Rain Enhancement Technologies Holdco, Inc. 10-K

Item 7. Management’s discussion and analysis of financial condition and results of operations. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the notes related thereto which follow Item 16 of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K. Unless otherwise indicated or the context otherwise requires, references in this Holdco Management’s Discussion and Analysis of Financial Condition and Results of Operations to the company, “we,” “us” “our,” “Holdco” and other similar terms refer to Rain Enhancement Technologies Holdco, Inc. on a consolidated basis. 42 Overview We were founded to provide the world with reliable access to water, one of life’s most important resources. To achieve this mission, we aim to develop, manufacture and commercialize AEI technology. We are combining unique expertise and personnel to develop, improve and commercialize AEI technology that enhances rainfall and snowfall when conditions are appropriate in the atmosphere. We are building our proprietary WETA platform with software, meteorology, hardware, product design and operations to make rain and snowfall generation more dependable. We aim to improve the existing rain and snowfall generation technologies by introducing robust measurement tools, including automation technology, rain gauges, and weather stations, to more precisely quantify the positive water benefit generated by our systems. We aim to develop, invent, improve, manufacture, commercialize and operate technologies that enhance rainfall and elevate water reserves. We believe that our future services will yield potable water that can be used for all purposes. The projected cost (not including land costs, which are still being determined) and energy requirements for our future technology are modest on a per gallon basis for communities and ecosystems, estimated to be $0.10 per cubic meter, less than other alternative technologies. We aim to enhance agricultural, industrial and household water supplies for all the communities in which we operate by developing technology and services to serve governmental and commercial clients’ needs in creating water resiliency and abundance. Our business model is based on a unique one-to-many community-centric business model. The numerous client segments to which we market include large landowners including agriculture, resorts, energy and transportation companies, insurance and reinsurance companies, decarbonization initiatives of major corporations and philanthropists, supranational governmental organizations, and city, county, state, federal and non-U.S. governments. In addition, we aim to leverage our offerings and enhance our potential market position by exploring ways to expand our future water generation products through licensing and acting as a channel partner for additional water generation technologies. Since the beginning of 2025 we have continued advancing the commercialization of our technology, including manufacturing and deploying additional rain and snowfall generation systems and conducting field deployments with potential governmental and commercial clients. We have also expanded our network of industry experts and consultants supporting system development, project execution and commercial outreach, and continued research and development activities aimed at improving system performance and exploring potential adjacent atmospheric water applications. We have a limited operating history, and our ability to generate revenue sufficient to achieve profitability will depend on our ability to successfully build and commercialize AEI technology and successfully execute our sales strategy. Restatement This Annual Report includes a restatement of our financial statements for the Affected Periods resulting from an error in the accounting for financed insurance premiums as of March 31, 2025 and June 30, 2025. In connection with the restatement, our management reassessed the effectiveness of our internal control over financial reporting and our internal control over financial reporting and our disclosure controls and procedures for the Affected Periods. As a result of that reassessment, we determined that a material weakness existed in the Company’s internal control over financial reporting as of December 31, 2024, and that our disclosure controls and procedures were not effective as of December 31, 2025. For more information, see “Item 9A—Controls and Procedures” in this Annual Report. We have not amended our previously filed Quarterly Reports on Form 10-Q for the Affected Periods. The financial information that has been previously filed or otherwise reported for the Affected Periods is superseded by the information in this Annual Report on Form 10-K, and the financial statements and related financial information contained in such previously filed reports should no longer be relied upon. The restatement is more fully described in Note 2 of the notes to the audited consolidated financial statements included herein. Business Combination On December 31, 2024 (the “Closing Date”), Coliseum Acquisition Corp., Rain Enhancement Technologies, Inc., Rain Enhancement Technologies Holdco, Inc. (“Holdco”), and the merger subsidiaries consummated the business combination pursuant to the Business Combination Agreement (the “Business Combination”). Following the closing, Holdco became the publicly traded parent company and holds all of the equity interests of RET. 43 The Business Combination was accounted as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Coliseum was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of RET issuing stock for the net assets of Coliseum, accompanied by a recapitalization. The net assets of Coliseum were stated at historical cost, with no goodwill or other intangible assets recorded. Our common stock and warrants commenced trading on the Nasdaq Stock Market LLC under the symbols “RAIN” and “RAINW”, respectively, on January 2, 2025. PIPE Subscriptions In connection with the Closing, Holdco entered into subscription agreements (collectively, the “PIPE Subscription Agreements”) with certain investors and related parties (the “PIPE Investors”) to sell an aggregate of 118,557 shares of Holdco Class A Common Stock at a purchase price of approximately $11.39 per share, for gross proceeds of $1.35 million. At the Closing, Holdco received $700,000 of the PIPE investment and issued an aggregate of 61,474 shares of Holdco Class A Common Stock to the PIPE Investors and recorded a subscription receivable of $650,000 for the remaining PIPE investment on the consolidated balance sheet as of December 31, 2024. On January 29, 2025, the Company received $500,000 pursuant to the PIPE Subscription Agreements and issued 43,910 shares of Class A Common Stock. On February 6, 2025, the Company received the remaining $150,000 and issued 13,173 shares of Class A Common Stock. As of February 6, 2025, the subscription receivable had been fully paid. Forward Purchase Agreement with Meteora On December 30, 2024, Holdco entered into a forward purchase agreement (the “Forward Purchase Agreement”) with Meteora Capital Partners, LP and affiliated funds (“Meteora”) for an OTC equity prepaid forward transaction. An aggregate of 361,858 shares of Holdco Class A Common Stock (the “Forward Purchase Shares”) are subject to the Forward Purchase Agreement, for which Meteora was paid approximately $4.1 million at Closing (the “Prepayment”) and we retained approximately $20,000 (the “Prepayment Shortfall”). The Forward Purchase Agreement matures on the date of the effectiveness of a certain registration statement filed by Holdco with the Securities and Exchange Commission following the Closing Date (the “Maturity Date”). Meteora may sell the Forward Purchase shares at any time following the Closing Date until the Maturity Date at a price not less than $10.00 per share. If Meteora sells any of the Forward Purchase Shares, Meteora will pay to Holdco $10.00 for each share sold, less the Prepayment Shortfall. On Maturity Date, any Forward Purchase Shares that have not been sold by Meteora will be returned to us for no consideration, provided that if the proceeds of the shares sold by Meteora prior to the Maturity Date is less than the Prepayment Shortfall, then we will pay cash to Meteora in an amount equal to such difference. The forward purchase agreement remains subject to its contractual terms, including settlement provisions tied to the effectiveness of a registration statement. Loan Agreement with an Affiliate of Harry You On December 30, 2024, Holdco entered into the Loan Agreement with RHY Management LLC (“RHY), an affiliate of Harry You, pursuant to which RHY committed to provide Holdco with up to $7 million in new loans. In addition, approximately $3.1 million of existing loans and advances owed to Mr. You and his affiliates were rolled into the Loan Agreement. As of December 31, 2025, the Company had approximately $9.1 million outstanding under the Loan Agreement, consisting of approximately $3.1 million of rollover amounts and approximately $6.0 million of additional borrowings during 2025. On March 11, 2026, the Compensation Committee and the Board approved repayment of the amounts due under the Loan Agreement of up to 30% of any amount received by the Company from any potential future capital raise net of any underwriting, legal, and accounting fees and related costs. On March 24, 2026, the Audit Committee and the Board approved an increase in the amount that could be borrowed under the Loan Agreement from $7,000,000 to $10,000,000. The Company and RHY entered into an amendment to the Loan Agreement reflecting such increase, effective as of March 31, 2026. 44 Recent Developments Business Developments In October 2025, we announced preliminary field observations from a fog-mitigation pilot conducted in Australia using our WETA platform. Initial observations suggested ionization may influence fog dissipation under certain atmospheric conditions. Based on these results, we plan to conduct expanded, instrumented pilot programs in 2026 in the USA (Oregon, California, Utah or Colorado) and Australia to further evaluate performance and use cases. These activities remain in the research and development stage and are not expected to generate material revenue until validation and commercialization. Our first two US installed systems entered operation in November 2025. These installations represent the Company’s first operational deployments in the United States and are part of our efforts to evaluate system performance under real-world atmospheric conditions. The systems are located in the La Sal Range of Utah, where we are monitoring snowfall and Snow Water Equivalent (“SWE”) measurements. Preliminary observations during certain periods of system operation coincided with changes in local snowfall and SWE measurements. These observations are preliminary, and additional research and analysis are ongoing to evaluate potential precipitation and snowpack impacts under varying atmospheric conditions. During 2025, we also expanded production of our WETA systems and manufactured ten additional units in Australia which were shipped to, and are stored in, the United States intended to support future pilot programs, field deployments and operational readiness. As of December 31, 2025, seven of these units had been completed and were being stored pending deployment. The remaining three units were completed and delivered to the United States in March 2026. Additionally, three systems are currently under construction. These systems are expected to support ongoing research activities, demonstration projects and potential future deployments as we continue to evaluate commercial applications of our technology. Management believes that maintaining an inventory of completed systems may allow the Company to respond more efficiently to pilot opportunities, research collaborations and potential commercial deployments as they arise. In addition, we also continued internal development efforts related to potential enhancements to our WETA platform, including instrumentation, data collection and deployment configurations intended to support future pilot programs and operational flexibility. These initiatives remain in development and are being evaluated as part of our broader research and engineering activities. The timing and extent of any future implementation or commercialization of these capabilities remain uncertain. Service Agreement with Utah Division of Water Resources In January 2026, we entered into a service agreement with the Utah Division of Water Resources to support the installation of a generator to facilitate radiometer data ingestion associated with our rainfall monitoring infrastructure. The agreement provides for payment of $10,500 to us in connection with the installation. We completed the installation and fully received the payment in February 2026. Appointment of Directors On December 22, 2025, the holders of Class B Common Stock appointed Mr. David Sylvester as a Class II director with a term expiring at the second annual meeting of stockholders, and the Board increased the size of the Board from seven to eight directors and appointed Mr. Sylvester as Chairperson of the Audit Committee. Following the appointment, Mr. Sylvester, Mr. Peperzak and Mr. Reardon serve on the Audit Committee. In connection with this appointment, Mr. Sylvester entered into a director agreement that is consistent with our form of Director Agreement. which provides for annual cash compensation and potential equity awards subject to approval by the Board and Compensation Committee. As of the date of this Annual Report, no equity awards have been granted to our directors under these agreements. 45 Nasdaq Compliance Notices On February 18, 2025, we received the MVLS Notice from the Staff of the Nasdaq which notified us that, for the 30 consecutive business days ended February 14, 2025, our MVLS closed below the $50,000,000 MVLS threshold required for continued listing on the Nasdaq Global Market under the MVLS Rule. Also on February 18, 2025, we received the MVPHS Notice from Nasdaq that for the 30 consecutive business days ended February 14, 2025, our MVPHS closed below the $15,000,000 MVPHS threshold required for continued listing on Nasdaq under Nasdaq Listing Rule 5450(b)(2)C). On August 19, 2025, we received the Notice from the Staff indicating that we had not regained compliance with either the MVLS Rule or the MVPHS Rule and, unless we timely request a hearing before the Panel, our securities would be subject to suspension and delisting from The Nasdaq Global Market. We timely submitted our request for a hearing before the Panel on August 21, 2025. As part of the compliance plan submitted to the Panel, we requested a transfer of our listing from the Nasdaq Global Market to the Nasdaq Capital Market. A hearing before the Panel was held on September 18, 2025 and on October 14, 2025, the Panel granted our request for continued listing on Nasdaq, subject to our timely application to transfer our listing from the Nasdaq Global Market to the Nasdaq Capital Market and demonstrating compliance with the applicable listing requirements. We completed the transfer to the Nasdaq Capital Market and demonstrated compliance with the applicable listing rules. Nasdaq subsequently confirmed that we had regained compliance with its previously disclosed deficiencies, Our Class A common stock and warrants continue to trade under the symbol “RAIN” and “RAINW”, respectively. On February 18, 2026, we received an additional written notice from Nasdaq indicating that, for the 30 consecutive business days ended February 17, 2026, our MVLS had closed below the $35,000,000 minimum required for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(2). In accordance with Nasdaq rules, we have 180 calendar days, or until August 17, 2026, to regain compliance with the MVLS requirement. To regain compliance, our MVLS must close at or above $35,000,000 for a minimum of ten consecutive business days during this compliance period. We intend to monitor our MVLS and evaluate available options to regain compliance with Nasdaq listing standards; however, there can be no assurance that we will regain or maintain compliance within the applicable compliance period. Plan of Operations 12-Month Plan RET currently has two rain and snowfall generation systems installed and placed in service in the United States. These units arrived in the US in September 2025, and began operating in November 2025 and are currently being used to support field observations, data collection and ongoing research activities related to our rainfall generation technology. Initial observations from these installations have enabled us to evaluate system performance using available meteorological and radar data. Data collection and analysis remain ongoing as we continue to evaluate system performance and potential atmospheric effects associated with our technology. During 2025, we expanded production of our WETA systems and manufactured ten additional units intended to support future pilot programs, field deployments and operational readiness. As of December 31, 2025, seven of these units had been completed and were being stored pending deployment. The remaining three units were completed and delivered to the United States in March 2026. Additionally, three systems are currently under construction. The timing and location of future installations will depend on factors such as site availability, permitting requirements, customer engagement and the results of ongoing testing and evaluation. We expect that some of these systems may be deployed during 2026 as part of pilot programs, demonstration projects or other research initiatives. We continue to document sourcing, manufacturing and assembly processes associated with our systems as part of our ongoing development efforts. As part of these efforts, we may evaluate potential supply chain arrangements and manufacturing partners to support future production, although no such arrangements have been finalized. 46 Future deployments, if pursued, may involve installing one or more systems within a geographic area as part of pilot programs or demonstration projects. Site selection will consider factors such as weather patterns, terrain, permitting requirements, accessibility and other operational considerations. We also continue research and development activities related to instrumentation and measurement tools designed to support monitoring and evaluation of system performance during field deployments. These efforts are intended to assist with the collection and analysis of atmospheric and precipitation data associated with our systems. In addition, we may pursue research collaborations with academic institutions or other research organizations to further study atmospheric effects and evaluate the potential impact of our technology in locations where systems are deployed. While our systems are currently being deployed primarily for research, pilot and demonstration purposes, the operational experience gained from these deployments is intended to support the continued development of our technology and inform potential future commercial applications. Going Concern Consideration In connection with our management’s assessment of going concern considerations in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Classification (“ASC”) Subtopic 205-40, “Presentation of Financial Statements - Going Concern,” we evaluate whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. This assessment considers our current cash position, projected cash requirements, and ability to obtain additional funding. As of December 31, 2025, we had approximately $214,000 in cash and had a working capital deficit of approximately $13.0 million. We expect to continue incurring expenses as we scale our operations and begin to generate revenue. We have historically funded our operations primarily through related-party financing arrangements, including borrowings under our line of credit with Mr. You. As of December 31, 2025, we had drawn substantially all available amounts under this facility. While we expect to continue relying on related party financing sources, additional capital raises and projected cash flows from operations, our limited operating history and continuing operating losses raise substantial doubt about our ability to continue as a going concern. Management’s plans to address this uncertainty include continued support from related parties, seeking additional financing through debt, equity, or a combination of both, and pursuing commercial opportunities for installation and service agreements. However, there is no assurance that such funding will be available on acceptable terms, or at all. Accordingly, our management has determined that we do not have sufficient liquidity to meet our anticipated obligations over the next year from the date of issuance of these consolidated financial statements. The consolidated financial statements included in this Annual Report do not include any adjustments that might result from the outcome of this uncertainty. Results of Operations During 2025, we incurred installation and field deployment costs associated with the initial deployment and pilot operation of our rain and snowfall generation systems in the United States. These activities were undertaken as part of system validation and research programs and were not associated with revenue-generating customer contracts. For the year ended December 31, 2025, we had a net loss of approximately $9.1 million, which consisted of installation costs of approximately $402,000, general and administrative expenses of approximately $7.6 million (primarily related to personnel costs, stock based compensation expense, professional services including annual audit, marketing, and other corporate operating expenses), research and development expenses of approximately $62,000, amortization expense of approximately $12,000, depreciation expense of approximately $7,000, a loss due to the change in fair value of warrant liabilities of $900,000, and interest expenses, minimal tax expenses and interest income from an operating account of approximately $283,000, partially offset by gain from a settlement with vendor of approximately $226,000. 47 For the year ended December 31, 2024, we had net loss of approximately $4.5 million, which consisted mainly of general and administrative expenses of approximately $4.5 million and interest expense in connection with the note payable to related parties of approximately $30,000. Cash Flows For the year ended December 31, 2025, net cash used in operating activities was approximately $2.0 million, net cash used in investing activities was approximately $987,805, and net cash provided by financing activities was approximately $3.1 million. Net cash used in operating activities included our net loss of approximately $9.1 million, and a gain from the settlement with a vendor of approximately $226,000, partially offset by changes in operating assets and liabilities of approximately $1.3 million, amortization expense of approximately $12,000, depreciation expense of approximately $7,000, approximately $3.5 million paid by related parties on behalf of RET, stock-based compensation expenses of approximately $1.6 million and a change in the fair value of a warrant liabilities of $900,000. Cash used in investing activities consisted solely of payment for building Equipment of approximately 987,805. Cash provided by financing activities resulted from proceeds from payment of subscription receivable of $650,000 and proceeds from drawdowns under the LOC (as defined below) of approximately $2.5 million. For the year ended December 31, 2024, net cash used in operating activities was approximately $1.3 million, net cash used in investing activities was approximately $46,000, and net cash provided by financing activities was approximately $1.4 million. Net cash used in our operating activities included our net loss of approximately $4.5 million, partially offset by non-cash activities, including stock-based compensation expense of approximately $2.8 million, amortization expense of approximately $12,000, and expenses paid by related parties on behalf of RET of approximately $321,000, and changes in operating assets and liabilities. Cash used in investing activities consisted solely of payment for building Equipment of approximately $46,000. Cash provided by financing activities resulted from (i) the issuance of RET Class A and RET Class B common stock of $740,000 and $125,000, respectively, (ii) cash proceeds from the issuance of Holdco Class A common stock in connection with PIPE subscriptions of $700,000, and (iii) proceeds from the reverse recapitalization in connection with the Business Combination, partially offset by payment of deferred financing costs of $75,000 and payment of the prepaid Forward Purchase Agreement with Meteora of approximately $4.1 million. Commitments and Contingencies Patent License On November 21, 2022, RET entered into a license agreement with Dr. Theodore Anderson, a plasma physicist, whereby RET was granted an exclusive, worldwide license under certain of Dr. Anderson’s patents. The consideration paid for the license of $33,000, which was fully paid in November 2022, was recorded as a finite-lived intangible asset. Consulting Agreement for Rainfall Ionization Equipment We entered into a consulting agreement to engage our senior technology advisor, Scott Morris in 2022, pursuant to which we agreed to pay him a one-time fee upon execution of the agreement and a consulting fee of AUD 250,000 per year (equivalent to approximately $170,000 as of the effective date). In February 2025, the agreement was amended to increase the annual consulting fee to $186,000, and in June 2025, it was further increased to $252,000 annually in exchange for the consultant assuming an additional role and responsibilities. The agreement also provides for success fees payable upon the achievement of specified sales and development milestones. On March 19, 2026, the agreement was amended to add three additional milestones, each of which would entitle him to a $25,000 cash bonus. During the year ended December 31, 2025, we paid an aggregate of $50,000 in milestone payments to Mr. Morris in connection with the achievement of certain development milestones. In connection with the consulting agreement, we also agreed to obtain from Mr. Morris an irrevocable, perpetual, non-exclusive license under certain engineering designs in connection with rainfall ionization equipment and systems. We fully paid this amount of $83,750 in June 2023. 48 Employment Agreement Effective January 2, 2025, we entered into a binding offer letter (as amended, the “Offer Letter”), which was later amended on June 27, 2025, with our new CEO, Mr. Seidl. Pursuant to the amended Offer Letter, we agreed to pay to the CEO (i) an annual salary of $500,000, (ii) an annual incentive bonus up to 200% of his base salary, subject to Board or Compensation Committee approval, which will be subject to the achievement of Company and/or individual performance goals mutually agreed by the CEO and the Board or the Compensation Committee, and (iii) a cash bonus of $5.82 million (the “Retention Bonus”) payable on the earlier of (x) December 31, 2028, (y) the date on which we terminate the CEO’s employment without cause, or (z) the date on which a change of control is consummated. We accrue the Retention Bonus over the period of service. As of December 31, 2025, we accrued approximately $831,000 of Retention Bonus and $1 million of annual incentive bonus for 2025 in accrued expenses to related party in the accompanying consolidated balance sheet. On March 16, 2026, the Company paid Mr. Seidl the $1 million annual incentive bonus for 2025 pursuant to the determination and approval of the Compensation Committee. In addition, Mr. Seidl is also entitled to an equity award under our equity incentive plan that was approved by the Compensation Committee on August 14, 2025 and by the Board on August 20, 2025. On September 5, 2025, we granted 602,320 RSAs to Mr. Seidl, of which 50% vested on January 1, 2026, and 50% of which shall vest on January 1, 2027, subject to continued employment or service through such vesting date. Termination Letter In January 2025, we entered into a termination letter agreement with our former CEO, Mr. Christopher Riley, pursuant to which, in lieu of all other compensation and payments, we agreed to pay Mr. Riley an aggregate of $124,500, payable in 18 monthly installments beginning in February 2025 in consideration for his past services. As of December 31, 2025, we had an aggregate of approximately $48,000 in outstanding amount in connection with such agreement that was included in accrued expenses in the accompanying consolidated balance sheet. Additionally, conditioned on approval by the Compensation Committee, the Termination Letter provides that Mr. Riley will be granted 10,000 shares of Class A Common Stock vesting one year from the date of grant. As of December 31, 2025, the stock has not been granted. Related Party Transactions Note Payable and Line of Credit from Related Parties On February 2, 2023, RET issued a promissory note (the “Note”) to its former CEO, Mr. You, and Mr. de Masi for an aggregate amount of $600,000. The Note has an annual interest rate of 5%. The Note amount owed to RET’s former CEO and Mr. de Masi totaling $400,000 remains as outstanding due on demand, and the $200,000 Note amount owed to Mr. You was included in the Rollover amount described below. On December 30, 2024, Holdco entered into the Loan Agreement with RHY, an affiliate of Harry You, pursuant to which RHY agreed to issue a line of credit (the “LOC”) to Holdco for up to $7 million, in addition to the Rollover amount described below (such amounts borrowed under the LOC, together with the Rollover, the “Loan”). The Loan bears interest at the greater of 5% per annum or the applicable IRS short-term rate in the month of each drawdown (“Interest Rate”), payable quarterly in arrears. If a quarterly payment is missed, the loan balance increases by an amount equal to the principal multiplied by the 2% Default Rate (as defined below). If an event of default has occurred and is continuing, then upon written notice by RHY to Holdco, the outstanding principal balance and any unpaid accrued interest will accrue interest at 2% above the Interest Rate (the “Default Rate”). Prior to closing of the Business Combination, the outstanding amount that Coliseum and RET owed to Mr. You and his affiliates was approximately $3.1 million. The Rollover amounts were assigned to and assumed by Holdco and are treated for all purposes as Loans outstanding under the Loan Agreement. The Rollover amount does not reduce the $7 million funding available to us under the LOC. As a result, as of December 31, 2024, we had approximately $3.1 million outstanding under the LOC, comprised solely of the Rollover amount. As of December 31, 2025, we had drawn approximately $6.0 million under the LOC, in the combined form of cash proceeds and payments made on behalf of the Company, bringing the total outstanding balance under the Loan Agreement to approximately $9.1 million (including the $3.1 million Rollover). 49 As of December 31, 2025 and 2024, we had an outstanding accrued interest balance in connection with both the Note and the LOC of approximately $323,000 and $38,000, respectively. On March 11, 2026, the Compensation Committee and the Board approved repayment of the amounts due under the Loan Agreement of up to 30% of any amount received by the Company from any potential future capital raise net of any underwriting, legal, and accounting fees and related costs. On March 24, 2026, the Audit Committee and the Board approved an increase in the amount that could be borrowed under the Loan Agreement from $7,000,000 to $10,000,000. The Company and RHY entered into an amendment to the Loan Agreement reflecting such increase, effective as of March 31, 2026. Board Agreement On April 1, 2025, the Board increased the size of the Board from five to seven directors and appointed Mr. Marcus Peperzak and Mr. Robert Reardon to the Board to fill the resulting vacancies. On December 22, 2025, the Board further increased its size from seven to eight directors and appointed Mr. David Sylvester as a Class II director. In connection with their appointments to the Board, Mr. Reardon, Mr. Peperzak, and Mr. Sylvester each entered into the Director Agreements which are the form of agreement adopted by the Board in April 2025 to govern the terms of service and compensation of our company’s non-employee directors. Additionally, effective as of April 4, 2025, we entered into Director Agreements with Lyman Dickerson, Alexandra Steele, and Christopher Riley, each non-employee members of the Board. Pursuant to the terms of the Director Agreements, we agreed to pay to each Board member (i) subject to approval by the Board and Compensation Committee, a cash payment of $12,500 promptly following attendance at each quarterly Board meeting, for a total annual cash compensation of $50,000; and (ii) subject to approval by the Board and the Compensation Committee, a grant of restricted stock, with the number of shares and terms to be determined by the Board. We recognized an aggregate of $225,000 in connection with such agreement during the year ended December 31, 2025 within general and administrative expenses in the accompanying consolidated statements of operations. As of December 31, 2025, there has been no grants of restricted stock to the directors. Segments We operate and manage the business as one reportable and operating segment, which is the business of developing, manufacturing and commercializing AEI technology. Our chief executive officer, who is the chief operating decision maker, or CODM, reviews financial information on an aggregate basis for allocating resources and evaluating financial performance. Off-Balance Sheet Arrangements We did not have off-balance sheet arrangements as of December 31, 2025, and do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Critical Accounting Estimates The consolidated financial statements have been prepared in accordance with U.S. GAAP and pursuant to the rules and regulations of the SEC. Preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. We also make estimates and assumptions on revenue generated and reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. 50 While our significant accounting policies are described in the notes to our consolidated financial statements included elsewhere in this Annual Report, our management believes there were no critical accounting estimates identified during the years ended December 31, 2025 and 2024. Derivative Financial Instruments We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to FASB ASC Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. The assessment considers whether the financial instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the financial instruments meet all of the requirements for equity classification under ASC 815, including whether the financial instruments are indexed to our own ordinary shares, among other conditions for equity classification. Equipment and Construction In-Process Equipment We capitalize our cost to build our rainfall ionization equipment (the “Equipment”), including materials and allocated labor costs directly attributable to the construction of the Equipment. Costs incurred prior to completion of the equipment are recorded as construction in progress. Upon the installation of the Equipment, we transferred our capitalized cost from Construction in-process to Equipment. Equipment that has been completed but has not yet been installed or otherwise placed into service remains within Construction in-process Equipment and is not depreciated until transferred into Equipment and placed into service. Depreciation begins when the equipment is placed into service and is recorded on a straight-line basis over the estimated useful life of the assets, which we currently estimate to be 10 years. At the time of retirement or other disposition of the Equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations. As of December 31, 2024, no Equipment has been placed in service. In November 2025, we completed installation of two existing systems and placed them into service. As a result, we moved these costs associated with these two units from Construction in-process into Equipment began recording depreciation on these assets and recognized approximately $7,000 of depreciation expense during the year ended December 31, 2025 in the accompanying consolidated statement of operations. Installation costs represent expenses incurred in connection with the installation of the Company’s rain and snowfall generation systems deployed in pilot installations and evaluation projects. These costs primarily consist of labor, travel, site preparation and related operational expenses associated with system deployment and testing. As we are currently in an early stage of commercial deployment, certain installation activities may occur prior to the execution of revenue-generating customer agreements. Intangible Assets Recognized intangible assets have finite lives and include acquired licenses for market-ready technology and designs of weather modification and rainfall ionization equipment. Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. Intangible assets with finite lives are amortized using the straight-line method over the estimated useful economic life. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the consolidated statements of operations and in the expense category that is consistent with the function of the intangible assets. 51 Intangible assets with finite lives are tested for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. These conditions may include a change in the extent or manner in which the asset is being used or a change in future operations. We assess the recoverability of the carrying amount by preparing estimates of future revenue, margins, and cash flows. If the sum of expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, an impairment loss is recognized. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value of the asset. Fair value of these assets may be determined by a variety of methodologies, including discounted cash flow models. As of December 31, 2025 and 2024, we did not have any intangible assets with indefinite useful lives. We evaluate long-lived assets, including intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. No impairment was recorded for the years ended December 31, 2025 or 2024. Stock Compensation Our policy is to account for stock-based compensation expense in accordance with FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity awards is measured at fair value upon the grant date and recognized over the requisite service period. To the extent a stock-based award is subject to a performance condition, the amount of expense recorded in a given period, if any, reflects an assessment of the probability of achieving such performance condition, with compensation recognized once the event is deemed probable to occur. Forfeitures are recognized as incurred. Recent Accounting Pronouncements In December 2023, the FASB issued ASU No. 2023-09 (Topic 740), Improvements to Income Tax Disclosures. The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as an expansion of other income tax disclosures. The ASU is effective on a prospective basis for annual reporting periods beginning after December 15, 2024. The Company adopted ASU 2023-09 in its fourth quarter of 2025 for the period ending December 31, 2025, and the adoption impacted only the disclosures with no material impact on the Company’s consolidated financial statements. Issued in November 2024, ASU 2024-03, Disaggregation of income Statement Expenses (Subtopic 220-40), requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. While early adoption is permitted, the Company does not plan to adopt this standard early. This ASU will likely result in additional disclosures being included in the Company’s consolidated financial statements once adopted. The Company is currently evaluating the provisions of this ASU. Emerging Growth Company Status Holdco is an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. Section 107 of the JOBS Act allows emerging growth companies to take advantage of the extended transition period for complying with new or revised accounting standards. Under Section 107, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Any decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable. The Company has elected to use the extended transition period available under the JOBS Act, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. 52 The Company will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the effectiveness of the Company’s registration statement on Form S-4 in connection with the Business Combination, (b) in which the Company has total annual revenue of at least $1,235,000,000, or (c) in which the Company is deemed to be a large accelerated filer, which means the market value of its common equity that is held by non-affiliates exceeds $700.0 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. We are also a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. The Company will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of the shares of Class A Common Stock held by non-affiliates exceeds $250.0 million as of the prior June 30, and (ii) the Company’s annual revenue exceeds $100.0 million during such completed fiscal year and the market value of the shares of Class A Common Stock held by non-affiliates exceeds $700.0 million as of the prior June 30. To the extent the Company takes advantage of such reduced disclosure obligations, it may also make comparison of the Company’s financial statements with other public companies difficult or impossible. Item 7A. Quantitative And Qualitative Disclosures About Market Risk We are a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act. Therefore, pursuant to Item 305(e) of Regulation S-K, we are not required to provide the information required by this Item. Item 8. Financial Statements and Supplementary Data This information appears following Item 16 of this Form 10-K and is incorporated herein by reference. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.