain additional financing depends on many factors, many of which may be beyond our control.
Our ability to make scheduled payments on, or to refinance our obligations under, our debt, will depend on our financial and operating performance, which, in turn, will be subject to prevailing economic and competitive conditions and to the financial and business factors, many of which may be beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations, that currently anticipated business opportunities will be realized on schedule or at all, or that future borrowings will be available to us in amounts sufficient to enable us to service our indebtedness and any amounts borrowed under future credit facilities, or to fund our other liquidity needs.
We will use cash to pay the principal and interest on our debt except to the extent that such debt may be convertible into equity. These payments limit funds otherwise available for working capital, capital expenditures, acquisitions, collaborations, and other purposes. As a result of these obligations, our current liabilities may exceed our current assets. We may need to take on additional debt as we expand in our industry, which could increase our ratio of debt to equity. The need to service our debt may limit funds available for other purposes and our inability to service debt in the future could lead to acceleration of our debt and foreclosure on assets.
We cannot assure that we will be able to refinance any of our indebtedness or obtain additional financing as well as prevailing market conditions. As a result, we could face liquidity problems and might be required to dispose of material assets or operations to meet our indebtedness service and other obligations.
Our projections are subject to significant risks, assumptions, estimates and uncertainties, including assumptions regarding future legislation and changes in regulations of the jurisdictions in which we operate, or seek to operate, our business. As a result, our projected revenues, market share, expenses and profitability may differ materially from our expectations.
We operate in a rapidly evolving and highly competitive industry and our projections are subject to the risks and assumptions made by management with respect to this industry. Operating results are difficult to forecast because they generally depend on our assessment of factors that are inherently beyond our control and impossible to predict with certainty, such as the timing of the adoption of future legislation and regulations by different jurisdictions.
Furthermore, if we invest in the development of new products or distribution channels that do not achieve commercial success, whether because of competition or otherwise, we may not recover the often material “up front” costs of developing and marketing those products and distribution channels or recover the opportunity cost of diverting management and financial resources away from other products or distribution channels.
Additionally, our business may be affected by reductions in customer acquisition, customer persistency and customer spending as a result of numerous factors which may be difficult to predict. This may result in decreased revenue levels, and we may be unable to adopt timely measures to compensate for any unexpectedshortfall in income. Our profitability projections make numerous assumptions about the expected future levels of various expense items. Historically, most of these expense items have been relatively stable or predictable either in absolute terms or in relation to revenue but there is no certainty that such stability or predictability will continue into the future. These inabilities could cause our operating results in a given period to be higher or lower than expected. If actual results differ from our estimates, analysts may react negatively, and our share price could be adversely impacted.
If we are unable to successfully identify, complete and integrate acquisitions, our results of operations could be adversely affected.
Acquisitions have been and will continue to be a significant component of our growth strategy. We seek to identify and complete acquisitions and may continue to make strategic acquisitions. Our previous or future acquisitions may not be successful or may not generate the financial benefits that we expected to achieve at the time of acquisition. In addition, there can be no assurance that we will be able to locate suitable acquisition candidates in the future or acquire them on acceptable terms or, because of competition in the marketplace and limitations imposed by the agreements governing our indebtedness or the availability of capital, that we will be able to finance future acquisitions. We may be unable to identify, negotiate, and complete suitable acquisition opportunities on reasonable terms.
Acquisitions involve special risks, including, without limitation, the potential assumption of unanticipated liabilities and contingencies, difficulty in assimilating the operations and personnel of the acquired businesses, disruption of our existing business, dissipation of our limited management resources and impairment of relationships with employees and customers of the acquired business as a result of changes in ownership. Such incidents can significantly affect our financial and operational outlook.
While we believe that strategic acquisitions can improve our competitiveness and profitability, these activities could have a material adverse effect on our business, financial condition, and operating results. We may incur significant costs such as transaction fees, professional service fees and other costs related to future acquisitions. We may also incur integration costs following the completion of any such acquisition as we integrate the acquired business with the rest of our Company. Although we expect that the realization of efficiencies related to the integration of any acquired businesses will offset the incremental transaction and acquisition-related costs over time, this net financial benefit may not be achieved in the near term or at all.
Risks associated with climate change and other environmental impacts, and increased focus and evolving views of our customers, shareholders, and other stakeholders on climate change issues, could negatively affect our business and operations.
The effects of climate change create short and long-term financial risks to our business, both in the UAE and globally. We have significant operations located in regions that have been, and may in the future be, exposed to significant weather events and other natural disasters. Climate related changes can increase variability in or otherwise impact natural disasters, including weather patterns, with the potential for increased frequency and severity of significant weather events (e.g., flooding, hurricanes, and tropical storms), natural hazards (e.g., increased flooding risk), rising mean temperature and sea levels, and long-term changes in precipitation patterns (e.g., drought, desertification, and/or poor water quality). We expect climate change could affect our facilities, operations, employees, and communities in the future, particularly at facilities in coastal areas and areas prone to extreme weather events and water scarcity. Our suppliers are also subject to natural disasters that could affect their ability to deliver or perform under our contracts, including as a result of disruptions to their workforce and critical infrastructure. Disruptions also impact the availability and cost of materials needed for manufacturing and could increase insurance and other operating costs.
Increased worldwide focus on climate change has led to legislative and regulatory efforts to combat both potential causes and adverse impacts of climate change, including regulation of greenhouse gas emissions. New or more stringent laws and regulations related to greenhouse gas emissions and other climate change related concerns may adversely affect us, our suppliers, and our customers. Some of our facilities are, for example, engaged in manufacturing processes that produce greenhouse gas emissions, including carbon dioxide, or rely on products from others that do so. We have worked for years to reduce our reliance on fossil-based energy sources, to decrease our greenhouse gas emissions, to reduce our consumption of water and production of waste, and to ensure our compliance with environmental regulations where we operate, enhancing our record of environmental sustainability. However, new, and evolving laws and regulations could mandate different or more restrictive standards, could require capital investments to transition to low carbon technologies, could adversely impact our ongoing operations, and could require changes on a more accelerated time frame. Our suppliers may face similar challenges and incur additional compliance costs that are passed on to us. These direct and indirect costs may adversely impact our results.
We may be adversely affected by the effects of inflation.
Inflation in wages, materials, parts, equipment, and other costs has the potential to adversely affect our results of operations, cash flows and financial position by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices, we charge our customers for our products and services. In addition, the existence of inflation in the economy has the potential to result in higher interest rates, which could result in higher borrowing costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects. We have currently experienced inflationary pressures on its supply chain due to increased shipping costs, increased energy prices for manufacture of our commercial products as well as increased prices from suppliers of raw materials. We have so far been able to offset inflationary pressure to consumers, but it cannot be guaranteed that that our results of operations will not be adversely affected by inflation in the future and could reduce sales and/or operating margins, and overall financial performance.
We are dependent on the availability of raw materials, parts, and components used in our products.
While we manufacture certain parts and components used in our products, we also require substantial amounts of raw materials and purchases of certain parts and components from suppliers. The availability of and prices for raw materials, parts and components may be subject to curtailment or change due to, among other things, suppliers’ allocations to other purchasers, interruptions in production by suppliers, including due to geopolitical or civil unrest, unfavorable economic or industry conditions, labor disruptions, supply chain disruptions, catastrophic weather events, natural disasters, the occurrence of a contagious disease or illness, changes in exchange rates and prevailing price levels. Any change in the supply of, or price for, these raw materials or parts and components could materially affect us and our financial condition, results of operations and cash flow.
Increases in the price of commodities could impact the cost or price of our products, which could impact our ability to sustain and grow earnings.
The manufacturing processes for gas fuel consume significant amounts of raw materials, the costs of which are subject to worldwide supply and demand factors, as well as other factors beyond our control. Raw material price fluctuations may adversely affect our results. In the past raw material prices have experienced volatility. Commodity pricing has fluctuated over the past few years and may continue to do so in the future. Such fluctuations could have a material effect on our results of operations, balance sheets and cash flows and impact the comparability of our results between financial periods
The markets in which we operate are highly competitive which could reduce sales and operating margins.
Most of our products are sold in competitive markets. Maintaining and improving a competitive position will require continued investment in manufacturing, engineering, quality standards, marketing, customer service and support and distribution networks. We may not be successful in maintaining our competitive position. Our competitors may develop products and methods that are more efficient or may adapt quicker to new technologies or evolving customer requirements. We may not be able to compete successfully with existing competitors or with new competitors. Pricing pressures may require us to adjust the prices of products to stay competitive. Failure to continue competing successfully could reduce sales, operating margins, and overall financial performance.
Our business operations may be adversely affected by information systems interruptions or cybersecurity intrusions.
We depend on various information technologies to administer, store, and support multiple business activities. If these systems are damaged, cease to function properly or are subject to cybersecurity attacks, such as those involving unauthorized access, malicious software and/or other intrusions, we could experience production downtimes, operational delays, other detrimental impacts on operations or the ability to provide products and services to its customers, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems or networks, financial losses from remedial actions, loss of business or potential liability, penalties, fines and/or damage to our reputation. Our systems, networks, products, and services remain potentially vulnerable to known or unknown threats, any of which could have a material adverse effect on the Company and its financial condition or results of operations. Further, given the unpredictability, nature, and scope of cybersecurity attacks, it is possible that potential vulnerabilities could go undetected for an extended period. A severe cybersecurity incident could reduce sales, operating margins, and overall financial performance.
Our long-term success depends, in part, on our ability to operate and expand internationally, and our business is susceptible to risks associated with international operations.
Currently, we only maintain operations in the UAE, and plan to continue our efforts to expand globally, in jurisdictions where we do not currently operate. We expect international operations and export sales to continue to constitute the majority of our sales and assets in the foreseeable future. Managing a global organization is difficult, time consuming and expensive, and any international expansion efforts that we undertake may not be profitable in the near or long term. Although we have operating experience in many foreign jurisdictions, we must still continue to make significant investments to build our international operations. Our sales from international operations and sales from export are both subject in varying degrees to risks inherent in doing business outside the United States. These risks include the following:
Costs, risks, and uncertainties associated with tailoring our services in international jurisdictions as needed to better address both the needs of customers, and the threats of local competitors;
Risks of economic instability, including due to inflation;
Uncertainties in forecasting revenues and expenses in markets where we have not previously operated;
Costs and risks associated with local and national laws and regulations governing the industries in which we operate, health and safety, climate change and sustainability, and labor and employment;
Operational and compliance challenges caused by distance, language, and cultural differences;
Costs and risks associated with compliance with international tax laws and regulations;
Costs and risks associated with compliance with the U.S. Foreign Corrupt Practices Act and other laws in the United States related to conducting business outside the United States, as well as the laws and regulations of non-U.S. jurisdictions governing bribery and other corrupt business activities;
Costs and risks associated with human trafficking, modern slavery and forced labor reporting, training and due diligence laws and regulations in various jurisdictions;
Being subject to other laws and regulations, including laws governing online advertising and other Internet activities, email and other messaging, collection and use of personal information, ownership of intellectual property, taxation, and other activities important to our online business practices;
Currency exchange rate fluctuations and restrictions on currency repatriation;
Competition with companies that understand the local market better than we do or that have preexisting relationships with regulators and customers in those markets;
Adverse effects resulting from the United Kingdom’s exit from the European Union (commonly known as “Brexit”);
Reduced or varied protection for intellectual property rights in some countries;
Disruption of operations from labor and political disturbances;
Withdrawal from or renegotiation of international trade agreements and other restrictions on the trade between the United States and other countries;
Changes in tariff and trade barriers; and
Geopolitical events, including natural disasters, climate change, public health issues, political instability (such as war between Ukraine and Russia and in the Middle East), terrorism, insurrection, or war.
Entry into certain transactions with foreign entities now or in the future may be subject to government regulations, including review related to foreign direct investment by U.S. or foreign government entities. If a transaction with a foreign entity is subject to regulatory review, such regulatory review might limit our ability to enter into the desired strategic alliance and thus our ability to carry out our long-term business strategy.
Operating in international markets also requires significant management attention and financial resources. The investment and additional resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability and could instead result in increased costs without a corresponding benefit. We cannot guarantee that our international operations or expansion efforts will be successful.
Any of these events as well as related events not aforementioned, could have a materially adverse impact on our Company and its operations.
Uncertainty related to environmental regulation and industry standards, as well as physical risks of climate change, could impact our results of operations and financial position.
Increased public awareness and concern regarding environmental risks, including global climate change, may result in more international, regional and/or federal requirements or industry standards to reduce or mitigate global warming and other environmental risks. New climate change laws and regulations could require us to change our manufacturing processes or obtain substitute materials that may cost more or be less available for its manufacturing operations. Various jurisdictions in which we do business have implemented, or in the future could implement or amend, restrictions on emissions of carbon dioxide or other greenhouse gases, limitations or restrictions on water use, the production of single use plastics, regulations on energy management and waste management and other climate change-based rules and regulations, which may increase our expenses and adversely affect its operating results. In addition, the physical risks of climate change may impact the availability and cost of materials, sources and supply of energy, product demand and manufacturing and could increase insurance and other operating costs. The expected future increased worldwide regulatory activity relating to climate change could expand the nature, scope, and complexity of matters that we are required to control, assess, and report. If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements upon us, our suppliers, our customers, or our products, or our operations are disrupted due to physical impacts of climate change on us, our customers or our suppliers, our business, results of operations and financial condition could be adversely impacted.
Significant fluctuations in foreign currency exchange rates may harm our financial results.
We operate primarily in the UAE, which attempts to fix the exchange rate of the UAE currency, UAE Dirham, to the U.S. dollar at a stable rate. However, we may still be or become exposed to fluctuations in foreign currency exchange rates. Any significant change in the value of the currencies of the countries in which we might do business against not pegged to the U.S. dollar could affect our ability to sell products competitively and control its cost structure, which could have a material adverse effect on our results of operations.
A significant or sustained decline in commodity prices including gas could negatively impact the levels of expenditures by certain company customers.
Demand for our products depends, in part, on the level of new and planned expenditures by certain of our customers. The level of expenditures by our customers is dependent on, among other factors, general economic conditions, availability of credit, economic conditions within their respective industries and expectations of future market behavior. Our profitability may be adversely affected during any periods of unexpected or rapid increases in interest rates and volatility in commodity prices, including gas, can negatively affect the level of these activities and impact our subsidiary and can result in postponement of capital spending decisions or the delay or cancellation of existing orders. The ability of our customers to finance capital investment and maintenance may also be affected by the conditions in their industries. Reduced demand for our products could result in the delay or cancellation of existing orders or lead to excess manufacturing capacity, which unfavorably impacts the absorption of fixed manufacturing costs. This reduced demand could have a material adverse effect on our financial condition and results of operations.
We are dependent on financing for the continuation of our operations.
It can at times be difficult to predict our capital needs on a monthly, quarterly, or annual basis. Our future is dependent upon our ability to obtain profitable operations or financing. We reserve the right to seek additional funds through private placements of our common stock and/or through debt financing. We do not have financing in place at this time for all future planned acquisitions. We may not have access to financing or on terms that are acceptable to us. Any lack of funds from operations or fundraising for any shortage could be detrimental to our ability to continue operations and negatively impact us and our financial condition, results of operations and cash flow.
Risks Relating to Our Industry and Market
The conflict in Iran, which escalatedsharply in late February 2026, poses material risks to our LPG distribution operations in Dubai.
As of March 31, 2026, our business is subject to significant risks arising from the ongoing armed conflict involving the United States, Israel, and Iran, which has materially disrupted regional energy markets, critical infrastructure, and the maritime supply chains upon which our LPG distribution operations in Dubai fundamentally depend. The conflict, which escalatedsharply beginning in late February 2026, has resulted in the effectiveclosure of the Strait of Hormuz — the world’s single most critical energy chokepoint — to most commercial shipping, with Iran threatening to fire on vessels attempting transit and commercial operators, major oil companies, and insurers having substantially withdrawn from the corridor. The closure has been characterized as the largest disruption to global energy supply since the 1970s energy crisis. Approximately 20% of the world’s daily oil and LPG supply normally transits the Strait, and LPG supply chains are among the most acutely exposed commodities, with alternative supply options characterized by market analysts as “very limited”. Attacks by Iranian forces have directly struck Dubai’s Jebel Ali port — the UAE’s principal maritime commercial hub — as well as Abu Dhabi port infrastructure and other UAE facilities, causing direct and material disruption to shipping and logistics operations in the Emirate. Iranian forces have further threatened to designate the UAE’s al-Hosn gas field and additional UAE energy infrastructure as “direct and legitimate targets,” with Iranian state media calling for evacuation of personnel. The UAE’s Habshan complex — one of the world’s largest gas processing facilities — has already been forced to shut down following falling debris from intercepted missiles, and the Bab oilfield was targeted. These developments have caused the Middle East Dubai crude benchmark to reach a record $166.80 per barrel and Brent crude to spike above $119 per barrel, with further price increases possible if supply disruptions are prolonged.
The escalatingconflictexposes our Dubai-based LPG distribution and related services business to a range of material and potentially severe operational, financial, and safety risks that could have a material adverse effect on our business, results of operations, financial condition, and prospects. Our ability to procure LPG at commercially viable prices and in sufficient volumes depends critically on regional supply chains and the continued operability of UAE port and infrastructure networks, all of which are currently under severestress. Importers across the Gulf are scrambling to reroute essential cargoes, with trucking costs from alternative ports projected to increase by multiples of standard ocean freight rates. Insurance premiums for vessels operating in and near the Strait of Hormuz have already reached six-year highs, making transit economically unviable for many commercial operators and further constraining supply availability. Even if active hostilities were to cease, the restoration of normal supply chains is expected to take substantial time, as LPG production facilities, refineries, and port infrastructure that have sustained damage may require years to repair. The war has also materially impaired broader economic activity in Dubai, including disruptions to aviation, tourism, trade, and retail, which could reduce demand for our services. We cannot predict the duration, intensity, or geographic scope of the conflict, the extent of damage to regional energy infrastructure, or the timing of any restoration of the Strait of Hormuz to normal commercial transit. If these conditions persist or worsen, our ability to source, transport, store, and distribute LPG, as well as to maintain continuity of our related services operations, could be significantly impaired, which could materially and adversely affect our revenues, costs, and overall financial performance.
We occasionally provide integrated gas distribution project management services in the form of long-term, fixed price contracts that may require us to assume additional risks associated with cost overruns, operating cost inflation, labor availability and productivity, supplier and contractor pricing and performance, and potential claims for liquidateddamages.
We occasionally provide integrated gas distribution project management services outside our normal discrete business in the form of long-term, fixed price contracts. Some of these contracts are required by our customers, primarily international gas companies. These services include acting as project managers as well as service providers and may require us to assume additional risks associated with cost overruns. These customers may provide us with inaccurate information in relation to their reserves, which is a subjective process that involves location and volume estimation, that may result in cost overruns, delays, and project losses. In addition, our gas distribution customers often operate in countries with unsettled political conditions, war, civil unrest, or other sources of disruption. These issues may also result in cost overruns, delays, and project losses.
Providing services on an integrated basis may also require us to assume additional risks associated with operating cost inflation, labor availability and productivity, supplier pricing and performance, and potential claims for liquidateddamages. We rely on third-party subcontractors and equipment providers to assist us with the completion of these types of contracts. To the extent that we cannot engage subcontractors or acquire equipment or materials in a timely manner and on reasonable terms, our ability to complete a project in accordance with stated deadlines or at a profit may be impaired. If the amount we are required to pay for these goods and services exceeds the amount we have estimated in bidding for fixed-price work, we could experience losses in the performance of these contracts. These delays and additional costs may be substantial, and we may be required to compensate our customers for these delays. This may reduce the profit to be realized or result in a loss on a project.
The success of our business depends on our ability to maintain and enhance our reputation and brand.
We believe that our reputation in our industry is of significant importance to the success of our business. A well-recognized brand is critical to increasing our customer base and, in turn, increasing our revenue. Since the industry is highly competitive, our ability to remain competitive depends to a large extent on our ability to maintain and enhance our reputation and brand, which could be difficult and expensive. To maintain and enhance our reputation and brand, we need to successfully manage many aspects of our business, such as cost-effective marketing campaigns to increase brand recognition and awareness in a highly competitive market. We cannot assure you, however, that these activities will be successful and achieve the brand promotion goals we expect. If we fail to maintain and enhance our reputation and brand, or if we incur excessive expenses in our efforts to do so, our business, financial conditions and results of operations could be adversely affected.
In the event that we are unable to successfully compete in our industry, we may see lower profit margins.
We face substantial competition in our industry. Due to our small size, it can be assumed that some of our competitors have greater financial, technical, and other competitive resources. Accordingly, these competitors may have already begun to establish superior technologies in our industry. We will attempt to compete against these competitors by developing technology that exceeds what is offered by our competitors. However, we cannot assure you that our technology will outperform competing technology, or that our competitors will not develop new products or services that exceed what we provide. In addition, we may face competition based on price. If our competitors lower the prices on their products, then it may not be possible for us to market our products at prices that are economically viable. Increased competition could result in lower than projected revenues, price reductions, and lower profit margins.
Any one of these results could adversely affect our business, financial condition, and results of operations.
In addition, our competitors may develop competing products that achievegreater market acceptance. It is also possible that new competitors may emerge and acquire significant market share. Our inability to achieve sales and revenue due to competition will have an adverse effect on our business, financial condition, and results of operations.
If we are unable to successfully manage growth, our operations could be adversely affected.
Our progress is expected to require the full utilization of our management, financial and other resources. Our ability to manage growth effectively will depend on our ability to improve and expand operations, including our financial and management information systems, and to recruit, train and manage personnel. There can be no absolute assurance that management will be able to manage growth effectively.
If we do not properly manage the growth of our business, we may experience significant strains on our management and operations and disruptions in our business. Various risks arise when companies and industries grow quickly. If our business or industry grows too quickly, our ability to meet customer demand in a timely and efficient manner could be challenged. We may also experience development delays as we seek to meet increased demand for our services and platform. Our failure to properly manage the growth that we or our industry might experience could negatively impact our ability to execute on our operating plan and, accordingly, could have an adverse impact on our business, our cash flow and results of operations, and our reputation with our current or potential customers.
Trends in gas prices affect the level of exploration, development, and production activity of our customers and the demand for our services and products, which could have a material adverse effect on our business, consolidated results of operations, and consolidated financial condition.
Demand for our services and products is particularly sensitive to the level of exploration, development, and production activity of, and the corresponding capital spending by, gas companies. The level of exploration, development, and production activity is directly affected by trends in gas prices, which historically have been volatile and are likely to continue to be volatile. Prices for gas are subject to large fluctuations in response to relatively minor changes in the supply of and demand for gas, market uncertainty, and a variety of other economic factors that are beyond our control. Given the long-term nature of many large-scale development projects, even the perception of longer-term lower gas prices by gas companies can cause them to reduce or defer major expenditures. Any prolonged reductions of commodity prices or expectations of such reductions could have a material adverse effect on our business, consolidated results of operations, and consolidated financial condition.
Factors affecting the price of gas include:
the level of supply and demand for gas;
the cost of, and constraints associated with, producing and delivering gas;
governmental regulations and other actions, including economic sanctions and policies of governments regarding the exploration for and production and development of their gas reserves;
weather conditions, natural disasters, and health or similar issues, such as pandemics or epidemics;
worldwide political and military actions, and economic conditions, including potential recessions; and
increased demand for alternative energy and use of electric vehicles and increased emphasis on decarbonization, including government initiatives to promote the use of renewable energy sources and public sentiment around alternatives to fossil fuels such as gas.
Our business is dependent on capital spending by our customers, and reductions in capital spending could have a material adverse effect on our gas distribution business, consolidated results of operations, and consolidated financial condition.
Our gas distribution business is directly affected by changes in capital expenditures by our customers, and reductions in their capital spending could reduce demand for our services and products and have a material adverse effect on our business, consolidated results of operations, and consolidated financial condition. Some of the items that may impact our customers’ capital spending include:
gas prices, which are impacted by the factors described in the preceding risk factor;
the inability of our customers to access capital on economically advantageous terms, which may be impacted by, among other things, a decrease of investors’ interest in hydrocarbon producers because of environmental and sustainability initiatives;
changes in customers’ capital allocation, including an increased allocation to the production of renewable energy or other sustainability efforts, leading to less focus on gas production growth;
restrictions on our customers’ ability to get their gas to market due to infrastructure limitations;
consolidation of our customers;
customer personnel changes; and
adverse developments in the business or operations of our customers, including write-downs of gas reserves and borrowing base reductions under customers’ credit facilities.
Constraints in the supply of, prices for, and availability of transportation of raw materials can have a material adverse effect on our gas distribution business and consolidated results of operations.
Raw materials essential to our gas distribution operations and manufacturing, such as proppants (primarily sand), chemicals, metals, and gels, are normally readily available. Shortages of raw materials as a result of high levels of demand or loss of suppliers can trigger constraints in the supply chain of those raw materials, particularly where we have a relationship with a single supplier for a particular resource. Many of the raw materials essential to our business require the use of rail, storage, and trucking services to transport the materials to our job sites. These services, particularly during times of high demand, may cause delays in the arrival of or otherwise constrain our supply of raw materials. These constraints could have a material adverse effect on our business and consolidated results of operations. In addition, price increases imposed by our vendors for raw materials and transportation providers used in our business, and the inability to pass these increases through to our customers, could have a material adverse effect on our business and consolidated results of operations.
Our ability to operate and our growth potential could be materially and adversely affected if we cannot attract, employ, and retain technical personnel at a competitive cost.
Many of the services that we provide and the products that we sell are complex and highly engineered and often must perform or be performed in harsh conditions. We believe that our success depends upon our ability to attract, employ, and retain technical personnel with the ability to design, utilize, and enhance these services and products. A significant increase in the wages paid by competing employers could result in a reduction of our skilled labor force, increases in the wage rates that we must pay, or both. If either of these events were to occur, our cost structure could increase, our margins could decrease, and any growth potential could be impaired.
Demand for the products we distribute could decrease if the manufacturers of those products were to sell a substantial amount of goods directly to end users in the markets we serve.
Our products are purchased through distributors and not directly from manufacturers. If those customers were to purchase the products that we sell directly from manufacturers, or if manufacturers sought to increase their efforts to sell directly to end users, our business, results of operations and financial condition could be materially and adversely affected. These or other developments that remove us from, or limit our role in, the distribution chain, may harm our competitive position in the marketplace and reduce our sales and earnings.
We may experience unexpected supply shortages.
We distribute products from a wide variety of manufacturers and suppliers. Nevertheless, in the future we may have difficulty obtaining the products we need from suppliers and manufacturers as a result of unexpected demand or production difficulties. Also, products may not be available to us in quantities sufficient to meet our customer demand. Our inability to obtain sufficient products from suppliers and manufacturers, in sufficient quantities, could have a material adverse effect on our business, results of operations and financial condition.
Price reductions by suppliers of gas products sold by us could cause the value of our inventory to decline. Also, such price reductions could cause our customers to demand lower sales prices for these products, possibly decreasing our margins and profitability on sales to the extent that our inventory of such products was purchased at the higher prices prior to supplier price reductions, and we are required to sell such products to our customers at the lower market prices.
The value of our gas products inventory could decline as a result of price reductions by manufacturers of products sold by us. There is no assurance that a substantial decline in product prices would not result in a write-down of our inventory value. Such a write-down could have a material adverse effect on our financial condition. Also, decreases in the market prices of products sold by us could cause customers to demand lower sale prices from us. These price reductions could reduce our margins and profitability on sales with respect to such lower-priced products. Reductions in our margins and profitability on sales could have a material adverse effect on our business, results of operations, and financial condition.
A substantial decrease in the price of gas could significantly lower our gross profit or cash flow.
We distribute gas and, as a result, our business may be significantly affected by the price and supply of gas. When gas prices are lower, the prices that we charge customers for products may decline, which affects our gross profit and cash flow. The gas industry as a whole is cyclical and at times pricing and availability of gas can be volatile due to numerous factors beyond our control, including general domestic and international economic conditions, labor costs, sales levels, competition, consolidation of steel producers, import duties and tariffs and currency exchange rates. When gas prices decline, customer demands for lower prices and our competitors’ responses to those demands could result in lower sale prices and, consequently, lower gross profit or cash flow.
If gas prices rise, we may be unable to pass along the cost increases to our customers.
We maintain inventories of gas to accommodate the lead time requirements of our customers. Accordingly, we purchase gas in an effort to maintain our inventory at levels that we believe to be appropriate to satisfy the anticipated needs of our customers based upon historic buying practices, contracts with customers and market conditions. Our commitments to purchase gas are generally at prevailing market prices in effect at the time we place our orders. If gas prices increase between the time, we order gas and the time of delivery of such products to us, our suppliers may impose surcharges that require us to pay for increases in gas prices during such period. Demand for the gas we distribute, the actions of our competitors, and other factors will influence whether we will be able to pass such gas cost increases and surcharges on to our customers, and we may be unsuccessful in doing so.
We may not have adequate insurance for potential liabilities, including liabilities arising from litigation.
In the ordinary course of business, we have and, in the future, may become the subject of various claims, lawsuits and administrative proceedings seeking damages or other remedies concerning our commercial operations, the products we distribute, employees and other matters, including potential claims by individuals alleging exposure to hazardous materials as a result of the products we distribute or our operations. Some of these claims may relate to the activities of businesses that we have acquired, even though these activities may have occurred prior to our acquisition of such businesses. The products we distribute are sold primarily for use in the energy industry, which is subject to inherent risks that could result in death, personal injury, property damage, pollution, or loss of production. In addition, defects in the products we distribute could result in death, personal injury, property damage, pollution or damage to equipment and facilities. Actual or claimed defects in the products we distribute may give rise to claimsagainst us for losses and expose us to claims for damages.
We maintain insurance to cover certain of our potential losses, and we are subject to various self-retentions, deductibles, and caps under our insurance. It is possible, however, that judgments could be rendered against us in cases in which we would be uninsured and beyond the amounts that we currently have reserved or anticipate incurring for such matters. Even a partially uninsured claim, if successful and of significant size, could have a material adverse effect on our business, results of operations and financial condition. Furthermore, we may not be able to continue to obtain insurance on commercially reasonable terms in the future, and we may incur losses from interruption of our business that exceed our insurance coverage. Finally, even in cases where we maintain insurance coverage, our insurers may raise various objections and exceptions to coverage which could make uncertain the timing and amount of any possible insurance recovery uncertain.
Our operations are subject to hazards inherent in the gas industry and, as a result, we are exposed to potential liabilities that may affect our financial condition and reputation.
Risks inherent to the gas industry, such as equipment malfunctions and failures, equipment misuse and defects, explosions and uncontrollable flows of gas and natural disasters, can cause personal injury, loss of life, suspension of operations, damage to facilities, business interruption and damage to or destruction of property, equipment, and the environment. These risks could expose us to substantial liability for personal injury, wrongful death, property damage, loss of gas production, pollution, and other environmental damages. The frequency and severity of such incidents will affect operating costs, insurability and relationships with customers, employees, and regulators. In particular, our customers may elect not to purchase our services if they view our safety record as unacceptable, which could cause us to lose customers and substantial revenues. In addition, these risks may be greater for us because we may acquire companies that have not allocated significant resources and management focus to safety and have a poor safety record requiring rehabilitative efforts during the integration process.
Our customers could seek damages for losses associated with these errors, defects, or other performance problems. Our insurance policies may not be adequate to cover all liabilities. Further, insurance may not be generally available in the future or, if available, insurance premiums may make such insurance commercially unjustifiable. Moreover, even if we are successful in defending a claim, it could be time-consuming and costly to defend.
We are subject to increased risks associated with our investments in emerging markets, particularly in the Middle East region and specifically in the United Arab Emirates. These risks encompass significant political, social, and economic uncertainties in the region. Given the volatile nature of these markets, instabilities in these regions could significantly adversely affect the value of our investments.
Our gas operations are conducted, and our gas assets are located in, the UAE, which is defined as an emerging market. There is no assurance that any political, social, economic or market conditions affecting countries in the Middle East region would not have a material adverse effect on our business, results of operations and financial condition.
Specific risks in the Middle East region that may have a material impact on our business, results of operations and financial condition include:
an increase in inflation and the cost of living;
a devaluation in the currency of any country in which we have operations;
external acts of warfare and civil clashes or other hostilities involving nations in the region;
governmental actions or interventions, including tariffs, protectionism, and subsidies;
difficulties and delays in obtaining governmental or other approvals, new permits and consents for our operations or renewing existing ones;
potential lack of transparency or reliability in jurisdictions where we operate;
cancellation of contractual rights;
lack of infrastructure;
expropriation or nationalization of assets;
inability to repatriate profits and/or dividends;
continued regional political instability and unrest, including government or military regime change, riots or other forms of civil disturbance or violence, including through acts of terrorism;
military strikes or the outbreak of war or other hostilities involving nations in the region;
a material curtailment of the industrial and economic infrastructure development that is currently underway across the Middle East region;
increased government regulations, or adverse governmental activities, with respect to price, import and export controls, the environment, customs and immigration, capital transfers, foreign exchange and currency controls, labor policies, land and water use and foreign ownership;
changing tax regimes, including the imposition of taxes in currently tax favorable jurisdictions;
arbitrary, inconsistent, or unlawful government action, including capricious application of tax laws and selective tax audits;
limited availability of capital or debt financing; and
slowing regional and global economic environment.
Any unexpected changes in these or other political, social, economic, or other conditions in which we operate in the UAE or neighboring countries may have a material adverse effect on our business, results of operations and financial condition. It is not possible to predict the occurrence of events or circumstances such as or like those outlined above or the impact of such occurrences and no assurance can be given that we would be able to achieveprofitable operations if such events or circumstances were to occur.
Investors should also be aware that emerging markets are subject to greater risks than more developed markets, including in some cases significant legal, economic, and political risks. Accordingly, investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, considering those risks, their investment is appropriate. Generally, investment in developing markets is only suitable for sophisticated investors who fully appreciate the significance of the risks involved.
To the extent that economic growth or performance in the countries in which we operate slows or begins to decline, or political conditions become sufficiently unstable to have a material adverse effect on our operations, our business, financial condition, and results of operations may be materially adversely affected.
We are exposed to risks from potentially unpredictable legal and regulatory environments in the UAE and Middle East region.
We currently operate in the UAE, an emerging market economy, which is in various stages of developing legal and regulatory systems that are not yet as fully matured and/or established as those of Western Europe and the United States. Some emerging market countries are also in the process of transitioning to a market economy and, as a result, are experiencing changes in their economies and their government policies (including, without limitation, policies relating to foreign ownership, repatriation of profits, property and contractual rights and planning and permit granting regimes) that may affect our business in those countries. Such countries are also characterized by less comprehensive legal and regulatory environments and systems. Existing laws and regulations may be applied inconsistently with anomalies in their interpretation or implementation. Such anomalies could affect our ability to enforce our rights under our contracts or to defend our business againstclaims by others.
There can be no assurance that if laws or regulations were imposed on the products and services offered by us it would not increase our costs, or adversely affect the way in which we conduct our business or otherwise have a material adverse effect on our results of operations and financial condition.
Any of the above factors, alone or in combination, may have a material adverse effect on our business, results of operations and financial condition.
We are exposed to risks arising from potential changes in the UAE’s visa legislation, which could adversely impact our business operations.
Any restrictive changes to the UAE’s visa policies may discourage foreign nationals from choosing to live, work, and invest in the UAE, which would have an adverse effect on our ability to attract skilled personnel, our business, results of operations and financial condition.
We are subject to risks associated with potential unlawful or arbitrary governmental actions in the UAE, which could negatively impact our operations and financial performance.
Governmental authorities in the UAE may have a high degree of discretion and, at times, act selectively or arbitrarily, without hearing or prior notice, and sometimes in a manner that is contrary to law or influenced by political or commercial considerations. Such governmental action could include, among other things, the withdrawal of building permits, the expropriation of property without adequate compensation or the forcing of business acquisitions, combinations, or sales. Any such action taken may have a material adverse effect on our business, results of operations and financial condition.
We are subject to the risk of international sanctions, which could significantly impact our business activities, results of operations and financial condition.
European, U.S. and other international sanctions have in the past been imposed on companies engaging in certain types of transactions with specified countries or companies or individuals in those countries. Companies operating in certain countries in the Middle East region have been subject to such sanctions in the past. The UAE is not subject to such sanctions as of the date of this report. The terms of legislation and other rules and regulations that establish sanctions regimes are often broad in scope and difficult to interpret.
If the UAE were in the future to violate European, U.S. or international sanctions, penalties could include a prohibition or limitation on the UAE’s ability to conduct business in certain jurisdictions or to access the U.S. or international capital markets. Any such sanction could have a material adverse effect on our business, results of operations and financial condition.
Risks Related to Legal, Accounting and Regulatory Matters
The sale of our products involves potential product liability and related risks that could expose us to significant insurance and loss expenses.
We face an inherent risk of exposure to product liability claims if the use of our products results in, or is believed to have resulted in, illness or injury. Any product liability claim may increase our costs and adversely affect our revenue and operating income. Moreover, liability claims arising from a seriousadverse event may increase our costs through higher insurance premiums and deductibles for our insurances and may make it more difficult to secure adequate insurance coverage in the future. In addition, our product liability insurance may fail to cover future product liability claims, which, if adversely determined, could subject us to substantial monetary damages. Al Shola Gas has General Liability Coverage.
Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.
Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act and new SEC regulations, are creating uncertainty for companies such as ours. These new or changed 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, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, 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 time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation may be harmed.
If we fail to comply with the rules under the Sarbanes-Oxley Act related to accounting controls and procedures, or if material weaknesses or other deficiencies are discovered in our internal accounting procedures, our stock price could decline significantly.
Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal controls over financial reporting. We are in the process of documenting and testing our internal control procedures, and we may identify material weaknesses in our internal control over financial reporting and other deficiencies. If material weaknesses and deficiencies are detected, it could cause investors to lose confidence in us and result in a decline in our stock price and consequently affect our financial condition. In addition, if we fail to achieve and maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our Common Stock could drop significantly. In addition, we cannot be certain that additional material weaknesses or significant deficiencies in our internal controls will not be discovered in the future.
Failure to comply with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act or other applicable anti-bribery laws could have an adverse effect on us.
The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business. Recent years have seen a substantial increase in anti-bribery law enforcement activity with more frequent and aggressive investigations and enforcement proceedings by both the Department of Justice and the SEC, increased enforcement activity by non-U.S. regulators and increases in criminal and civil proceedings brought against companies and individuals. Our policies mandate compliance with all anti-bribery laws. Our internal control policies and procedures may not always protect us from reckless or criminal acts committed by employees or third-party intermediaries. Violations of these anti-bribery laws may result in criminal or civil sanctions, which could have a material adverse effect on us as well as our financial condition and results of operations.
Changes in tax laws or exposure to additional income tax liabilities could have a material impact on our company, the results of operations, financial conditions and cash flows.
We are subject to income and non-income-based taxes in the jurisdictions in which we operate and intend to operate, as well as jurisdictions such as the United States. The tax laws in these jurisdictions could change on a prospective or retroactive basis, and any such changes could adversely affect us and our effective tax rate.
Taxation regulation in territories around the world can also change very quickly, which may mean that all the implications for businesses may not have been fully thought through by the regulating authorities before final guidelines and laws are issued. Furthermore, any changes made by tax authorities, together with other legislative changes, to the mandatory sharing of company information (financial and operational) with tax authorities on both a local and global basis, could lead to disagreements between jurisdictions with respect to the proper allocation of profits between such jurisdictions. We therefore continuously monitor changes to tax regulation and double tax treaties between the territories in which we operate. We also maintain a comprehensive transfer pricing policy to govern the flow of funds between various tax territories.
We are further subject to ongoing tax audits in the various jurisdictions in which we operate. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provisions. However, there can be no assurance that we will accurately predict the outcomes of these audits, which could have a material impact on the business, financial condition, results of operations, and cash flows.
While we have recorded reserves for potential payments to various tax authorities related to uncertain tax positions, the calculation of such tax liabilities involves the application of complex tax regulations in many jurisdictions. Therefore, any dispute with a tax authority may result in payment that is significantly different from our estimates. If the payment proves to be less than the recorded reserves, the reversal of the liabilities would generally result in tax benefits being recognized in the period when we determine the liabilities to be no longer necessary. Conversely, if the payment proves to be more than the reserves, we could incur additional charges, and these could have a materially adverse effect on the Company’s business, financial condition, results of operations, and cash flows.
The U.S. Department of the Treasury’s Office of Foreign Assets Control, and the Bureau of Industry and Security at the U.S. Department of Commerce administer certain laws and regulations that restrict U.S. persons and, in some instances, non-U.S. persons, in conducting activities, transacting business with, or making investments in certain countries, governments, entities and individuals subject to U.S. economic sanctions.
Our international operations subject us to these laws and regulations, which are complex and constantly changing. They restrict business dealings with certain countries, governments, entities, and individuals and may enact, amend, enforce, or interpret further restrictions in a manner that materially impacts our operations.
Our subsidiary sells and installs products, and may provide related services, to distributors or contractors and other purchasing bodies in such countries. These business dealings represent an insignificant amount of our consolidated revenues and income but expose us to a heightened risk of violating applicable sanctions regulations. Violations of these regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts and revocations or restrictions of licenses, as well as criminalfines and imprisonment.
We have established policies and procedures designed to assist with compliance with such laws and regulations. However, there can be no assurance that these will prevent us from violating these regulations in every transaction in which we may engage. As such a violation could adversely affect our reputation, business, financial condition, results of operations and cash flows.
Risks Related to our Management and Control Persons
Our largest shareholder, Fusion Fuel Green PLC, holds substantial control over the Company and is able to influence all corporate matters, which shareholders may consider to not always be in their best interests.
Fusion Fuel holds substantial control of our Company with over 50% of the outstanding shares of common stock. By virtue of the ownership of common stock, Fusion Fuel is able to exercise significant influence over all matters requiring approval by our stockholders, including the election of directors, the approval of significant corporate transactions, and any change of control of our Company.
We are dependent on the continued services of our director and chairman and officers and if we fail to keep them or fail to attract and retain qualified senior executives and key technical personnel, our business may not be able to expand.
We are dependent on the continued availability of Frederico Figueira de Chaves, the Company’s Chairman and director; John-Paul Backwell, the Company’s Chief Executive Officer and director; Carsten Kjems Falk, the Company’s Interim Chief Financial Officer and a director; and Sanjeeb Safir, the Company’s Chief Operating Officer and Managing Director Middle East; and the availability of new executives to implement our business plans. The market for skilled employees is highly competitive, especially for employees in our industry. Although we expect that our planned compensation programs will be intended to attract and retain the employees required for us to be successful, there can be no assurance that we will be able to retain all our key employees or a sufficient number to execute our plans, nor can there be any assurance we will be able to continue to attract new employees as required.
The elimination of monetary liability against our directors, officers and employees under our Articles of Incorporation and the existence of indemnification rights to our directors, officers and employees may result in substantial expenditures by the Company and may discourage lawsuits against our directors, officers, and employees.
Our Articles of Incorporation contain provisions that eliminate the liability of our directors for monetary damages to the Company and shareholders. Our bylaws also require us to indemnify our officers and directors. We may also have contractual indemnification obligations under our agreements with our directors, officers, and employees. The foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against directors, officers, and employees that we may be unable to recoup. These provisions and resulting costs may also discourage us from bringing a lawsuit against directors, officers, and employees for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our shareholders against our directors, officers, and employees even though such actions, if successful, might otherwise benefit the Company and shareholders.
Certain officers and directors have other business activities which might cause conflicts of interest.
Part of our management and board also serve on the management and board of Fusion Fuel. Our Chairman, Frederico Figueira de Chaves, is also the Interim Chief Financial Officer and a director of Fusion Fuel. Our Chief Executive Officer, John-Paul Backwell, is also the Chief Executive Officer and a director of Fusion Fuel. Our Interim Chief Financial Officer, Carsten Kjems Falk, is also head of M&A of Fusion Fuel. As a result, these officers may not be able to work for our company on a full-time basis, or may be subject to conflicts of interest, to the extent that the interest of Fusion Fuel and the Company may diverge. Our officers and directors may also face conflicts of interest impacting how funds are allocated between us and such affiliated entities. These competing interests could disrupt the focus of our key management and board. As a result, conflicts of interest may arise that can be resolved only through exercise of such judgment as is consistent with each officer or director’s understanding of his or her fiduciary duties to our company. We are at risk that our officers and director will favor their other business interests over the needs of the Company. These competing business interests could interfere with our ability to implement our business plan successfully.
Risks Relating to our Securities
We may conduct offerings of our equity securities in the future, in which case your proportionate interest may become diluted.
We may be required to conduct equity offerings in the future to finance our current projects or to finance subsequent projects that we decide to undertake. If our common stock is issued in return for additional funds, the price per share could be lower than that paid by our current shareholders but with the aim to increase overall value for all shareholders. We anticipate continuing to rely on sales of our common stock in order to fund our business operations. If we issue additional common stock or securities convertible into shares of our common stock, your percentage interest in us could become diluted.
Our common stock price may be volatile and could fluctuate, which could result in substantial losses for investors.
The market price of our common stock has been volatile and could continue to be volatile and fluctuate in price in response to various factors, many of which are beyond our control, including:
government regulation;
the establishment of partnerships;
intellectual property disputes;
additions or departures of key personnel;
sales of our common stock;
our ability to integrate operations, technology, products, and services;
our ability to execute our business plan;
operating results 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 experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales could occur, could cause our stock price to fall.
The market price of our common stock could decline significantly as a result of sales of a large number of shares of our common stock. If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the contractual and securities law restrictions on resale of such common stock lapse, or after those shares become registered for resale pursuant to an effective registration statement, the trading price of our common stock could decline. Any sales of shares or any perception in the market that such sales may occur could cause the trading price of our common stock to decline.
The issuance of shares of our common stock upon conversion or exercise of convertible notes, will dilute ownership to existing shareholders and may cause our stock price to fall.
Any issuance of additional common stock by us in the future as a result of the conversion or exercise of convertible notes or debt settlements would result in dilution to our existing shareholders. Such issuances could be made at a price that reflects a discount or a premium to the then-current trading price of our common stock.
Future issuance of additional shares of common stock and/or preferred stock could dilute existing stockholders. We have and may issue preferred stock that could have rights that are preferential to the rights of common stock that could discourage potentially beneficially transactions to our common stockholders.
Pursuant to our Articles of Incorporation, we currently have authorized 450,000,000 shares of common stock and 1,000,000 shares of preferred stock. Our Board of Directors has the ability to issue additional shares of common stock in the future for such consideration as the Board of Directors may consider sufficient. The issuance of any additional securities could, among other things, result in dilution of the percentage ownership of our stockholders at the time of issuance, result in dilution of our earnings per share and adversely affect the prevailing market price for our common stock.
An issuance of shares of preferred stock could result in a class of outstanding securities that would have preferences with respect to voting rights and dividends and in liquidation over our common stock and could, upon conversion or otherwise, have all of the rights of our common stock. Our Board of Directors’ authority to issue preferred stock could discourage potential takeover attempts or could delay or prevent a change in control through merger, tender offer, proxy contest or otherwise by making these attempts more difficult or costly to achieve. The issuance of preferred stock could impair the voting, dividend, and liquidation rights of common stockholders without their approval.
We have never declared or paid any cash dividends or distributions on our capital stock.
We have never declared or paid any cash dividends or distributions on our capital stock. While we may not anticipate paying a dividend in the short-term and we currently intend to retain short-term earnings for growth, we may do so in the medium to long-term future.
The declaration, payment and amount of any future dividends will be made at the discretion of the Board of Directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the Board of Directors considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.
We may become involved in securities class action litigation that could divert management’s attention and harm our business.
The stock market in general has experienced extreme price and volume fluctuations. These fluctuations have often been unrelated or disproportionate to the operating performance of the companies involved. If these fluctuations occur in the future, the market price of our shares could fall regardless of our operating performance. In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. If the market price or volume of our shares suffers extreme fluctuations, then we may become involved in this type of litigation, which would be expensive and divert management’s attention and resources from managing our business.
As a public company, we may also from time to time make forward-looking statements about future operating results and provide some financial guidance to the public markets. Projections may not be timely made and set at expected performance levels and could affect the price of our shares.
We are an “emerging growth company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to use the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our common stock less attractive to investors. In addition, if we cease to be an emerging growth company, we will no longer be able to use the extended transition period for complying with new or revised accounting standards.
We will remain an emerging growth company until the earliest of: (1) the last day of the fiscal year following the fifth anniversary of the first sale of our common stock pursuant to an effective registration statement; (2) the last day of the first fiscal year in which our annual gross revenue is $1.235 billion or more; (3) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (4) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC.
We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future results of operations may not be comparable to the results of operations of certain other companies in our industry that adopted such standards. 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.
cancellation
Impact of Acquisitions
A significant component of our growth has been through the acquisition and consolidation of our operating companies in our targeted sectors. We typically incur upfront costs as we incorporate and integrate acquired businesses into our operating philosophy and operational excellence. This includes consolidation of supplies and raw materials, optimized logistics and production processes, and sales synergies within the operating businesses with the aim to expand globally. The benefits of these integration efforts may not positively impact our financial results instantly but is expected to do so in the medium to long-term future.
Planned Developments
In 2026, the Company expects to allocate resources to its majority-owned subsidiary, Al Shola Gas, to enhanceefficiency, boost sales, and positively influence their financial performance, primarily through investment from our parent company, Fusion Fuel. We plan to continue investing in new vehicles for our subsidiary to improve their bulk LPG supply capabilities and increase our revenue. We expect that our revenue and operating expenses will increase as we implement such plans.
Write-offs of Buyback Reserve and Related-Party Receivable
As part of management’s ongoing assessment of asset recoverability, the Company reevaluated the accounting treatment of certain assets arising from prior-period transactions, including (i) a reserve (the “Buyback Reserve” recorded within other current assets in connection with the issuance of shares of common stock pursuant to a certain Share Purchase and Buyback Agreement, dated August 21, 2023, among the Company, Artelliq Software Trading, Ilustrato, Saseendran Kodapully Ramakrishnan, and Quality International Co Ltd FZC, and (ii) a related-party receivable associated with a purchase of a certain asset from the Company by Ilustrato (the “Related-Party Receivable”).
With respect to the Buyback Reserve, the Company determined in fiscal year 2025 that the $2.0 million balance, no longer represented an asset from which future economic benefits were probable. Accordingly, the Company recorded a non-cash write-off of $2.0 million in fiscal year 2025.
With respect to the Related-Party Receivable, management concluded that $1.5 million of the receivable, representing the asset-purchase-related balance, was not recoverable based on a reassessment of collectability. This conclusion was reached following management’s assessment of the recoverability of the receivable, based on information available to the Company and its evaluation of the counterparty’s ability to satisfy the obligation. As a result, the Company recorded a $1.5 million write-off of the Related-Party Receivable in fiscal year 2025. The remaining balance of approximately $0.5 million, primarily representing an intercompany loan, is expected to be recoverable and continues to be recognized as an asset.
As part of its fiscal year 2025 review procedures, management reassessed the recoverability of certain assets, including the Buyback Reserve and the Related-Party Receivable. Based on this reassessment, management determined that the balances were not recoverable and recorded the related write-offs in fiscal year 2025 in accordance with U.S. GAAP. These conclusions were reviewed and approved by the Company’s Board of Directors.
Although the foregoing balances have been written off, the Company may pursue recovery or claw back actions against the applicable counterparties. Any amounts recovered, whether in cash, equity, or other consideration, would be recognized as a gain in the period realized.
Results of Operations
Revenues
Revenue for the year ended December 31, 2025, was $16,307,787, compared to $11,177,567 for the year ended December 31, 2024, representing an increase of $5,130,220, or 45.90%. The increase in reported revenue was primarily attributable to (i) the inclusion of a full year of revenue from the Company’s majority-owned subsidiary, Al Shola Gas, in 2025, compared to consolidation beginning in the second quarter of 2024 following its acquisition, and (ii) higher sales volumes and improved operational performance driven by continued growth in customer demand and expansion of business activities.
Cost of Revenues
Cost of revenues for the year ended December 31, 2025, was $11,519,007, compared to $7,214,304 for the year ended December 31, 2024, representing an increase of $4,304,703, or 59.67%. The increase was primarily due to (i) the inclusion of a full year of revenue from the Company’s majority-owned subsidiary, Al Shola Gas, in 2025, compared to consolidation beginning in the second quarter of 2024 following its acquisition, and (ii) higher revenue during the year ended December 31, 2025.
Gross Profit
We earned $4,788,780 in gross profit for the year ended December 31, 2025, compared with $3,963,263 for the year ended December 31, 2024, representing an increase of $825,517, or 20.83%. The increase in gross profit was primarily attributable to (i) the inclusion of a full year of revenue from the Company’s majority-owned subsidiary, Al Shola Gas, in 2025, compared to consolidation beginning in the second quarter of 2024 following its acquisition, and (ii) higher revenue during the year ended December 31, 2025.
Operating Expenses
Operating expenses increased to $5,245,558 for the year ended December 31, 2025, from $3,265,008 for the year ended December 31, 2024. The increase was attributable to (i) costs for salary and bonus payments to management totaling $1,380,000 and settlement payments to certain former officers of the Company totaling $606,816; and (ii) an increase of $596,887 in operating expenses resulting from the inclusion of a full year of operations of the Company’s majority-owned subsidiary, Al Shola Gas, in the year ended December 31, 2025, as compared to only three quarters of operations in the year ended December 31, 2024 due to the timing of the Company’s acquisition of Al Shola Gas, which was completed at the end of the first quarter of 2024.
We anticipate that our operating expenses will increase as we undertake our subsidiary expansion plan. The increase is anticipated to be attributable to administrative and operating costs associated with our business activities and the professional fees associated with our reporting obligations.
Net Non-Operating Expenses
We had net other non-operating expenses of $3,981,758 for the year ended December 31, 2025, compared to $275,201 for the year ended December 31, 2024.
Non-operating expenses for the year ended December 31, 2025, increased significantly compared to the year ended December 31, 2024, primarily due to the write-off of non-operating assets totaling $3,502,388. During the year, management performed an assessment of the recoverability of certain non-operating asset balances and determined that these amounts were no longer realizable. Accordingly, the Company recorded a write-off consisting of $2.0 million related to the reversal of the Buyback Reserve, $1,500,000 representing the Related-Party Receivable, and $2,388 related to other miscellaneous non-operating assets.
Non-Operating Income
We had other non-operating income of $318,706 for the year ended December 31, 2025, compared to $427,554 for the same period in 2024. Our other income for the year ended December 31, 2025, resulted from the release of claims under the Lucosky Settlement Agreement.
Net Income/Net Loss
We incurred net loss of $4,603,645 for the year ended December 31, 2025, compared to a net income of $266,780 for the year ended December 31, 2024, primarily due to the reasons described above for increased cost of revenues and increased operating expenses.
Liquidity and Capital Resources
As of December 31, 2025, and 2024, we had total current assets of $7,038,913 and $7,466,617, respectively, and total current liabilities of $16,753,372 and $11,223,627. As of December 31, 2025, our working capital deficit was $9,714,459 compared to $3,757,010 as of December 31, 2024.
We will require additional financing to fund our operations beyond the near term. Based on our current projections, our existing cash resources will not be sufficient to meet our anticipated operating and other cash needs through December 31, 2026, and for at least 12 months beyond that period, unless we receive such additional financing, including the costs associated with being a public reporting company. Since our own financial resources may be insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities in public offerings, private placements or credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.
Going Concern
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.
Management evaluated all relevant conditions and events that are reasonably known or reasonably knowable, in the aggregate, as of the date the consolidated financial statements are issued and determined. The Company’s ability to continue as a going concern is dependent on the Company’s ability to continue to generate sufficient revenues and raise capital within one year from the date of filing.
For the 12 months ended December 31, 2026, the Company anticipates that Fusion Fuel, the Company’s parent company, will finance certain investments in connection with the operations of our majority-owned subsidiary, Al Shola Gas. In addition, the Company anticipates that Fusion Fuel will provide all compensation required by our executive officers, other than our Chief Operating Officer and Managing Director Middle East, Sanjeeb Safir. Further, management plans to use borrowings and security sales to mitigate the effects of cash flow deficits. However, no assurance can be given that any such financing, compensation, or capital will be available, if and when required.
Summary of Cash Flow
The following table provides detailed information about our net cash flow for fiscal years ended December 31, 2025, and December 31, 2024:
Years Ended December 31,
Net cash (used in) provided by operating activities
Net cash (used in) investing activities
Net cash provided by (used in) financing activities
Net change in cash and cash equivalents
Cash and cash equivalents – beginning of period
Cash and cash equivalents – end of period
Net cash used in operating activities was $(2,587,934) for the fiscal year ended December 31, 2025, as compared with $1,154,846 provided for the fiscal year ended December 31, 2024. The change was primarily driven by adverse working capital movements, mainly due to an increase in accounts receivable of $2.10 million and a decrease in accounts payable of approximately $0.64 million.
Net cash used in investing activities was $(1,377,470) for the fiscal year ended December 31, 2025, as compared with $(5,636) used for the fiscal year ended December 31, 2024. The change was primarily due to payments to ASG shareholders of $1.00 million, advances for the purchase of property, plant and equipment of $0.30 million, and additions to property, plant and equipment of approximately $0.08 million during the fiscal year ended December 31, 2025..
Net cash provided by financing activities was $4,166,407 for the fiscal year ended December 31, 2025, as compared with net cash used in financing activities $(926,120) used for the fiscal year ended December 31, 2024. The change was primarily due to proceeds from related party loans of $4.43 million, changes in minority interest of $0.45 million, and proceeds from the issuance of common stock of approximately $0.04 million during the fiscal year ended December 31, 2025. These inflows were partially offset by net repayments of convertible notes of $0.49 million, payments for ASG debt of approximately $0.23 million, and a repurchase of shares of the Company’s common stock for $0.03 million during the fiscal year ended December 31, 2025.
Debt
The Company’s debt obligations as of December 31, 2025, were as follows (including convertible and nonconvertible promissory notes).
Lender
Date of Issue
Maturity Date
Principal Amount ($)
Initial Interest Rate
Interest Accrued
Default Interest Rate
Default Interest
Accrued
Amount Repaid
Amount Converted
Principal Outstanding
Total Balance Remaining
RB Capital Partners Inc.
August 3, 2022
August 3, 2024
RB Capital Partners Inc.
March 17, 2023
March 16, 2025
Jefferson Street Capital LLC
May 23, 2023
February 23, 2024
Sky Holdings Ltd
June 16, 2023
December 16, 2024
Sean Levi
December 20, 2023
December 20, 2024
Exchange Listing LLC
February 6, 2024
August 6, 2024
Jefferson Street Capital LLC
May 21, 2024
February 21, 2025
J.J. Astor & Co. (9)
September 20, 2024
June 30, 2025
Total
The note may be converted by the holder at the initial conversion price of $1.00 per share, subject to adjustment.
The note may be converted by the holder at the initial conversion price of $1.00 per share, subject to adjustment.
The note may be converted by the holder at the initial conversion price of $0.35 per share, subject to adjustment. As of December 31, 2025, the holder had converted an aggregate of $100,000 of principal into 2,697,315 shares of common stock.
The note was initially convertible by the holder at the initial conversion price of $0.35 per share. On May 16, 2024, the note was amended to have a conversion price equal to $0.0375 per share. As of December 31, 2025, the holder had converted $77,000 of principal and $35,863 of accrued interest into 3,009,680 shares of common stock at a conversion price of $0.0375 per share.
20% interest will be charged on the day the Company receives certain funding, and thereafter 15% per annum will be charged.
The note may be converted by the holder at the initial conversion price equal to 200% of the value of the note, subject to adjustment.
The note may be converted by the holder at the initial conversion price equal to the price reflecting a discount of 35% to the volume weight average price of the Company’s common stock for the five days before any conversion.
The note may be converted by the holder at the initial conversion price of $0.03 per share, subject to adjustment. $1,500 will be added to principal for each conversion. Ilustrato is a guarantor under the note.
The note ranks senior to other debt and is secured by all assets of the Company.
The note may be converted by the holder at the initial conversion price is 80% of the average of the four lowest volume weighted average closing prices of the Company’s common stock over the 20 trading days immediately prior to each permitted conversion of the note, subject to adjustment.
Reflects an increase to 110% of the principal outstanding due to the occurrence of an event of default under the note.
Impact of Acquisitions
Historically, our growth has been through the acquisition of businesses in our targeted sectors. We typically incur upfront costs as we incorporate and integrate acquired businesses into our operating philosophy and operational excellence. This includes consolidation of supplies and raw materials, optimized logistics and production processes, and other restructuring and improvement initiatives. The benefits of these integration efforts and upcoming planned acquisitions may not positively impact our financial results instantly, but this has historically been the case in future periods.
Critical Accounting Estimates
A critical accounting estimate is an estimate that: (i) is made in accordance with generally accepted accounting principles, (ii) involves a significant level of estimation uncertainty and (iii) has had or is reasonably likely to have a material impact on the Company’s financial condition or results of operations.
The “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” section is based on the Company’s Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and judgments that affect reported amounts and related disclosures. On an ongoing basis, management evaluates and updates its estimates. Management employs judgment in making its estimates but they are based on historical experience and currently available information and various other assumptions that the Company believes to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results could differ from those estimates. Management believes that its judgment is applied consistently and produces financial information that fairly depicts the results of operations for all periods presented.
Significant estimates include estimates used to review the Company’s impairments and estimations of long-lived assets, revenue recognition of Contract-based revenue, allowances for uncollectible accounts, and the valuations of non-cash capital stock issuances. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Further, refer to the Company’s significant accounting policies as described in Note 2 of the Notes to Consolidated Financial Statements.
We consider the following accounting estimate to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements:
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Recently Issued Accounting Pronouncements
The Company has evaluated all recently issued accounting pronouncements and has implemented all standards that are currently in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that any recently issued accounting pronouncements will have a material impact on its financial position, results of operations, or cash flows.
ASU 2017-04, Simplifying the Test for Goodwill Impairment, has been effective for fiscal years beginning after December 15, 2019, and has been adopted by the Company. Under this standard, if the carrying amount of a reporting unit exceeds its fair value, an impairmentloss is recognized in an amount equal to that excess, limited to the total goodwill allocated to that reporting unit. The Company applies this simplified one-step impairment test in its annual goodwill assessment. As noted above, no impairment was identified as of December 31, 2025.
