Nauticus Robotics (KITT) risk factors, FY2024 10-K

Risks Relating to our Business and Industry

1. 01We are an early-stage company with a history of losses, and we expect to incur significant expenses for the foreseeable future
2. 02going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business
3. 03We have restated our unaudited condensed consolidated financial statements for certain prior periods, which may lead to additional risks and uncertainties, including loss of investor confidence and negative impacts on our stock price
4. 04We identified material weaknesses in our internal control over financial reporting which we are working to remediate. This material weaknesses could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner
5. 05If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be adversely affected
6. 06In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended and anticipate that we will continue to expend significant resources, including accounting-related costs, and significant management oversight
7. 07A significant amount of our revenues is derived from a limited number of customers. A material portion of our current revenue may be generated by sales to government entities, which are subject to a number of uncertainties, challenges, and risks
8. 08If we fail to effectively manage our limited financial and intellectual resources, we may not be able to design, develop, manufacture, market, and launch new generations of our robotic systems successfully
9. 09Our operating and financial projections rely on management assumptions and analyses. If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results
10. 10Unfavorable changes in any of these or other factors, most of which are beyond our control, could cause us to fail to meet our operating and financial projections and could materially and adversely affect our business, financial condition, results of operations, cash flows, reputation and prospects
11. 11Our business plans require a significant amount of capital. Our future capital needs may require us to sell additional equity or debt securities that may dilute our stockholders or introduce covenants that may restrict our operations or our ability to pay dividends
12. 12We may be unable to raise sufficient affordable capital needed to fund and grow our business
13. 13Our products and services are disruptive to the ocean services industries, and important assumptions about the market demand, pricing, adoption rates and sales cycles with respect to our current and future products and services may be inaccurate
14. 14The benefits of our products and services to customers and projected return on investment have not been substantiated through long-term trials or use
15. 15Even if we successfully market our products and services, the purchase or subscription, adoption, and use of the products and services may be materially and negatively impacted if our customers resist the use and adoption of the products and services
16. 16If we are successful in commercializing our products and services, our revenue will be concentrated in a limited number of models and a limited number of operating units for the foreseeable future
17. 17We may not be able to complete or enhance our product and service offerings through our research and development efforts
18. 18additional expenses, and we may not be successful in commercializing or marketing the associated products and services at all or within the currently expected timeline
19. 19Even if our products perform properly, if operators sustain any injuries while using our products, we could be exposed to liability and our results of operations, financial condition, and reputation may be adversely affected
20. 20Our ability to manufacture products of sufficient quality on schedule is unproven, and delays in the design, production and launch of our products could harm our business, financial condition, results of operations, cash flows, reputation and prospects
21. 21We are or may be subject to risks associated with strategic alliances or acquisitions and may not be able to identify adequate strategic relationship opportunities, or form strategic relationships, in the future
22. 22We are highly dependent on the services of our senior management and other key employees and, if we are unable to attract and retain a sufficient number of qualified employees, our ability to design, manufacture and launch our products, operate our business and compete could be harmed
23. 23We incur significant expenses and administrative burdens as a public company which could have a material adverse effect on our business, financial condition, results of operations, cash flows, reputation and prospects
24. 24Climate change laws and environmental regulations could result in increased operating costs and reduced demand for our products and services
25. 25We may be subject to various new or changing products regulations and environmental laws and regulations, which could cause significant fines and liability, or otherwise adversely affect our business, financial condition, results of operations, cash flows, reputation and prospects
26. 26We are subject to the evolving data privacy and security laws and regulations and any data breach may cause significant liabilities, fines, litigation and may negatively affect our business, financial condition, results of operations, cash flows, reputation and prospects
27. 27We are subject to cybersecurity risks to our operational systems, security systems, infrastructure, integrated software in our products and data processed by us or third-party vendors
28. 28We are subject to the anti-corruption laws and anti-money laundering laws in countries in which we conduct activities, and any violations of such regimes may result in investigations, criminal liability and could adversely affect our business, financial condition, results of operations and prospects
29. 29We are subject to governmental export and import controls and other laws and regulations that could subject us to liability in the event of noncompliance
30. 30obtaining licenses, clearances or authorizations from various regulatory entities. If we are not allowed to export our products or if the clearance process is burdensome and costly, our ability to generate revenue would be adversely affected
31. 31Our robotic systems use batteries that rely on lithium-ion chemistry, which, if not appropriately handled, controlled, or stored, could catch fire or vent smoke and flame
32. 32We may be unable to adequately control the costs associated with our operations
33. 33We operate in a competitive industry that is subject to rapid technological change, and we expect competition to increase
34. 34These companies have products that are commercially available and in development. We expect some products currently in development to become commercially available in the next few years and present a competitive threat to our products
35. 35Our target markets include international markets which require skills, knowledge and competencies in foreign exchange, taxation, legal, export controls, anti-bribery and other fields. We have added personnel with the necessary skills to oversee these risks and the ability is concentrated in few individuals
36. 36Our financial results may vary significantly from period to period due to fluctuations in our operating costs, demand for our products and services, seasonal variation and other factors
37. 37If we fail to implement or maintain appropriate and effective internal control over financial reporting and disclosure controls and procedures, we may suffer harm to our reputation and investor confidence levels
38. 38We have yet to achieve positive operating cash flow and, given our projected funding needs, our ability to generate positive cash flow is uncertain
39. 39Our ability to use net operating loss carryforwards to offset future income is subject to limitation and risk that could further limit our ability to utilize our net operating losses
40. 40Litigation or legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business
41. 41Failure to successfully identify, complete, manage and integrate acquisitions could materially and adversely affect our business, financial condition and results of operations and could cause the price of the Common Stock to decline
42. 42Any acquisitions, partnerships, or joint ventures that we enter into could disrupt our operations and have a material adverse effect on our business, financial condition and results of operations
43. 43If we are unable to adapt to and satisfy customer demands in a timely and cost-effective manner, our ability to grow our business may suffer
44. 44If we fail to respond to commercial industry cycles in terms of our cost structure, manufacturing capacity, and/or personnel needs, our business could be seriously harmed
45. 45Our systems, products, and related equipment may have shorter useful lives than we anticipate
46. 46We use estimates when accounting for certain contracts and changes in these estimates may have a significant impact on our financial results

Risks Related to Government Contracts

1. 47The terms of certain of our likely future contracts are highly sensitive and we are limited in our ability to disclose such terms
2. 48For the reasons discussed above, the nature of future contracts with the U.S. government will limit our ability to disclose sensitive terms such as contract scope, schedules, and budgets, and, in some cases, the specific end user
3. 49We have government customers, which subjects us to risks including early termination, audits, investigations, sanctions and penalties
4. 50Our reputation and ability to do business may be impacted by the improper conduct of our employees, agents, or business partners

Risks Related to Our Securities

1. 51We may issue a significant number of shares or equity-linked securities in the future in connection with investments or acquisitions
2. 52Because we became a public reporting company by means other than a traditional underwritten initial public offering, our stockholders may face additional risks and uncertainties
3. 53If certain holders of Common Stock sell a significant portion of their securities, it may negatively impact the market price of the shares of our Common Stock and such holders still may receive significant proceeds
4. 54The market price of our Common Stock is volatile, and you may lose some or all of your investment
5. 55If we are unable to maintain compliance with Nasdaq’s listing criteria, including their minimum bid price rule and minimum market value and stockholder equity requirement, Nasdaq may delist the Company’s stock
6. 56Volatility in our share price could subject us to securities class action litigation
7. 57If securities or industry analysts do not publish research or reports about us, or publish negative reports, our stock price and trading volume could decline
8. 58Because we do not anticipate paying any cash dividends in the foreseeable future, capital appreciation, if any, would be your sole source of gain
9. 59We may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to investors, thereby making Public Warrants worthless. We may redeem outstanding Series A Preferred Stock and the November 2024 Debentures
10. 60Our warrants may never be in the money, and they may expire worthless