Nauticus Robotics (KITT) risk factors, FY2025 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 future33% rewritten
2. 02We 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
3. 03We previously identified material weaknesses in our internal control over financial reporting, which we are working to remediate. These material weaknesses could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner67% rewritten
4. 04In addition, the Company’s management determined that the Company did not, as of December 31, 2024, design and maintain effective internal controls over financial reporting related to the failure to remediate previously reported material weakness over ineffective design and operation of user access controlsNew
5. 05The Company concludes that the controls have been operating for sufficient time and independently validated by management and the material weakness related to the design and operation of user access controls is fully remediatedNew
6. 06If 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
7. 07In 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
8. 08A 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 risks25% rewritten
9. 09If 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
10. 10Our 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
11. 11Unfavorable 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
12. 12Our 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
13. 13We may be unable to raise sufficient affordable capital needed to fund and grow our business
14. 14Our 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
15. 15The benefits of our products and services to customers and projected return on investment have not been substantiated through long-term trials or use
16. 16Even 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
17. 17If 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
18. 18We may not be able to complete or enhance our product and service offerings through our research and development efforts91% rewritten
19. 19We may not be able to enforce or protect our intellectual property rights, or third parties may claim we infringe their intellectual property rightsNew
20. 20could also result in negative publicity, damage to our reputation or, in the event of regulatory developments, delays in new product acceptanceNew
21. 21Even 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
22. 22Our 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
23. 23We 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
24. 24We 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
25. 25We 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 prospects41% rewritten
26. 26Climate change laws and environmental regulations could result in increased operating costs and reduced demand for our products and services
27. 27We 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 prospects60% rewritten
28. 28usage, monitor and exclude an expanding list of restricted substances and participate in recovery and recycling of our products or components. We are unable to predict how any future changes will impact us and if such impacts will be material to our businessNew
29. 29We 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
30. 30We 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 vendors93% rewritten
31. 31security incidents, some of which have involved sophisticated and highly targeted attacks. We may be a target for attacks by state-sponsored actors and others designed to disrupt our operations or to attempt to gain access to our systems or data that is processed or maintained in our businessNew
32. 32We 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
33. 33We are subject to governmental export and import controls and other laws and regulations that could subject us to liability in the event of noncompliance79% rewritten
34. 34financial condition, results of operations, cash flows, reputation and prospects. We have not yet identified all of the suppliers that we are likely to rely on to support future commercialization of our core productsNew
35. 35Our 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
36. 36We may be unable to adequately control the costs associated with our operations
37. 37We operate in a competitive industry that is subject to rapid technological change, and we expect competition to increase50% rewritten
38. 38in different markets. At the most basic level, these software platforms are similar in nature and our software could also be applied in additional markets outside of the blue technologies and ocean services spaceNew
39. 39These 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
40. 40Our 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 individuals22% rewritten
41. 41Our 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
42. 42If 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
43. 43We have yet to achieve positive operating cash flow and, given our projected funding needs, our ability to generate positive cash flow is uncertain24% rewritten
44. 44Our 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 losses83% rewritten
45. 45generated prior to December 31, 2017, however, have a 20-year carryforward period, but are not subject to the 80% limitationNew
46. 46Litigation or legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business
47. 47Failure 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
48. 48Any 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
49. 49If 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
50. 50If 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
51. 51Our systems, products, and related equipment may have shorter useful lives than we anticipate
52. 52We use estimates when accounting for certain contracts and changes in these estimates may have a significant impact on our financial results
53. 53We are subject to risks associated with conducting business internationally, including legal, regulatory, and compliance risks that differ significantly from those applicable to our domestic operationsNew
54. 54domestic content requirements applicable to our government contracts, which could increase our costs and limit our sourcing flexibilityNew
55. 55Conditions in the Middle East, including current uncertainty and instability resulting from conflict between the United States, Israel, and Iran, as well as other regional hostilities could adversely affect our businessNew
56. 56Changes in U.S. and international trade laws and policies, including the imposition of new or increased tariffs and duties, could adversely affect our business, financial condition, results of operations, and cash flowsNew

Risks Related to Government Contracts

1. 57impact on our operations. In addition, the termination of a program or the failure to commit additional funds to a program that already has been started could result in lost revenue and increase our overall costs of doing businessNew
2. 58The terms of certain of our likely future contracts are highly sensitive and we are limited in our ability to disclose such terms
3. 59For 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
4. 60In the future we may have government contracts, which subjects us to risks including early termination, audits, investigations, sanctions and penalties
5. 61Our 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. 62We may issue a significant number of shares or equity-linked securities in the future in connection with investments or acquisitions, which may cause dilution to, or otherwise adversely affect, our stockholders
2. 63Future offerings of debt or equity securities may rank senior to our Common StockNew
3. 64Because we became a public reporting company by means other than a traditional underwritten initial public offering, our stockholders may face additional risks and uncertainties
4. 65If 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
5. 66The market price of our Common Stock is volatile, and you may lose some or all of your investment
6. 67If 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 stock36% rewritten
7. 68Volatility in our share price could subject us to securities class action litigation
8. 69If securities or industry analysts do not publish research or reports about us, or publish negative reports, our stock price and trading volume could decline
9. 70Because we do not anticipate paying any cash dividends in the foreseeable future, capital appreciation, if any, would be your sole source of gain95% rewritten
10. 71any, of shares of Common Stock owned by you would be your sole source of gain on an investment in such shares for the foreseeable futureNew
11. 72We 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, Series B and Series C Preferred Stock and the November 2024 Debentures
12. 73Our warrants may never be in the money, and they may expire worthless29% rewritten