Item 1A. Risk Factors
ITEM
1A.
RISK
FACTORS
WE
HAVE A LIMITED HISTORY OF LOSSES AND HAVE NEVER REALIZED REVENUES TO DATE.
Since
inception, we have incurred losses and have negative cash flows from operations and have realized only minimal revenues. From inception
through December 31, 2021, we have an accumulated deficit of $151,914,888. These factors, among others discussed in Note (1) to the financial
statements included in this Annual Report, raise substantial doubt about our ability to continue as a going concern. We expect to continue
to incur net losses until we are able to realize revenues to fund our continuing operations. We may fail to achieve any or significant
revenues from sales or achieve or sustain profitability. Accordingly, there can be no assurance of when, if ever, we will be profitable
or be able to maintain profitability.
WE
ARE A DEVELOPMENT STAGE COMPANY AND MAY BE UNABLE TO MANAGE OUR GROWTH OR IMPLEMENT OUR EXPANSION STRATEGY IF WE ARE ABLE TO LAUNCH OUR
PRODUCT AND SERVICE OFFERINGS.
We
are a development stage company that was formed on April 24, 2006 and may not be able to launch our product and service offerings or
implement the other features of our business strategy at the rate or to the extent presently planned. If we are able to launch our product
and service offerings, our projected growth will place a significant strain on our administrative, operational and financial resources.
If we are unable to successfully manage our future growth, establish and upgrade our operating and financial control systems, recruit
and hire necessary personnel or effectively manage unexpected expansion difficulties, our financial condition and results of operations
could be materially and adversely affected.
WE
MAY NOT BE ABLE TO SUCCESSFULLY DEVELOP AND COMMERCIALIZE OUR TECHNOLOGIES WHICH WOULD RESULT IN CONTINUED LOSSES.
While
we have made progress in the development of our products, we have generated only minimal revenues and are unable to project when we will
achieve profitability, if at all. As is the case with any new technology, we are a development stage company and expect the development
process to continue. We may not be able to develop our product offering, develop a customer base and markets, or implement the other
features of our business strategy at the rate or to the extent presently planned. Growth beyond the product development stage will place
a significant strain on our administrative, operational and financial resources. In addition, our operations will not be able to move
out of the development stage without additional funding.
OUR
REVENUES ARE DEPENDENT UPON ACCEPTANCE OF OUR PRODUCTS BY THE MARKET; THE FAILURE OF WHICH WOULD CAUSE TO CURTAIL OR CEASE OPERATIONS.
We
believe that virtually all of our revenues will come from the sale or license of our products. As a result, we will continue to incur
substantial operating losses until such time as we are able to sell and license our products and generate revenue. There can be no assurance
that businesses and customers will adopt our technology and products, or that businesses and prospective customers will agree to pay
for or license our products. In the event that we are not able to significantly increase the number of customers that purchase or license
our products, or if we are unable to charge the necessary prices or license fees, our financial condition and results of operations will
be materially and adversely affected.
7
WE
DO NOT MAINTAIN THEFT OR CASUALTY INSURANCE, AND ONLY MAINTAIN MODEST LIABILITY AND PROPERTY INSURANCE COVERAGE AND THEREFORE WE COULD
INCUR LOSSES AS A RESULT OF AN UNINSURED LOSS.
We
do not maintain theft or casualty insurance and we have modest liability and property insurance coverage. We cannot assure you that we
will not incur uninsured liabilities and losses as a result of the conduct of our business. Any such uninsured loss or liability could
have a material adverse effect on our results of operations.
IF
WE LOSE KEY EMPLOYEES AND CONSULTANTS OR ARE UNABLE TO ATTRACT OR RETAIN QUALIFIED PERSONNEL, OUR BUSINESS COULD SUFFER.
Our
success is highly dependent on our ability to attract and retain qualified scientific, engineering and management personnel. We are highly
dependent on our chief executive officer, Dr. David Lee, who has been critical to the development of our technologies and business. The
loss of the services of Dr. Lee could have a material adverse effect on our operations. We are also highly dependent on our chief operating
officer, Mr. Spencer Hall, who has been critical in the development of business relationships with partners and potential customers.
We do not have employment agreements with Dr. Lee or Mr. Hall and do not maintain key man insurance with respect to Dr. Lee or Mr. Hall.
Accordingly, there can be no assurance that they will remain associated with us. Their efforts will be critical to us as we continue
to develop our technology and as we attempt to transition from a development stage company to a company with commercialized products
and services. If we were to lose Dr. Lee, or any other key employees or consultants, we may experience difficulties in competing effectively,
developing our technology and implementing our business strategies.
THE
LOSS OF STRATEGIC RELATIONSHIPS USED IN THE DEVELOPMENT OF OUR PRODUCTS AND TECHNOLOGY COULD IMPEDE OUR ABILITY TO COMPLETE OUR PRODUCT.
We
may rely on strategic relationships with technology development partners to provide personnel, and expertise in the research and development
of our technology and manufacturing process underlying our product. A loss of these relationships for any reason could cause us to experience
difficulties in completing the development of our product and implementing our business strategy. There can be no assurance that we could
establish other relationships of adequate expertise in a timely manner or at all.
OUR
CURRENT AND POTENTIAL COMPETITORS, SOME OF WHOM HAVE GREATER RESOURCES THAN WE DO, MAY DEVELOP PRODUCTS AND TECHNOLOGIES THAT MAY CAUSE
DEMAND FOR, AND THE PRICES OF, OUR PRODUCTS TO DECLINE.
While
there are a number of companies developing green hydrogen technologies for electrolyzers, we do not know of any employing anything similar
to our non-precious metal-based catalysts. We may face competition from these companies as they may expand or extend their product offering
to incorporate new catalyst materials.
Many
of our current and potential competitors have longer operating histories, significantly greater financial, technical, product development
and marketing resources, greater name recognition and larger customer bases than we do. Our present or future competitors may be able
to develop products comparable or superior to those we offer, adapt more quickly than we do to new technologies, evolving industry trends
and standards or customer requirements, or devote greater resources to the development, promotion and sale of their products than we
do. Accordingly, we may not be able to compete effectively in our markets, competition may intensify and future competition may harm
our business.
WE
ARE CONTROLLED BY CURRENT OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS.
Our
directors and executive officers beneficially own approximately 31.6% of the outstanding shares of our common stock as of December 31,
2021. Accordingly, our executive officers, directors, principal stockholders and certain of their affiliates will have the ability to
control the election of our Board of Directors and the outcome of matters submitted to a vote of our stockholders.
8
Risks
Related to Our Common Stock
BECAUSE
THERE IS A LIMITED MARKET IN OUR COMMON STOCK, STOCKHOLDERS MAY HAVE DIFFICULTY IN SELLING OUR COMMON STOCK AND OUR COMMON STOCK MAY
BE SUBJECT TO SIGNIFICANT PRICE SWINGS.
There
is a very limited market for our common stock. Since trading commenced in February 2007, there has been little activity in our common
stock and on some days, there is no trading in our common stock. Because of the limited market for our common stock, the purchase or
sale of a relatively small number of shares may have an exaggerated effect on the market price for our common stock. We cannot assure
stockholders that they will be able to sell common stock or, that if they are able to sell their shares, that they will be able to sell
the shares in any significant quantity at the quoted price.
IF
WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED FROM THE OTC BULLETIN BOARD WHICH WOULD LIMIT THE ABILITY
OF BROKER-DEALERS TO SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES IN THE SECONDARY MARKET.
Securities
traded on the OTCQB must be registered with the Securities and Exchange Commission and the issuer must be current with its filings pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1933, as amended in order to maintain price quotation privileges on the OTCQB.
If we fail to remain current in our reporting requirements, we could be removed from the OTCQB. As a result, the market liquidity for
our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability
of stockholders to sell their securities in the secondary market. In addition, we may be unable to get re-listed on the OTCQB, which
may have an adverse material effect on our Company.
OUR
COMMON STOCK IS SUBJECT TO THE “PENNY STOCK” RULES OF THE SEC AND THE TRADING MARKET IN OUR SECURITIES IS LIMITED, WHICH
MAKES TRANSACTIONS IN OUR STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.
The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes
relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00
per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
●
that
a broker or dealer approve a person’s account for transactions in penny stocks; and
●
the
broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the
penny stock to be purchased.
In
order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
●
obtain
financial information and investment experience objectives of the person; and
●
make
a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge
and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating
to the penny stock market, which, in highlight form:
●
sets
forth the basis on which the broker or dealer made the suitability determination; and
●
that
the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally,
brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more
difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
9
Disclosure
also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions
payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies
available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the limited market in penny stocks.
WE
DO NOT EXPECT TO PAY DIVIDENDS IN THE FUTURE; ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR COMMON STOCK.
We
do not currently anticipate paying cash dividends in the foreseeable future. The payment of dividends on our Common Stock will depend
on earnings, financial condition and other business and economic factors affecting it at such time as the board of directors may consider
relevant. Our current intention is to apply net earnings, if any, in the foreseeable future to increasing our capital base and development
and marketing efforts. There can be no assurance that the Company will ever have sufficient earnings to declare and pay dividends to
the holders of our Common Stock, and in any event, a decision to declare and pay dividends is at the sole discretion of the our Board
of Directors. If we do not pay dividends, our Common Stock may be less valuable because a return on your investment will only occur if
its stock price appreciates.
ITEM
2.
PROPERTIES.
Our
headquarters are located at 27936 Lost Canyon Road, Suite 202, Santa Clarita, California 91387. We lease our facility under a month-to-month
lease without an expiration date. Our monthly lease payment is $550. The size of our office is 144 square feet.
ITEM
3.
LEGAL
PROCEEDINGS.
We
are not currently a party to, nor are any of our property currently the subject of, any pending legal proceeding that will have a material
adverse effect on our business.
ITEM
4.
MINE
SAFETY DISCLOSURES
N/A
10
PART
II
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