CPWR 10-K
Ocean Thermal Energy Corp (CPWR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the fiscal year ended
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For the transition period from _____________ to ___________________
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DOCUMENTS INCORPORATED BY REFERENCE: None
TABLE OF CONTENTS
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Throughout this report, unless otherwise designated, the terms “we,” “us,” “our,” and “our company” refer to Ocean Thermal Energy Corporation, a Nevada corporation, and our subsidiary. All amounts in this report are in U.S. dollars, unless otherwise indicated.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
This report may contain certain “forward-looking” statements as such term is defined by the U.S. Securities and Exchange Commission (“SEC”) in its rules, regulations, and releases, which represent our expectations or beliefs, including statements concerning our operations, economic performance, financial condition, growth and acquisition strategies, investments, and future operational plans. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” “might,” “plan,” “propose,” “predict,” or “should,” or the negative or other variations thereof or comparable terminology, are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors, including uncertainty related to acquisitions, governmental regulation, management and maintenance of growth, the operations of the company and its subsidiaries, volatility of stock price, commercial viability of OTEC systems, and any other factors discussed in this and our other filings with the SEC.
These risks, uncertainties, and other factors include those set forth under “Risk Factors” of this report. Given these risks and uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Except as otherwise required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in this report or in the documents we incorporate by reference, whether as a result of new information, future events, changed circumstances, or any other reason after the date of this report.
This report contains forward-looking statements, including statements regarding, among other things:
| · | the significant international political and economic disruption caused by Russia’s military invasion of Ukraine and the war in Iran; |
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| · | our ability to continue as a going concern; |
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| · | our anticipated needs for working capital; |
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| · | our significant amount of defaulted debt and ability to secure additional future financing; |
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| · | our ability to successfully identify viable projects and obtain contracts to develop those projects; |
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| · | the possibility that actual capital costs, operating costs, production, and economic returns may differ significantly from those that we have anticipated; |
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| · | the financial model for our proposed projects has not been tested and may not be successful; |
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| · | changing attitudes about environmental risks; |
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| · | substantial regulation of our projects; |
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| · | rapidly changing regulatory schemes and enforcement of those regulations in the United States and abroad; |
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| · | the impact of tariffs on the cost of constructing our projects; |
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| · | financial, technical, managerial, and sales risks that may make us unsuccessful; |
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| · | our exposure to political and legal risks in developing or emerging markets where we propose to locate our plants; |
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| · | technological advances that may render our technologies obsolete; and |
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| · | operational problems, natural events or catastrophes, casualty loss, or other events that may impair the commercial operation of our projects. |
The forward-looking information is based on present circumstances and on our predictions respecting events that have not occurred, that may not occur, or that may occur with different consequences from those now assumed or anticipated. Actual events or results may differ materially from those discussed in forward-looking statements because of various factors, including the risks outlined under “Risk Factors,” and matters described in this report generally. The forward-looking statements included in this report are made only as of the date of this report.
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PART I
ITEM 1. BUSINESS
Overview
We use our proprietary technology to develop designs for renewable energy systems, primarily for Ocean Thermal Energy Conversion (“OTEC”), Seawater Air Conditioning (“SWAC”), and Lake Source Cooling (“LSC”) systems. Our geographical markets are tropical and subtropical regions of the world for OTEC, SWAC, and LSC, and worldwide markets for SWAC and LSC. We also intend to develop projects for renewable power generation, desalinated water production, and air conditioning using our proprietary technologies designed to extract energy from the temperature differences between warm surface water and cold deep water. In addition, our projects provide ancillary products such as potable/bottled water and high-profit aquaculture, mariculture, and agriculture opportunities. To date, we have not completed any projects, however we are present developing a project in the South Pacific under a contract with the U.S. Department of Defense. Our website is OTECorporation.com.
Our Business
We develop projects for renewable power generation, desalinated water production, and air conditioning using proprietary intellectual property designed and developed by our own oceanographers, engineers, and marine scientists. Plants using our technologies are designed to extract energy from the temperature difference between warm surface ocean water and cold deep seawater at a depth of approximately 3,000 feet. We believe these technologies provide practical solutions to the fundamental human needs for sustainable, affordable energy; desalinated water for domestic, agricultural, and aquaculture uses; and cooling, all without the use of fossil fuels.
| · | Ocean Thermal Energy Conversion, known in the industry as “OTEC,” power plants are designed to produce electricity. In addition, some of the seawater running through an OTEC plant can be desalinated efficiently, producing fresh water for agriculture and human consumption. |
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| · | Seawater Air Conditioning, known in the industry as SWAC, plants are designed to use cold water from ocean depths to provide air conditioning for large commercial buildings or other facilities. This same technology can also use deep cold water from lakes, known as Lake Source Cooling or LSC. |
Both OTEC and SWAC/LSC systems can be engineered to produce desalinated water for potable, agricultural, and fish farming/aquaculture uses.
We expect to use our technology to develop OTEC and SWAC/LSC systems for various applications for potential customers in tropical and subtropical regions, the U.S. Department of Defense, and the U.S. Department of Agriculture. We hope to one day facilitate the development of living communities by creating an ecologically sustainable “OTEC EcoVillage” powered by 100% fossil-fuel-free electricity.
Through our Small Business Innovation Research credentials, we continue to discuss opportunities to design, build, own, and operate an OTEC system producing base-load sustainable electricity and desalinated water without using fossil fuels to do so. We already have under development an OTEC plant for a Naval Support Facility in the South Pacific as a part of our Small Business Innovation Research program.
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Our Vision
Our vision is to bring our technologies to tropical and subtropical regions where approximately three billion people live. Our market includes 68 countries and 29 territories with suitable sea depth, shore configuration, and need. We plan to be the first company in the world to design and build a commercial-scale OTEC plant. Our initial markets and potential projects include several U.S. Department of Defense bases in Asia Pacific and other regions where energy independence is crucial. Currently, we have projects in the planning and development stages with the U.S. Department of Defense, the Ministry of Earth Sciences at the Government of India, and an Engineering Company from France.
Our Technology
OTEC is a self-sustaining energy source, with no supplemental power required to generate continuous (24/7) electricity. It works by converting heat from the sun, which has warmed ocean surface water, into electric power, and then completing the process by cooling the plant with cold water from deep in the ocean. The cold water can also be used for very efficient air conditioning and desalinated to produce fresh potable water. OTEC has worked in test settings with a natural temperature gradient of 20 degrees Celsius or greater in the ocean. We believe OTEC can deliver sustainable electricity in tropical and subtropical regions of the world at rates approximately 20-40% lower than typical costs for electricity produced by fossil fuels in those markets.
Technology advancements have significantly reduced the capital costs of OTEC to make it competitive compared to traditional energy sources. Technology advancements include larger diameter seawater pipes manufactured with improved materials, increased pumping capabilities from OTEC depths, better understanding of material requirements in the deep ocean environment, more experience in deep water pipeline and cable installation techniques, and more accurate sea bottom mapping technology, which is required for platform positioning and pipe installation. The cold-water pipes at a demonstration site in Hawaii have been in continuous operation for over 20 years, and the technology has undergone significant improvements since the Hawaiian installation. Our Senior OTEC Scientist, Dr. Luis Vega, was the Program Manager for the Department of Energy-funded demonstration OTEC system designed and built at the Natural Energy Laboratory of the Hawaii Authority.
We estimate that a small OTEC plant that delivers 10 megawatts (MWs) per hour would currently cost approximately $250 million. This is the plant size that we typically propose for our initial target markets to meet 20% or more of their current demand for electricity and a large portion of their need for fresh drinking water and agricultural water, although discussions with the U.S. Department of Defense have included OTEC plants of various sizes.
Finally, we believe the decreasing supply and increasing cost of fossil-fuel-based energy has intensified the search for renewable alternatives. Renewable energy sources, although traditionally more expensive than comparable fossil-fuel plants, have many advantages, including increased national energy security, decreased carbon emissions, and compliance with renewable energy mandates and air quality regulations. We believe these market forces will continue and potentially increase. Renewable energy sources may be attractive in remote islands where shipping costs and limited economies of scale substantially increase fossil-fuel-based energy. Many islands contain strategic military bases with high-energy demands that we believe would greatly benefit from a less expensive, reliable source of energy that is produced locally, such as OTEC.
SWAC/LSC is a process that uses cold water from locations such as the ocean or deep lakes to provide the cooling capacity to replace traditional electrical chillers in an air conditioning system. SWAC/LSC applications can reduce the energy consumption of a traditional air-conditioning system by as much as 90%. Even when the capital cost amortization of building a typically sized SWAC/LSC system providing 9,800 tons of cooling are taken into account, SWAC/LSC may save the customer approximately 25-40% when compared to conventional systems. Cooling systems using seawater or groundwater for large commercial structures are in use at numerous locations developed and operated by others worldwide, including Bora Bora (Intercontinental Hotel), Finland (Google Data Center); Cornell University, NY; Stockholm, Sweden; and the City of Toronto, Canada.
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How Our Technology Works
OTEC uses the natural temperature difference between cooler deep ocean water at a depth of approximately 3,000 feet and warmer shallow or surface water to create energy. An OTEC plant project involves installing about six-foot diameter, deep-ocean intake pipes (which can readily be purchased), together with surface water pipes, to bring seawater onshore. OTEC uses a heat pump cycle to generate power. In this application, an array of heat exchangers transfers the warm ocean surface water as an energy source to vaporize a liquid in a closed loop, driving a turbine, which in turn drives a generator to produce electricity. The cold deep ocean water provides the required temperature to condense vapor back into a liquid, thus completing the thermodynamic cycle, which is constantly and continuously repeated. The working fluid is typically ammonia, as it has a low boiling point. Its high hydrogen density makes ammonia a very promising green energy storage and distribution media. Among practical fuels, ammonia has the highest hydrogen density, including hydrogen itself, in either its low temperature, or cryogenic, and compressed forms. Moreover, since the ammonia molecule is free of carbon atoms (unlike many other practical fuels), combustion of ammonia does not result in any carbon dioxide emissions. The fact that ammonia is already a widely produced and used commodity with well-established distribution and handling procedures allows for its use as an alternative fuel. This same general principle is used in steam turbines, internal combustion engines, and, in reverse, refrigerators. Rather than using heat energy from the burning of fossil fuels, OTEC power draws on temperature differences of the ocean caused by the sun’s warming of the ocean’s surface, providing an unlimited and free source of energy.
OTEC and SWAC/LSC infrastructure offers a modular design that facilitates adding components to satisfy customer requirements and access to a sufficient supply of cold water. These components include reverse-osmosis desalination plants to produce drinkable water, bottling plants to commercialize the drinkable water, and off-take solutions for aquaculture uses (such as fish farms), which benefit from the enhanced nutrient content of deep ocean water. A further advantage of a modular design is that, depending on the patterns of electricity demand and output of the OTEC plant, a desalination plant can be run using the excess electricity capacity.
Currently, OTEC requires a minimum temperature difference of approximately 20 degrees Celsius to operate, with each degree greater than this increasing output by approximately 10-15%. OTEC has potential applications in tropical and subtropical zones and is particularly well suited for tropical islands and coastal areas with proximate access to both cold deep water and warm surface water. Data from the National Renewable Energy Laboratory of the U.S. Department of Energy website indicated that at least 68 countries and 29 territories around the globe appear to meet these criteria.
SWAC/LSC is a significantly more cost-effective and environmentally friendly way to implement air-conditioning using cold water sourced from lakes or, analogous with OTEC, deep ocean water, rather than from an electric chiller. Comparing Federal Energy Management Program engineering efficiency requirements of approximately 0.94 kilowatts of electricity per ton of cooling capacity with our own engineering estimates of 0.09 kilowatts of electricity per ton of cooling capacity, as calculated by DCO Energy, our engineering, procurement, and construction partner, we estimate that SWAC/LSC systems can reduce electricity consumption by up to 80-90% over conventional systems. Therefore, we believe energy reductions may make SWAC/LSC systems well-suited for large structures, such as office complexes, medical centers, resorts, data centers, airports, and shopping malls. We believe that other SWAC/LSC plants we may develop will likely achieve similar efficiencies. There are examples of proven successful SWAC/LSC systems in use, including a large 79,000-ton system used to cool buildings in the downtown area of the City of Toronto, Canada; a SWAC system in Google’s data center in Finland that uses waters from the Baltic Sea to keep servers cool; and a system with more than 18,000 tons of cooling in operation at Cornell University, Ithaca, New York.
OTEC Versus Other Energy Sources
The construction costs of power plants using any technology are much higher in remote locations, such as tropical islands, than on the mainland of the United States, principally due to the need to transport materials, components, and other construction supplies and labor unavailable locally. There are also considerations that make those other technologies less attractive in those areas. We believe the consistency of OTEC during its life provides clear advantages over other power-generation technologies in the tropical and subtropical markets because its base-load power (available at all times and not subject to fluctuations throughout the day) is an important asset to the small transmission grid, which is typical in these regions.
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Combined-cycle natural gas plants typically need to be capable of generating several hundred MWs to attain the lower-cost, per-kilowatt installed values that make these plants economically feasible. Tropical locations do not have large enough grids and market demand to make that plant size reasonable. Further, tropical locations frequently do not have domestic fuel supplies, requiring fuel to be imported. In order to import natural gas, it must be liquefied for shipment and then vaporized at the location. There are initial cost and public safety concerns with such facilities. In addition, gas-fired plants emit undesirable nitrogen oxide, carbon dioxide, and volatile organic compounds.
Solar applications continue to increase as the cost and effectiveness of photovoltaic panels improve. However, we estimate that the cost to install solar panels in tropical regions remains high. Beyond the issues with shipping and labor costs that all construction must overcome, the design and building code requirements are more stringent in storm-prone areas, which are subject to potential wind damage from hurricanes, earthquakes, and typhoons, than are typically encountered in mainland nontropical installations. Support structures must be more substantial in order to hold the solar panels in place in case of hurricane-force winds. Solar power, like wind power, places substantial stress on an electrical grid. Since the input of both of these sources is subject to weather conditions, they cannot be considered reliable suppliers of power, and back-up capacity is necessary. Further, instantaneous changes in output due to sporadic cloud cover create transient power flow to the grid and difficulties in maintaining proper voltages and stability. OTEC is a stabilizing source to the grid, providing constant and predictable power, and has no emissions. The ability of OTEC to provide constant, continuous power is a large benefit as compared to any of the other renewable options available.
OTEC’s power price, determined almost entirely by the amortization of its initial cost, is a protection against inflation and rising interest rates, which greatly affect coal and oil. Customers in our target markets currently pay significantly more for power from coal and oil-fueled power plants than comparable populations. Additionally, imported fuels are subject to price volatility, which directly impacts the cost of electricity and adds operating risk during a plant’s life. The fuel handling to allow for shipping, storage, and local transport is expensive, a potential source of damaging fuel spills, and a basis for environmental concerns. Fossil-fuel plants create pollution, emit carbon dioxide, and are visually unappealing, which is of particular concern in tropical areas renowned for their clear, pristine air and beauty. We believe that an OTEC plant can reduce power costs for these markets by up to 40%, compared to their current electrical costs, and when revenues from fresh drinking water, aquaculture, and agriculture production are considered, the justification is even more compelling.
Overview of the Market and the Feasibility of OTEC in Current Market Conditions
We believe that OTEC is now an economically, technologically, and environmentally competitive power source, especially for developing or emerging countries in certain tropical and subtropical regions contiguous to oceans. Our natural target markets are communities in countries around the Caribbean, Asia, and the Pacific. These locations are typically characterized by limited infrastructure, high energy costs, mostly imported or expensively generated electricity, and frequent significant fresh water and food shortages. These are serious limitations on economic development, which we believe our OTEC technology can address.
The National Oceanic and Atmospheric Administration (NOAA) reports that the development of OTEC technology has promise in tropical areas, where year-round temperature differences between the deep cold and warm surface waters are greater than 20 degrees Celsius (36 degrees Fahrenheit). This energy technology also has the potential to generate potable water, hydrogen, and ammonia. Cold water from the OTEC process can be used to benefit commercial products, such as air conditioning and aquaculture.
Over the past 15 years, there have been substantial changes in many areas that have now made the commercialization of OTEC a reality, influenced by the frequently changing and unpredictable price of oil and the effects of climate change leading to violent weather patterns and drought conditions around the world. These developments have increased attention and interest in OTEC in the commercial sector and among candidates. With OTEC power, customers can decouple the price of electricity from the price of oil, combat the effects of climate change, and reduce greenhouse gases escaping into the atmosphere.
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According to the U.S. Energy Information Administration (“EIA”), renewable energy can play an important role in U.S. energy security and in reducing greenhouse gas emissions. Using renewable energy can help to reduce energy imports and reduce fossil fuel use, which is the largest source of U.S. carbon dioxide emissions. As the Army optimizes the use of fuel, water, electricity, and other resources, we increase our resilience while saving taxpayer dollars and reducing our impact on the planet. The Army will mitigate and adapt to climate change, and in doing so gain a strategic advantage, especially as we continue to outpace our near-peer competitors. We believe the ongoing concerns about environmental issues and the price instability of fossil-fuel prices are motivation for increased commercial interest in OTEC, renewed activity in the commercial sector, and increased interest among communities and agencies that recognize the potential benefits of this technology, including the U.S. Department of Defense and U.S. Department of the Interior territories.
Political instability, especially in Eastern Europe and the Middle East proved that fossil-fuel-producing regions and oil price volatility have exposed the criticality of energy security and independence for all countries. The need to have tighter control of domestic energy requirements is a matter of increasing international concern. Continued reliance on other countries (particularly those in oil-producing regions) is no longer a favorable option. We believe these considerations will continue to drive renewable research and commercialization efforts that promote technologies with global potential to replace fossil-fuel-based energy systems and benefit from base-load capabilities like OTEC.
Our current management team has led the development of the business since 2010 and has advanced the technology and understanding of OTEC and SWAC/LSC to worldwide markets. These efforts have helped us establish a marketplace for our technology and an understanding of the importance of designing, building, and operating a commercial-grade OTEC system.
Our Competition
We compete in the development, construction, and operation of OTEC and SWAC/LSC plants with other operators that develop similar facilities powered by other energy sources, primarily oil, natural gas, nuclear energy, and solar power. These traditional energy sources have well-established infrastructures for production, delivery, and supply, with well-known commercial terms, and are currently less costly to construct than an OTEC system. In developing our OTEC and SWAC/LSC plants, we will need to satisfy our customers that these technologies are sound and economical, which may be a challenge until and unless we have an established, successful operating history. The energy industry is dominated by an array of companies of all sizes that have proven technologies and well-established fuel sources from a number of suppliers.
We expect that we will encounter increasing competition for OTEC and SWAC/LSC plants. Other firms with greater financial and technical resources are focusing on the commercialization of these technologies. Our competitors may benefit from collaborative relationships with countries, including a large number of Caribbean nations, that now have renewable-energy standards and are seeking ways to reduce their carbon footprints, decouple the price of electricity from the volatile price of oil, and increase energy security. Other competitors may have advantageous relationships with authorities such as Hawaii, U.S. territories, and the U.S. Department of Defense, which are considering OTEC as a possible source of renewable energy and water for drinking, fish farming, and agriculture.
We believe competition in this industry is and will be based on technical soundness and viability, the economics of plant outputs as compared to other energy sources, developmental reputation and expertise, financial capability, and ability to develop relationships with potential customers. All these factors are outside our control. We cannot assure that we will be able to compete effectively as the industry grows and becomes more established and as OTEC and SWAC/LSC plants become more accepted as viable and economic energy solutions.
Our Operational Strategy and Economic Models
We have developed economic models of costs and potential revenue structures that we will seek to implement as we develop OTEC and SWAC/LSC projects.
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OTEC Projects
The estimated construction costs for a 20-MW plant are approximately $445 million with hard costs of approximately $301 million for the power system and platform construction and piping, which make up 68% of the total. The remaining 32% consists of other construction costs and the deployment of the cold-water pipe and soft costs of approximately $144 million for design, permits and licensing, environmental impact assessment, bathymetry, contractor fees, and insurance.
Once operational, the capacity factor, which is the projected percent of time that a power system will be fully operational, considering maintenance, inspections, and estimated unforeseen events, is expected to be 95% annually. This factor is used in our financial calculations, which means the plant will not be generating revenue for 5% of the year. Most fossil-fuel plants have capacity factors around 90%, as a result of the major maintenance for high-temperature boilers, fossil-fuel feed in systems, safety inspections, cleaning, etc. The normal maintenance cycle for the pumps, turbine, and generators used in the OTEC plant is typically every five years. This includes the cleaning of the heat exchangers and installation of new seals.
We anticipate that project returns will be comprised of two components. First, as the project developer, we will seek a lump-sum payment as a development fee at the time of closing the project financing for each project. These payments will be allocated toward reimbursement of development costs and perhaps a financial return at the early stage of each project. The development fee will vary, but initially we will seek a fee of approximately 3% of the project cost, payable upon closing the project financing. Second, we expect to retain a percentage of equity in the project, with a goal to retain a minimum of 51% of the equity in any OTEC project in order to participate in operating revenues.
We will seek revenue from OTEC plants from contract pricing charged on an energy-only price per kilowatt-hour (“kWh”) or on the basis of a generating capacity payment priced per kilowatt per month and an energy usage price per kWh. In many of the countries of the world where we intend to build OTEC and SWAC/LSC plants, potable water is in short supply, and in some locations, water is even considered the more important commodity. Depending on where the plant is built, in addition to revenue from power generation, supplying water for drinking, fish farming, and agriculture would significantly increase plant revenue.
We cannot guarantee that we will be able to maintain the revenue points outlined above, that any fees received will offset development costs, or that any operating plant will generate revenue.
SWAC/LSC Projects
The estimated construction costs for a SWAC/LSC plant are approximately $150 million, with hard costs of approximately $91 million for piping and installation, which make up 60% of the total. The remaining 40% consists of the pump house, central utility plant (CUP), mechanical and engineering equipment, design, and other contingency costs and soft costs of approximately $59 million for the CUP license, permits, environmental impact assessment, bathymetry, and insurance.
Under our economic model, we will seek revenue at two stages of the project. First, as the project developer, we will seek a lump-sum payment of a development fee equal to approximately 3% of the project cost at the time of closing the project financing for each project. These payments would provide us with income at the early stage of each project. The second component of project returns is based upon the percentage of equity we will retain in the project.
SWAC/LSC contract revenue will be based typically on three charges:
| · | Fixed Price–this is based upon the capital costs of the project paid over the term of the debt and with the intention of covering the costs of debt. |
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| · | Operation and Maintenance–this payment covers the cost of the labor and fixed overhead needed to run the SWAC/LSC system, as well as any traditional chiller plant operating to fulfill back-up or peak-load requirements. |
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| · | Chilled Water Payment–this is a variable charge based on the actual chilled water use and chilled water generated both by the SWAC/LSC and conventional system at the agreed upon conversion factors of kilowatt/ton and current electricity costs in U.S. dollars per kWh. |
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We plan to structure project financing with the goal of retaining 100% of the equity in any SWAC/LSC project. We cannot guarantee that we will recover project development costs or realize a financial return over the life of the project.
Our Project Timeline
We have not yet constructed or placed into operation any OTEC or SWAC/LSC plants. However, based on our planning process and development experience, we estimate that it will take approximately two years or more, depending on local conditions, including regulatory and permitting requirements, to take a project from a preliminary memorandum of understanding with a potential power or other product purchaser to completion and commencement of operation.
Our Construction and Components
Once we have designed the system, we will review the design with our engineering, procurement, and construction partners to maximize the likelihood that the project can be delivered according to plan and on budget. We expect our construction contracts to be at a fixed price and to include penalties if the construction timetable is missed.
In our systems, the two most important components are heat exchangers and deep-water intake pipes. Although there are multiple providers of each of these components, the supply of the best components comes from just a few companies globally. We expect to source our deep-water intake pipes from pipe manufacturing companies in the U.S. and Norway, the only companies we know of that make pipes of sufficient quality, strength, and diameter (2.5 meters) to support our planned OTEC plants.
We will also need high quality, large heat exchangers for our systems; heat exchangers represent a large percentage of the projected costs of our OTEC and SWAC/LSC systems and account for a significant portion of the complexity inherent in commercial OTEC and SWAC/LSC designs.
Other major components, such as ammonia turbines, generators, and pumps, are manufactured by several multinational companies, including General Electric and Siemens.
Our Operations
For OTEC electricity-generating facilities, we intend to enter into 20- to 30-year power purchase agreements, or PPAs, pursuant to which the project would supply fixed-price, baseload electricity to satisfy the minimum demand of the purchaser’s customers. This PPA structure allows customers to plan and budget their energy costs over the life of the contract. For our SWAC/LSC systems, we intend to enter into 20- to 30-year energy service agreements, or ESAs, to supply minimum quantities of chilled water for use in a customer’s air conditioning system.
We anticipate that operations of OTEC and SWAC/LSC plants will be subcontracted to third parties that will take responsibility for ensuring the efficient operation of the plants. These arrangements may reduce our exposure to operational risk, although they may also reduce our financial return if actual operating costs are less than the subcontract payments. We cannot assure that any OTEC and SWAC/LSC plants will permit the PPAs and ESAs to yield minimum target internal rates of return. Our first projects are likely to have lower returns than subsequent projects. Variances in internal rates of return may occur due to a range of factors, including availability and structure of project financing and localized issues such as taxes, some of which may be outside of our control.
We expect our OTEC contract pricing will be charged either on an energy-only price per kWh or on the basis of a capacity payment priced per kilowatt per month and an energy usage price per kWh. We cannot guarantee that this pricing will enable us to recoup our funding and project costs and allow us to earn a profit.
We continue to review other contracting opportunities that will help commercialize OTEC technology. There can be no assurance we will be able to obtain the terms outlined above.
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Marketing Strategies
Our marketing and sales efforts are managed and directed by our chairman and chief executive officer, Jeremy P. Feakins, who has 40 years’ experience of senior-level sales in both commercial and governmental markets. Our marketing campaign has focused on educating potential customers concerning the economic, environmental, and other benefits of OTEC and SWAC/LSC through personal contacts, industry interactions, our website, and social media channels.
Our target markets are comprised of large institutional customers that typically include governments, utilities, large resorts, hospitals, educational institutions, and municipalities. We market to them directly through personal meetings and contact by our chief executive officer and other key team members. We also make extensive use of centers of influence, either to heighten awareness of our products in the minds of key customers’ decision-makers or to secure face-to-face meetings and preliminary agreements between our customers and our chief executive officer.
Sales cycles in our business are extraordinarily long and complex and often involve multiple meetings with the governmental, regulatory, electric utility, and corporate entities. Therefore, we cannot predict when or if any projects we currently have under development will progress to a signed contract or operational phase and generate revenue. We do not expect sales to be seasonal or cyclical.
Material Regulation
Our business and products are subject to significant regulation. However, because we contemplate offering our products and services in different countries, the specific nature of the regulatory requirements will be wholly dependent on the nation where the project will be located and the national, state, and local regulations that apply at that location. In all cases, we expect the level of regulation will be material and will require significant permitting and ongoing compliance during the life of the project.
The most significant regulations will likely be environmental and will include mitigating possible adverse effects during both the construction and operational phases of the project. However, we believe that the limited plant site disturbance of both SWAC/LSC and OTEC projects, together with the significantly lower emissions that result from these projects as compared to fossil-fuel electrical generation, will make compliance with all such regulation manageable in the normal course.
The second most significant regulations will likely involve coordination with existing infrastructure. We believe compliance with this type of regulation is a routine civil engineering coordination process that exists for all new buildings and infrastructure projects of all types. Again, we believe that the design of both SWAC/LSC and OTEC projects can readily be modified to avoid interference with existing infrastructure in most cases.
Facilities
Our principal executive offices are located at. 3675 Market Street, Suite 200, Philadelphia, Pennsylvania 19104. We also maintain a small office in Lancaster, Pennsylvania, pursuant to a lease with a company controlled by our chief executive officer. Our telephone number at that address is (717) 299-1344.
Intellectual Property
Our intellectual property rights can be categorized broadly as proprietary know-how, technical databases, and trade secrets comprising concept designs, plant design, and economic models. Additionally, we have received approval from the U.S. Patent and Trademark Office for the trademark TOO DEEP® for use with the provision of desalinated deep ocean water for consumption. We may apply for patents for components of our intellectual property for OTEC and SWAC/LSC systems, including novel or new methodologies for cold-water piping, heat exchanges, and computer-aided design programs. We cannot guarantee that any patents we seek will be granted.
Our intellectual property has been developed by our employees and is protected under employee agreements confirming that the rights in the inventions and developments made by the employees are our property. Confidential information is protected by nondisclosure agreements that we have entered into with prospective partners or other third parties with which we do business.
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We have not received any notification from third parties that our processes or designs infringe any third-party rights, and we are not aware of any valid and enforceable third-party intellectual property rights that infringe our intellectual property rights. Currently, to our knowledge no company has a patent for OTEC technology.
Employees
We currently have two full-time employees, one officer and one Engineering Program Manager. Our employees do not have collective bargaining agreements, and we have not experienced work interruptions or strikes. We supplement our employed workforce with various outsourced consulting services.
History
Tetridyn Solutions, Inc. was incorporated in Nevada on May 22, 2006. TetriDyn provided technology and data integration solutions to businesses. In May 2017, Tetridyn changed its name to Ocean Thermal Energy Corporation and merged with and acquired Ocean Thermal Energy Corporation, a Delaware corporation formed in 2006. Since then, we have focused on developing OTEC and SWAC/LSC technology.
ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. Investors should carefully consider the risks described below, as well as the other information in this report, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, operating results, and growth prospects. In such an event, the market price of our common stock could decline, and investors may lose all or part of their investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
Risks Related to Our Financial Condition
Our auditors have raised doubts about our ability to continue as a going concern.
The report of our auditors on our consolidated financial statements for the years ended December 31, 2025 and 2024, as well as for prior years, contains an explanatory paragraph raising substantial doubt about our ability to continue as a going concern.
We have no current project that will generate revenues in the near future.
None of our projects is at a stage of development that will allow them to generate revenues in the near future. Our project development cycles are expected to be relatively long, extending over several years as we identify a potential project site, complete negotiations with third parties, complete permitting, obtain financing, complete construction, and place a plant into service. We expect to receive a development fee of approximately 3% of the project cost from our projects, payable upon the close of project financing. Operating revenues from projects are expected to be received when the plant has been built and placed into operation. We are currently under contract with the U.S. Army through Johnson Controls Government Systems to provide detailed engineering designs and financial analyses for an OTEC system at a remote military installation in the Pacific. This contract, valued at approximately $3.6 million, focuses on developing a comprehensive Basis of Design to enable the Army to evaluate OTEC as a long-term, sustainable source of renewable energy and desalinated water. Upon completion of this phase, we anticipate that our work may lead to discussions with the U.S. Army regarding a potential Power Purchase Agreement (“PPA”), under which the Army would purchase power and water from a proposed OTEC facility for a period of 25 to 30 years. However, there can be no assurance that such a PPA or similar arrangement will be negotiated or executed. Until such time as we begin to generate revenues from this or other projects, we expect to continue to rely on external sources of capital to fund our operations.
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We will require substantial amounts of additional capital from external sources.
We do not have any current source of revenues or sufficient cash or other liquid resources to fund our planned activities until we begin receiving development fees from new contracts. Accordingly, as in the past, we will need substantial amounts of capital from external sources to fund day-to-day operations and project development. We have no arrangements or commitment for such capital. We plan to continue our practice of seeking external capital through the sale of debt or equity, although we cannot guarantee that such efforts will be successful. Any new investments will dilute the interests of the current stockholders. Further, new investors may require preferential financial returns, security, voting rights, or other preferences that will be superior to the rights of the holders of common stock. Alternatively, as project development advances, we may be required to sell all or a portion of our interest in one or more projects, which could reduce our retained financial interest and potential return.
Existing convertible obligations and legacy debt may result in future dilutive equity issuances.
The Company currently has outstanding indebtedness that is convertible into shares of the Company’s common stock. Some of this debt is associated with legacy financing arrangements entered into to support the Company’s operations and development activities during earlier phases of its growth. In certain circumstances, holders of these instruments may elect to convert amounts owed into shares of common stock in accordance with the terms of the underlying agreements. The potential issuance of additional shares upon conversion of these instruments may result in dilution to existing stockholders and could create an overhang of potential share issuances that may affect the market price or volatility of the Company’s common stock.
Management is actively engaged in ongoing discussions with certain creditors and stakeholders regarding potential restructurings, settlements, refinancing arrangements, or conversions that could better align creditor interests with the long-term growth of the Company. The Company has historically sought, and may continue to seek, to address such obligations through negotiated restructurings, settlements, or other capital structure adjustments. In some circumstances, the conversion of indebtedness into equity may reduce cash repayment obligations and strengthen the Company’s balance sheet. The Company continues to evaluate opportunities to simplify its capital structure over time. However, until such obligations are fully resolved, they will continue to represent a potential source of dilution and financial risk that could adversely affect the Company’s financial condition, results of operations, or the market value of its common stock.
Risks Related to Our Business
Our efforts to develop OTEC and SWAC/LSC plants are subject to many financial, technical, managerial, and sales risks that may make us unsuccessful.
We incur substantial upfront costs that we may not recover developing a new project that ultimately we may not build, operate, or sell. The identification of suitable locations, the investigation of the applicable regulatory and economic framework, the identification of potential purchasers, the completion of preliminary engineering and planning, and the funding of related administrative and support costs ordinarily require several years to complete before we determine to further develop or abandon a project. Each of these steps is fraught with risks and uncertainties, such as:
| · | limited market due to low demand, existing competitive energy sources, low power costs, or the absence of large potential output purchasers; |
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| · | a regulatory scheme suggesting that the development and operation of a plant would be subject to excessively stringent utility regulations or environmental requirements, burdensome zoning or permitting practices and requirements, or similar factors; |
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| · | shortage of suitable onshore locations, lack of available cold water with near-shore accessibility, sea wave and current conditions, and exposure to hurricanes, typhoons, earthquakes, or similar extreme events; |
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| · | the unavailability of favorable tax or other incentives or excessively stringent applicable incentive requirements; |
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| · | the high cost and potential regulatory difficulties in integrating into new markets; |
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| · | the possibility that new markets may be limited or unstable or our exposure to competition from other sources of existing or potentially new energy sources; |
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| · | difficulties in negotiating power purchase agreements (PPAs) with potential customers, including in some instances, the necessity to assist in the formation of a power purchasing group; and |
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| · | the need to educate the market as well as investors regarding the reliability and economical and environmental benefits of ocean thermal technologies. |
We cannot assure that we will be able to overcome these risks as we initiate the development of a project. We may incur substantial costs in advancing a project through the early stages, only to conclude eventually that the project is not economically or technically feasible, in which case we may be unable to recover the costs that we have then incurred. When we elect to proceed with a project, we may continue to incur substantial costs and be unable to complete the development, sell the project, or otherwise recover our investment. Even when a project is developed, constructed, and placed into operation, we cannot guarantee that we will be able to operate at a profit sufficient to recover our total investment.
We are dependent on the performance of counterparties to our agreements.
Our projects are and will be complex, with a number of agreements among several parties that purchase plant outputs; provide financing; complete design, construction, and other services; design and perform regulatory compliance; and fulfill other requirements. The failure of any participant in one of our projects due to its own management, financial, operating, or other deficiencies, all of which may be outside our control, can materially and adversely affect our operations and financial results. In circumstances in which we are not the prime developer of a large-scale project involving many components in addition to our OTEC, SWAC/LSC, or other systems, we would have little ability to address problems resulting from performance failures by others or implement project-wide remedial measures. The foregoing is illustrated in our Baha Mar project, which is now on hold, and may never resume, because of contract performance and financing disputes by others.
Russia’s military intervention in Ukraine and the US-Israel war on Iran have created substantial political and economic disruption, uncertainty, and risk.
Russia’s military intervention in Ukraine in late February 2022, Ukraine’s widespread resistance, and the NATO-led and United States coordinated economic, financial, communications, and other sanctions imposed by other countries have created significant political and economic world uncertainty. There is significant risk of expanded military confrontation between Russia and other countries, possibly including the United States. Current and likely additional international sanctions against Russia may contribute to higher costs, particularly for petroleum-based products. These actions, responses, and consequences that cannot now be predicted or controlled may contribute to worldwide economic reversals. In these circumstances, our efforts to commercialize our technology may be delayed or otherwise negatively impacted.
Ongoing geopolitical instability in the Middle East, including the US-Israel war on Iran and heightened regional tensions, may contribute to volatility in global financial and energy markets and disrupt international trade and transportation routes. Escalation of hostilities, sanctions, or other governmental actions could adversely affect global economic conditions, commodity prices, and supply chains. Although the Company does not currently conduct material operations in the affected region, prolonged instability could indirectly impact the Company through broader macroeconomic effects, including fluctuations in energy prices, shifts in government policy or spending priorities, and disruptions affecting international markets.
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Ongoing world economic, currency-exchange, energy-price, contagious disease, and political circumstances adversely affect our project development activities.
Recent and ongoing world events outside of our control or influence adversely affect our development activities. Economic uncertainties have resulted in the unpredictable availability of credit, debt, and equity financing; volatile interest rates; currency exchange-rate fluctuations that add risk to international projects; restrictions on the availability of borrowing; concerns respecting inflation and deflation; economic turmoil resulting from unpredictable political events and tensions in the Middle East and other international relations; substantial reductions in hydrocarbon energy prices and the impact of such declines on the cost of energy generally; shifts in the economic feasibility of competitive energy sources; and similar factors. These adverse factors frequently have a particularly intense effect on emerging markets and developing countries, which we believe provide the greatest opportunity for the development of our projects. The possibility that principal energy prices will continue at current or even lower levels, which could reduce the projected cost at which power could be generated by hydrocarbon-fueled power plants, could make our relatively higher-cost plants less competitive. These emerging and developing markets are particularly vulnerable to the negative impacts of these adverse circumstances. The economic feasibility of alternative energy, including the process we develop and propose to operate, as compared to hydrocarbon energy is adversely affected as the prices for hydrocarbon fuels decline. Accordingly, possible continuing low hydrocarbon prices may retard the potential increase in the economic feasibility of alternative energy. Crude oil prices have remained volatile in recent years, fluctuating generally between approximately $70 and $90 per barrel as of 2025. While these levels are higher than the lows experienced several years ago, they remain below the historical peaks of over $100 per barrel. Sustained periods of relatively moderate oil prices can reduce the perceived economic advantage of alternative and renewable energy technologies, potentially slowing investment and development activity in the sector. Although we believe that the global emphasis on energy security, decarbonization, and climate resilience continues to drive long-term demand for sustainable solutions such as OTEC, extended intervals of lower fossil-fuel prices may adversely affect investor interest, the availability of government incentives, and the pace of commercialization for emerging renewable technologies. Our ability to develop and operate alternative energy plants and our ability to generate revenue will be adversely affected by continuing, relatively soft hydrocarbon energy prices. Further, alternative energy development may be adversely affected by uncertainty in hydrocarbon prices or public expectations that hydrocarbon prices may continue to decline.
We require substantial amounts of capital for all phases of our proposed activities.
We require substantial amounts of capital to fund efforts to identify, research, preliminarily engineer, permit, and design our projects and to negotiate PPAs for them. These costs may not be recovered, because we may not elect to complete the development of the project or because the development and operation of the project are not successful. We will rely on external capital to fund our operations, and we cannot assure that such capital will be available. Our efforts to access capital markets will be limited, particularly at the outset, because we have not yet developed and placed into operation our first plant. Accordingly, we expect that we will have to provide the potential for a significant economic return for the initial capital we obtain, which will likely dilute the interests of our existing stockholders. We expect that each project that we are able to fully develop, construct, and place into operation will require several stages and levels of debt and equity financing. For example, we expect that a 20-MW OTEC plant may require total capital expenditures of approximately $445 million, consisting of $365 million in project debt financing and $80 million in equity. We cannot assure that we will be able to obtain financing. If obtained, such financing may be on terms that we will retain only a minority financial interest in the completed project and its operations. Our inability to obtain required financing for any activity or project could have a material adverse effect on our activities and operations.
We are reliant on our key executives and personnel.
Our business, development, and prospects are highly dependent upon the continued services and performance of our directors and other key personnel, on whom we rely for experience, technical skills, and commercial relationships. We believe that the loss of services for any reason of any existing key executives, or failure to attract and retain necessary personnel, could have a material adverse impact on our business, development, financial condition, results of operations, and prospects. Although we have entered into employment agreements with our key executives, we may not be able to retain them. We do not maintain key-man life insurance on any of our executive employees.
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Our projects will be subject to substantial regulations and policies that may adversely affect our ability to develop projects, and any changes in the applicable regulatory schemes may adversely affect projects that we are constructing or have constructed and are operating.
Our projects likely will be significant commercial or industrial enterprises in each of their locations and, as such, will be subject to numerous environmental, health and safety, antidiscrimination, and similar laws and regulations in each of the jurisdictions governing our locations. These laws and regulations will require our projects to obtain and maintain permits and approvals; complete environmental impact assessments or statements prior to construction; and review processes and operations to implement environmental, health and safety, antidiscrimination, and other programs and procedures to control risks associated with our operations.
Environmental health and safety laws, regulations, and permit requirements applicable to any specific project at the time of construction may change or become more stringent during the life of the operation. Any such changes could require that our projects incur substantial additional costs, alter their operations, or limit or curtail their operations in order to comply, which would have a material adverse effect on our operations. We may not be able to pass on any additional costs that we incur to our power purchasers, particularly in those cases in which we sell power pursuant to a long-term, fixed-price agreement.
The financial model for our proposed projects has not been tested and may not be successful.
We are proposing a financial model for the development of individual projects that includes development financing provided by us, construction financing provided by equity investors in the specific projects, and project debt financing; the payment of a development fee to us at the time of construction; and continuing equity participation by us throughout the plant’s operation. We have not used this model in the financing or completion of any plant, and we cannot assure that the financial model and, therefore, the anticipated financial return to us will be acceptable to parties that might provide the requisite external capital.
We may need to revise extensively our financing structure for each project, and we cannot assure that any restructured proposal would not substantially reduce our financial return or increase our risk. The financial, investment, and credit community are generally unfamiliar with OTEC and SWAC/LSC projects, which will adversely affect our financing efforts. We have no existing relationships with potential sources of debt or equity capital, and any financing sources that we may develop may be inadequate to support the anticipated capital needs of our business. Our efforts to obtain financing may be adversely affected by the fact that our projects will likely be located in developing or emerging markets. Our inability to obtain financing may force us to abandon projects in which we have invested substantial costs, which we may be unable to recover. The process of identifying new sources of debt and equity financing and agreeing on all relevant business and legal terms could be lengthy and could require us to limit the rate at which we can develop projects or reduce our financial return.
We may be exposed to political and legal risks in the developing or emerging markets in which we propose to locate plants.
Many of the markets that may be suitable for a potential OTEC or SWAC/LSC plant are located in emerging or developing countries that may have evolving and untested regulatory and legal environments for large-scale, international, commercial enterprises. Further, political instability, regime change, or other factors may increase uncertainty and instability, which in turn may adversely affect our ability to secure necessary regulatory approvals and obtain required project financing, which increases related costs and reduces our financial return. Any changes in applicable laws and regulations, including any governmental incentives, environmental requirements or restrictions, safety requirements, and similar matters, and the risk or likelihood of such a change could adversely affect the availability and cost of financing. Further, in some jurisdictions, applicable legal requirements may not have been fully tested and are still being developed in the face of modern international commercial transactions and environmental requirements, which may lead to changes in interpretation or application that may be adverse to us. Our expectations regarding the size of the potential OTEC and SWAC/LSC markets and the number of possible suitable locations may not be accurate.
Our business plan and models are based on our identification of potential suitable locations for OTEC or SWAC/LSC plants based on a preliminary evaluation of public information respecting demographic data, current power-generation costs, and local seafloor contours and seawater temperatures, which may be inaccurate. Any material inaccuracy could substantially reduce the total market available to us for plant development.
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We may be unable to arrange or complete future construction projects on time, within expected budgets, or without interruption due to materials availability and disruptions in supply, labor, or other factors. If any project reaches the point at which we undertake construction, such construction may be subject to actual prices higher than the amount budgeted, the limited or delayed availability of components or materials, shortages or interruptions of labor or materials, or similar circumstances. In the case we have insufficient budget flexibility to pay increased construction costs, corresponding delays could result in delayed construction, completion, and the commencement of operations.
Emerging markets are often associated with growth rates that may not be sustainable and may be accompanied by periods of high inflation. Rising inflation or related government monetary and economic policies in certain project jurisdictions may affect our ability to obtain external financing and reduce our ability to implement our expansion strategy. We can give no assurances that a local government will not implement general or project-specific measures to tighten external financing standards, or that if any such measure is implemented, it will not adversely affect our future operating results and profitability.
We are subject to changing attitudes about environmental risks.
Our projects may face opposition from environmental groups that may oppose our development, construction, or operation of OTEC or SWAC/LSC plants. Each project is expected to have different environmental issues, especially as many of our projects are based in different settings having a wide range of environmental standards. We intend to solicit input from environmental organizations and activists early in our design process for our projects in an effort to consider appropriately these organizations’ recommendations in order to mitigate subsequent conflict or opposition, but we cannot assure that such outreach will be effective in all cases, and if it is not, opposition to our projects could increase our cost and adversely affect the results of our operations.
We may be unable to find land suitable for our projects.
Each project site requires land of differing characteristics to permit the cost-effective construction of OTEC or SWAC/LSC plants, and suitable land may not always be available. Even if available, such land may be difficult to obtain in a timely or cost-effective manner. For example, we would prefer to place OTEC power systems and facilities as close to the ocean as possible. We hope to mitigate this risk by using land owned by local governments, rather than private individuals or entities, as targeting local governments with favorable energy policies or mandates should reduce land rights risks. Our inability to secure appropriate land at a reasonable cost may render certain of our future projects economically unfeasible.
We have a limited number of suppliers for certain materials, which could increase our costs or delay completion of projects.
In our systems, the two most important components are heat exchangers and deep-water intake pipes. Although there are multiple providers of each of these components, the supply of the best components comes from just a few companies globally. Should these resources become unavailable for any reason or too costly, we would be required to seek alternative suppliers. The products from such suppliers could be of a lower quality or more costly, in any event requiring us to expend additional monies or time to complete our projects as planned. This could result in financial penalties or other costs to us.
There may be greater cost in building OTEC plants that generate over 10 MWs of electricity.
In order to successfully obtain debt financing for OTEC facilities, we must find engineering, procurement, and construction contractors willing to enter into fixed-price contracts at a price that is economically viable for us. Based on our preliminary discussions, we believe that engineering, procurement, and construction contractors may be willing to consider fixed-price arrangements for up to 10-MW OTEC facilities, but we have not yet discussed performance risk guarantees for OTEC plants greater than 10 MWs. The cost of construction for larger OTEC power systems may vary considerably, and these variances could include increased costs for construction, design, and component procurement. As we gain more experience, we may improve upon efficiencies and accuracy in pricing. Failure to procure engineering, procurement, and construction contractors willing to perform fixed-price contracts on facilities that produce more than 10 MWs may have a material adverse effect on our operations.
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Technological advances may render our technologies, products, and services obsolete.
We operate in a fast-moving sector in which innovative forms of power generation and new energy sources are continuously being researched. New technologies may be able to provide power, coolant, desalinated seawater, or other outputs at a lower cost, including amortization of capital costs, or with less environmental impact. We will remain subject to these risks for the useful life of our projects, which could extend for 20 years or more. Any such technological improvements could render our projects obsolete.
We may not successfully manage growth.
We intend to continue to develop the projects in our pipeline of opportunities and to construct and operate plants as we deem warranted and as we are able to finance. This is an ambitious growth strategy. Our growth and future success will depend on the successful completion of the expansion strategies and the sufficiency of demand for our energy products. The execution of our expansion strategies may also place a strain on our managerial, operational, and financial reserves. Should we fail to effectively implement our expansion strategies or should there be insufficient demand for our products and services, our business operations, financial performance, and prospects would be adversely affected.
There will likely be a single or limited number of power purchasers from each plant, so we will be dependent on their economic viability and stability and continued operations.
We expect that any plant that we operate will provide power, cooling, desalinated water, or other products to a few or a limited number of key power purchasers that will use the power for specific commercial enterprises, such as resorts, manufacturing or processing plants, or similar large-scale operations. Accordingly, our ability to sell power and other outputs will be dependent on the economic viability of these purchasers. If one or more key purchasers were to fail, we would be required to obtain alternative purchasers for our power and other outputs, and there may be no or a limited number of alternative purchasers in the emerging and developing markets where we anticipate our plants may be located. Accordingly, a failure of an output purchaser may result in the failure of our power plant project. We do not anticipate that we will be able to obtain insurance on acceptable terms to protect us against such a loss. Further, our project output purchasers may not comply with contractual payment obligations or may otherwise fail to perform their contracts, and they may have greater economic bargaining power and negotiating leverage as we seek to enforce our contractual rights. To the extent that any of our project power purchasers are, or are controlled by, governmental entities, our projects may also be subject to legislative, administrative, or other political action or policies that impair their contractual performance. Any failure of any key power purchasers to meet their contractual obligations for any reason could have a material adverse effect on our business and operations.
Operational problems, natural events or catastrophes, casualty loss, or other events may impair the commercial operation of our projects.
Once we have successfully launched projects, our ability to meet our delivery obligations under power-generation contracts, as well as our ability to meet economic projections, will depend on our ability to maintain the efficient working order of our plants. Severe weather, natural disasters, accidents, failure of significant equipment components, inability to obtain replacement parts, failure of power transmission facilities, or other catastrophes or occurrences could materially interrupt our activities and consequently reduce our economic return. Since all our plants will be located on the shore within close proximity to deep-ocean or lake water, our plants will be subject to extraordinary natural occurrences, such as wave surges from hurricanes or typhoons, tsunamis, earthquakes, and other events, over which we will have absolutely no control. We cannot assure that we can obtain sufficient insurance to protect us from all risks resulting from such catastrophes. Further, we cannot assure that any design features or operating policies that we may use will mitigate the risks to which our plants may be exposed. Any threatened or actual events could expose us to plant shutdowns, substantial repairs, interruptions of operations, damage to our power purchasers, and similar events that could require us to incur substantial costs and significantly impair our revenues and results of operations. Because of the size and cost of major components of our power plants, we typically will not inventory spare components, so that any substantial damage may require that we await the custom manufacture and delivery of such items, which may involve substantial delays.
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We may be adversely affected by climate change.
Climate change may result in changes in ocean currents and water temperatures that could have a material adverse effect on our results of operations. These changes may require additional capital costs or impair the efficiency of our operations. Significant changes may render any plant inefficient and uneconomical.
Insurance to cover anticipated risks may become more expensive.
There are no known commercial OTEC and SWAC/LSC plants in operation, so the nature and cost of insurance is difficult to predict. Insurance costs may substantially exceed the costs forecast during the planning process or budgeted during actual operations. We cannot assure that adequate insurance coverage will be available to protect us against all risks or that any related costs will be economical. Accordingly, if we are unable or cannot afford to purchase insurance against specific risks, our projects may be fully exposed to those risks, which also could have a material adverse effect on the viability of any affected plant.
Risks Related to Our International Operations
Certain risks of loss arise from our need to conduct transactions in foreign currencies.
Our business activities outside the United States and its territories may be conducted in foreign currencies. In the future, our capital costs and financial results may be affected by fluctuations in exchange rates between the applicable currency and the dollar. Other currencies used by us may not be convertible at satisfactory rates. In addition, the official conversion rates between a particular foreign currency and the U.S. dollar may not accurately reflect the relative value of goods and services available or required in other countries. Further, inflation may lead to the devaluation of such other currencies.
Foreign governmental entities may have the authority to alter the terms of our rights or agreements if we do not comply with the terms and obligations indicated in such agreements.
Pursuant to the laws of some jurisdictions where we may develop or operate plants, foreign governmental entities may have the authority to alter the terms of our contractual or financial rights or override the terms of privately negotiated agreements. In extreme circumstances, some foreign governments have taken the step of confiscating private property on the assertion that such action is necessary in the public interest of the country. If this were to occur, we may not be compensated fairly or at all. We cannot assure that we have complied, and will comply, with all the terms and obligations imposed on us under all foreign laws to which one or more of our operations and assets may be subject.
Our operations will require our compliance with the Foreign Corrupt Practices Act.
We must conduct our activities in or related to foreign countries in compliance with the U.S. Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery laws that generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business. Enforcement officials interpret the FCPA’s prohibition on improper payments to government officials to apply to officials of state-owned enterprises, including state-owned enterprises with which we may develop or operate projects or to which we may sell plant outputs. While our employees and agents are required to acknowledge and comply with these laws, we cannot assure that our internal policies and procedures will always protect us from violations of these laws, despite our commitment to legal compliance and corporate ethics. The occurrence or allegation of these activities may adversely affect our business, performance, prospects, value, financial condition, reputation, and results of operations.
Our competitors may not be subject to laws similar to the FCPA, which may give them an advantage in negotiating with underdeveloped countries and the government agencies.
Our competitors outside the United States may not be subject to anti-bribery or corruption laws as encompassing or stringent as the U.S. laws to which we are subject, which may place us at a competitive disadvantage.
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We may encounter difficulties repatriating income from foreign jurisdictions.
As we develop and place plants into operation, we intend to enter into revenue-generating agreements in which we are paid only in U.S. dollars directly to our U.S. banks or through countries in which repatriation of the funds to our U.S. accounts is unrestricted. However, situations could arise in which we agree to accept payment in foreign jurisdictions and for which restrictions make it difficult or costly to transfer these funds to our U.S. accounts. In this event, we could incur costs and expenses from our U.S. assets for which we cannot recover income directly. This could require us to obtain additional working capital from other sources, which may not be readily available, resulting in increased costs and decreased profits, if any.
Risks Related to Our Common Stock
Our common stock is thinly traded, and there is no guarantee of the prices at which the shares will trade.
Our common stock is quoted on the OTCID Basic Market operated by the OTC Markets Group, Inc., under the ticker symbol “CPWR.” Not being listed on an established securities exchange has an adverse effect on the liquidity of our common stock, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of our company. This may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and asked prices for our common stock. Historically, our common stock has been thinly traded, and there is no guarantee of the prices at which the shares will trade or of the ability of stockholders to sell their shares without having an adverse effect on market prices.
We have never paid dividends on our common stock, and we do not anticipate paying any dividends in the foreseeable future.
We have not paid dividends on our common stock to date, and we do not expect to be in a position to pay dividends in the foreseeable future. Our ability to pay dividends depends on our ability to successfully develop our OTEC business and generate revenue from future operations. Further, our initial earnings, if any, will likely be retained to repay debt and finance our growth. Any future dividends will depend upon our earnings, our then-existing financial requirements, and other factors and will be at the discretion of our board of directors.
Because our common stock is a “penny stock,” it may be difficult to sell shares of our common stock at times and prices that are acceptable.
Our common stock is a “penny stock.” Broker-dealers that sell penny stocks must provide purchasers of these stocks with a standardized risk disclosure document prepared by the SEC. This document provides information about penny stocks and the nature and level of risks involved in investing in the penny stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser, and obtain the purchaser’s written agreement to the purchase. The penny stock rules may make it difficult for investors to sell their shares of our common stock. Because of these rules, many brokers choose not to participate in penny stock transactions and there is less trading in penny stocks. Accordingly, investors may not always be able to resell shares of our common stock publicly at times and prices that they feel are appropriate.
In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (known as “FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives, and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative, low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit an investor’s ability to buy and sell our stock and have an adverse effect on the market for our shares.
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We have failed to make timely filings with the SEC, and the liquidity of our stock has suffered.
We did not timely file our annual report for 2024 and our quarterly reports for the first, second and third quarters of 2025. As a result, the OTC had identified the Company as delinquent in its SEC filings and our stock is only eligible to trade for unsolicited orders. Although we have made our delinquent filings but cannot guarantee that we will be able to remain current in our filings, which would limit the public information available about the Company and negatively impact the liquidity and trading price of our stock.
Investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.
As a public reporting company, we are subject to the Sarbanes-Oxley Act of 2002 as well as to the information and reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other federal securities laws. As a result, we incur significant legal, accounting, and other expenses, including costs associated with our public company reporting requirements and corporate governance requirements. As an example of public reporting company requirements, we evaluate the effectiveness of disclosure controls and procedures and of our internal control over financing reporting to allow management to report on such controls.
Our management concluded that our internal control over financial reporting was not effective as of December 31, 2025, due to a failure to maintain an effective control environment, failure of segregation of duties, failure of entity-level controls, and our sole executive’s access to cash.
If significant deficiencies or other material weaknesses are identified in our internal control over financial reporting that we cannot remediate in a timely manner, investors and others may lose confidence in the reliability of our financial statements. This would likely have an adverse effect on the trading price of our common stock and our ability to secure any necessary additional equity or debt financing.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
We store and transmit data, including sensitive and nonpublic data regarding our company, employees, and counterparties. Given our limited size, resources and operations, we believe we have appropriate processes in place, as well as appropriate physical and administrative controls, to allow oversight and identification of cybersecurity threats to our operations. The Company depends on the proper functioning, availability, and security of its information systems, including financial, data processing, communications, and operating systems. Several information systems are software applications
Like many companies, we might be subjected to attempts by unauthorized actors to disrupt our operations, access our data, or otherwise cause damage to our technology infrastructure, including through the use of phishing, malware, and other attack vectors.
In addition, we are subject to cybersecurity risk in connection with vendors we use. For example, a weakness in vendor systems or software products that we use in the operation of our business may provide a mechanism for a cyber threat actor to access our systems or information through trusted paths. Recent global supply chain security incidents such as compromises of reputable software update services are illustrative of this type of occurrence.
To date, we have
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Governance
Our board of directors is responsible for the oversight of risks related to cybersecurity threats. Management communicates with the board of directors on a regular basis regarding cybersecurity efforts through risk
Cybersecurity Governance and Expertise
We are subject to cybersecurity risk management and disclosure requirements under Regulation S-K Item 106(c). The Company has implemented a comprehensive cybersecurity program designed to identify, assess, and mitigate material risks from cybersecurity threats.
In support of these requirements, the Company has achieved certification under the Department of Defense’s Cybersecurity Maturity Model Certification (CMMC) Level 2 framework, demonstrating compliance with current cybersecurity standards applicable to defense contractors. This certification reflects the Company’s adherence to established controls for protecting Controlled Unclassified Information (CUI) and maintaining robust information security practices.
Oversight of cybersecurity risk is conducted at the Board and senior management levels. The Company benefits from leadership with experience in defense, infrastructure, and mission-critical systems, which informs its approach to cybersecurity risk management, resilience planning, and regulatory compliance. Management regularly reports to the Board regarding cybersecurity posture, risk exposure, and ongoing compliance efforts.
Given our limited resources, we believe we have appropriate processes in place, as well as appropriate physical and administrative controls, to allow oversight and identification of cybersecurity threats to our operations.
ITEM 2. PROPERTIES
Our principal executive offices are located at. 3675 Market Street, Suite 200, Philadelphia, Pennsylvania 19104, where we lease fully-furnished and customizable office space from a third party. We also maintain a small office in Lancaster, Pennsylvania, pursuant to a lease with a company controlled by our chief executive officer. Our telephone number at that address is (717) 299-1344.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are involved in legal proceedings and regulatory proceedings arising from operations. We establish reserves for specific liabilities in connection with legal actions that management deems to be probable and estimable.
As previously disclosed, on February 10, 2012, DCO Energy, LLC (“DCO”) loaned the Company $1.0 million pursuant to a loan agreement and cognovit promissory note. We had not paid the DCO loan in full when due, and DCO had previously granted payment extensions to the Company. However, on January 21, 2026, DCO filed a suit titled DCO Energy, LLC v. Ocean Thermal Energy Corporation, Case Number: 2026-NO-000335, in the Court of Common Pleas of York County, Pennsylvania, and obtained a confession of judgement for approximately $2.5 million representing principal, interest and fees. On February 27, 2026, we signed a settlement agreement with DCO to resolve the dispute. Pursuant to the settlement agreement we agreed to pay DCO $126,266 for a previously disputed invoice for subcontracted design services performed by DCO in connection with the Company’s U.S. Army project at Kwajalein Atoll. DCO agreed to a forbearance and loan extension agreement for the outstanding loan obligations and to withdraw the judgement without prejudice. We made the required payment on March 3, 2026, and each party mutually released the other from any claims related to the invoice and the project. The settlement agreement did not extinguish the underlying loan obligation, and DCO retains the ability, subject to the terms of the forbearance arrangement, to pursue remedies in the event of future default, including the potential re-entry of judgment. We believe that the settlement allowed us to resolve outstanding disputes and continue pursuing our business objectives.
On May 4, 2018, we reached a settlement of the claims at issue in Ocean Thermal Energy Corp. v. Robert Coe, et al., Case No. 2:17-cv-02343SHL-cgc, before the United States District Court for the Western District of Tennessee. Between May 30 and July 19, 2018, we received three payments totaling $100,000 from the defendants. On August 8, 2018, an $8 million judgment was entered against the defendants and in our favor. On May 28, 2019, we further settled the claims at issue with two of the defendants, Brett M. Regal and his company, Trade Base Sales, Inc. (“Regal Debtors”), for $17,500,000, bringing the combined judgment and settlement amount owed to us is $25,500,000. On July 1, 2019, the United States District Judge for the Central District of California (case number: 2:19-cv-05299-VAP-JPR), approved our stipulated application for an order permitting us to levy on property and appointing a receiver to carry out the levy on Regal Debtors’ property, such that it may be sold (subject to further order of the court approving and confirming such sales), to satisfy the $25,500,000 settlement and judgment amounts in our favor. On August 15, 2019, the court-appointed receiver notified the court that he had taken custody, possession, and control of certain gemstone and mineral specimens, known as the “Ophir Collection” and 350,000 pounds of unrefined gold and other precious metal bearing ore. By order of the court, the receiver was given the authority to assign, sell, and transfer the debtor property. The proceeds of any sales will be used to satisfy the judgment and settlement agreement, receivership’s reasonable costs and fees, as well as any other claims as determined by the court. Various parties have come forward asserting ownership and priority lien rights to the property. In our ongoing efforts to collect the $25,500,000 judgment obtained, a third party has intervened in our case in the Central District of California (case number: 2:19-cv-05299-VAP-JPR), asserting that it is the rightful owner of the “Ophir Collection” of gems and mineral specimens that is now in possession of the court-appointed receiver. On February 25, 2022, all parties who have appeared in this case stipulated to dismiss all pending claims while leaving the receivership established by the court in place. On the same date, the court ordered that upon a successful sale of the Ophir Collection, the net proceeds shall be distributed in accordance with the terms of the January 3, 2022, confidential settlement between the parties. This matter is ongoing, and we understand that the receiver is attempting to liquidate the assets of the defendants.
On May 21, 2019, Theodore T. Herman filed a complaint against us in Theodore T. Herman v. Ocean Thermal Energy Corporation, Case No. CI-19-04780, in the Court of Common Pleas of Lancaster County, Pennsylvania, asserting that he is entitled to payment on the $290,000 promissory note described in our financial statements under Note 4: Convertible Notes and Notes Payable. On July 1, 2019, we filed preliminary objections to the complaint, and subsequently filed an answer and new matter on August 20, 2019, to which the plaintiff filed a reply on September 9, 2019. Herman has not pursued this action since 2020, and on October 7, 2025, the court terminated the case with prejudice for failure to prosecute.
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On August 22, 2018, Fugro USA Maine, Inc. (“Fugro”), filed suit against us in Fugro USA Marine, Inc. v. Ocean Thermal Energy Corp., Cause No. 2018-56396, in the District Court for Harris County, TX, 165th Judicial District, seeking approximately $500,000 allegedly owed for engineering services provided. On June 23, 2020, a settlement was reached under which we would pay Fugro $375,000 by June 30, 2021. We were unable to pay the remaining balance and therefore entered into a second amendment to the settlement agreement extending the deadline for full payment, with 18% interest per annum, to December 31, 2021. We will continue to make regular monthly payments to Fugro of $10,000 per month, until the balance owed has been paid. We have recorded the amount of accrued legal settlement as of December 31, 2025. We have repaid $260,000, and the balance at December 31, 2025, was $115,000, with accrued interest of $113,999 at December 31, 2025.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is quoted on the OTCID Basic Market operated by the OTC Markets Group, Inc., under the ticker symbol “CPWR.” Because we were delinquent in our SEC filings for most of 2025, our shares were only eligible to trade for unsolicited customer orders, not proprietary broker-dealer quotations. The following table sets forth, for the periods indicated, the range of high and low closing prices of our common stock per quarter as reported by the OTC Markets. All quoted prices reflect interdealer prices without retail mark-up, mark-down, or commission, adjusted to account for past stock splits, and may not necessarily represent actual transactions:
|
| Low |
|
| High |
| ||
Year Ended December 31, 2025 |
|
|
|
|
|
| ||
Fourth Quarter |
| $ | 0.0001 |
|
| $ | 0.0209 |
|
Third Quarter |
| $ | 0.0001 |
|
| $ | 0.0220 |
|
Second Quarter |
| $ | 0.0001 |
|
| $ | 0.0010 |
|
First Quarter |
| $ | 0.0001 |
|
| $ | 0.0010 |
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2024 |
|
|
|
|
|
|
|
|
Fourth Quarter |
| $ | 0.0001 |
|
| $ | 0.0100 |
|
Third Quarter |
| $ | 0.0012 |
|
| $ | 0.0110 |
|
Second Quarter |
| $ | 0.0062 |
|
| $ | 0.0333 |
|
First Quarter |
| $ | 0.006200 |
|
| $ | 0.0350 |
|
On March 15, 2026, the closing price per share of our common stock as quoted on the OTC marketplace was $0.0076. As of March 15, 2026, there were approximately 1,550 stockholders of record of our common stock.
Dividends
We have not paid or declared any cash dividends since our inception and do not intend to declare or pay any such dividends in the foreseeable future. Our ability to pay cash dividends is subject to limitations imposed by state law.
Equity Compensation Plan
We do not have any securities authorized under equity
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ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and operating results should be read together with our financial statements and related notes included elsewhere in this report. This discussion and analysis and other parts of this report contain forward-looking statements based upon current beliefs, plans, and expectations that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this report. Our fiscal quarters end on March 31, June 30, September 30, and December 31, and our current fiscal year ended on December 31, 2025.
Overview
We develop projects for renewable power generation, desalinated water production, and air conditioning using our proprietary technologies designed to extract energy from the temperature differences between warm surface water and cold deep water. In addition, our projects provide the opportunity for ancillary products such as potable/bottled water and high-profit aquaculture, mariculture, and agriculture processes.
We are currently executing a $3.5 million U.S. Army engineering and design contract in partnership with Johnson Controls for the U.S. Army Garrison-Kwajalein Atoll and are actively seeking to expand into additional Indo-Pacific markets such as Guam, Diego Garcia, and the Northern Marianas. Our project pipeline also includes commercial engagements in the Caribbean and Southeast Asia, including India and Indonesia.
Although we have generated only limited revenue since inception, we are transitioning from research and development to contract execution and revenue-generating power purchase agreements. We continue to rely on external funding to support operations, project development, and corporate initiatives, including a planned NYSE uplisting. There can be no assurance that such funding will be available or that it can be obtained on acceptable terms or that we will successfully uplist .
Our operating expenses consist principally of expenses associated with the development of our projects until we determine that a particular project is feasible. Salaries and wages consist primarily of employee salaries and wages, payroll taxes, and health insurance. Our professional fees are related to consulting, engineering, legal, investor relations, outside accounting, and auditing expenses. General and administrative expenses include travel, insurance, rent, marketing, and miscellaneous office expenses. The interest expense includes interest and discounts related to our loans and notes payable.
Results of Operations
Comparison of Years Ended December 31, 2025 and 2024
During the year ended December 31, 2025, the Company recognized revenue of $3,013,875 compared to $-0- for the previous year. The increase is solely due to the Company’s contract to provide services to the United States Department of Defense relative to the design and engineering of an OTEC unit on Kwajalein Atoll.
During the year ended December 31, 2025, we had $2,424,943 of direct cost of contracts compared to $-0- for the previous year. The increase is solely due to costs incurred to service the Company’s contract to provide services to the United States Department of Defense relative to the design and engineering of an OTEC unit on Kwajalein Atoll.
During the year ended December 31, 2025, we had salaries and compensation of $197,424, compared to salaries and compensation of $925,553 during 2024, a decrease of 79%, primarily due to the allocation of costs to cost of contracts and management’s continued cost cutting efforts for areas which are not specific to the fulfilment of the Kwajalein Atoll contract.
During the years ended December 31, 2025, and 2024, we recorded professional fees of $491,917 and $534,789, respectively, a decrease of 8%. An increase in legal, audit and accounting fees incurred related to bringing our delinquent SEC filings current was offset by decreases in other areas, as the Company has had less activities requiring the use of professionals during the period which were not specific to fulfilling the Kwajalein Atoll contract.
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We incurred general and administrative expenses of $71,694 during the year ended December 31, 2025, compared to $116,268 for 2024, a decrease of 38% due to the allocation of costs to cost of contracts and multiple factors associated with management cost reduction efforts for ancillary services not directly related to the fulfilment of the Kwajalein Atoll contract.
Our interest expense was $2,872,050 for the year ended December 31, 2025, compared to $2,504,722 for 2024, an increase of 15%. This change was due to increased debt and higher interest rates on defaulted notes payable.
There was $54,440 debt discount amortization for the year ended December 31, 2025, compared to $2,245 for the previous year. The increase is due to new notes payable entered into during the period.
There was an increase in the fair value of the derivative liability of approximately $66 million during the year ended December 31, 2025, compared to a $2,868,111 decrease for 2024, a 2,409% increase. This change results primarily from the increase in the market value of our common stock in 2025 compared to 2024.
We recognized gain on conversion of notes payable of $11,898 during the year ended December 31, 2025, compared to a gain of $30,303 in the 2024 period. This change is primarily driven by changes in the market value of our common stock which was used to settle outstanding notes payable during the period.
Our operations used net cash of $93,395 in 2025, as compared to $562,627 in the prior year. The decrease in cash used was primarily the result of an increase in the change in accounts payable and accrued expenses and a decrease in loss, after adjusting for noncash activities, partially offset by an increase in accounts receivable related to the Kwajalein Atoll contract.
Financing activities provided cash of $480,920 for our operations during the year ended December 31, 2025, as compared to providing cash of $463,620 in the prior year. During the years ended December 31, 2025, and 2024, we received cash proceeds from the sale of common and preferred stock and issuance of notes payable which was the primary financing activity during the period.
Liquidity and Capital Resources
At December 31, 2025, our principal source of liquidity consisted of $403,667 of cash, as compared to $16,142 of cash at December 31, 2024. At December 31, 2025, we had negative working capital (current assets minus current liabilities) of $113,330,567. In addition, our stockholders’ deficit was $113,401,127 at December 31, 2025, compared to stockholders’ deficit of $44,551,904 at the end of 2024. We are exploring external funding alternatives, as our current cash is insufficient to fund operations for the next 12 months.
Our consolidated financial statements have been prepared assuming we will continue as a going concern. We have experienced recurring losses from operations and have an accumulated deficit. Our ability to continue our operations as a going concern is dependent on the success of management’s plans, which include raising capital through debt and/or equity markets until such time that revenue provided by operations is sufficient to fund working capital requirements. We will require additional funding to finance the growth of our current and expected future operations as well as to achieve our strategic objectives The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
We have no significant contractual obligations or commercial commitments not reflected on our balance sheet as of this date.
Critical Accounting Policies and Estimates
We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations. The list is not intended to be a comprehensive list of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management’s judgment in their application. The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see the notes to our consolidated financial statements for the year ended December 31, 2025. Note that our preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. We cannot assure that actual results will not differ from those estimates.
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Revenue Recognition
We recognize revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers. The Company’s primary source of revenue is a long-term fixed-price contract to provide engineering and technical development services related to the design and delivery of a renewable energy system.
The contract includes a series of activities such as site-specific modeling, mechanical and structural integration, and engineering validation that are delivered as part of a single, combined project outcome. These services are highly interrelated and not separately identifiable within the context of the contract. Accordingly, the Company determined that the arrangement contains a single performance obligation.
Revenue is recognized over time using the cost-to-cost input method. This method compares actual costs incurred to total estimated costs to determine the percentage of completion and is used to calculate revenue earned to date. The cost-to-cost method reflects the Company’s progress toward satisfying its performance obligation and is consistent with how the project is managed internally.
Contract assets are recorded when revenue recognized exceeds billings to date (referred to as costs in excess of billings). Contract liabilities are recorded when billings exceed revenue recognized (billings in excess of costs). These amounts are presented separately on the condensed consolidated balance sheets.
Income Taxes
We use the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and on the amount of operating loss carry-forwards and are measured using the enacted tax rates and laws that will be in effect when the temporary differences and carry-forwards are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.
Fair Value of Derivative Liability
We identified conversion features embedded within convertible debt issued. We have determined that the features associated with the embedded conversion option should be accounted for at fair value as a derivative liability. We have elected to account for these instruments together with fixed conversion price instruments as derivative liabilities as we cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. We value the derivative liabilities using the Black-Scholes option valuation model. The derivative liabilities are valued at each reporting date and the change in fair value is reflected as change in fair value of derivative liability.
Contingencies
In the normal course of business, we are subject to contingencies, including legal proceedings and claims arising out of our business that relate to a wide range of matters, such as government investigations and tax matters. We recognize a liability for such contingency if we determine it is probable that a loss has occurred and a reasonable estimate of the loss can be made. We may consider many factors in making these assessments including historical and the specific facts and circumstances of each matter.
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Recent Accounting Pronouncements
The Company currently believes there are no issued and not yet effective accounting standards that are materially relevant to our consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements, including the Report of Independent Registered Public Accounting Firm on our consolidated financial statements, are included beginning on page F-1 of this report, which are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us, in the reports that we file or submit to the SEC under the Exchange Act, is recorded, processed, summarized, and reported within the periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to our management, including our principal executive and principal financial officer (whom we refer to in this periodic report as our Certifying Officer), as appropriate to allow timely decisions regarding required disclosure. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our management evaluated, with the participation of our Certifying Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2025, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officer concluded that, as of December 31, 2025, our disclosure controls and procedures were not effective to provide reasonable assurance because certain deficiencies involving internal controls constituted material weaknesses, as discussed below. The material weaknesses identified did not result in the restatement of any previously reported financial statements or any other related financial disclosure, and management does not believe that the material weaknesses had any effect on the accuracy of our financial statements for the current reporting period.
Limitations on Effectiveness of Controls
A system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the system will meet its objectives. The design of a control system is based, in part, upon the benefits of the control system relative to its costs. Control systems can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. In addition, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Also, the design of any control system is based in part upon assumptions about the likelihood of future events.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2025, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. We have assessed the effectiveness of those internal controls as of December 31, 2025, using the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control—Integrated Framework (2013) as a basis for our assessment.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance respecting financial statement preparation and presentation. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects our ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of our annual or interim financial statements that is more than inconsequential will not be prevented or detected.
Based on our evaluation of internal control over financial reporting, our management concluded that our internal control over financial reporting was not effective as of December 31, 2025 as a result of the following material weaknesses identified by management:
| · | Control Environment - We did not maintain an effective control environment for internal control over financial reporting. |
|
|
|
| · | Segregation of Duties - As a result of limited resources and staff, we did not maintain proper segregation of incompatible duties (ie, our chief executive officer also serves as our chief financial officer). The effect of the lack of segregation of duties potentially affects multiple processes and procedures. |
|
|
|
| · | Entity Level Controls - We failed to maintain certain entity-level controls as defined by the 2013 framework issued by COSO. Specifically, our lack of staff does not allow us to effectively maintain a sufficient number of adequately trained personnel necessary to anticipate and identify risks critical to financial reporting. There is a risk that a material misstatement of the financial statements could be caused, or at least not be detected in a timely manner, due to lack of adequate staff with such expertise. |
|
|
|
| · | Access to Cash - One executive had the ability to transfer from our bank accounts. |
These weaknesses are continuing. Management and the board of directors are aware of these weaknesses that result because of limited resources and staff. Management has begun the process of formally documenting our key processes as a starting point for improved internal control over financial reporting. Efforts to fully implement the processes we have designed have been put on hold due to limited resources, but we anticipate a renewed focus on this effort in the future. Due to our limited financial and managerial resources, we cannot assure when we will be able to implement effective internal controls over financial reporting.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this annual report.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth the names, ages, and positions of our executive officers and directors as of December 31, 2025:
Name |
| Age |
| Position |
Jeremy P. Feakins |
| 72 |
| Chairman of the Board, Chief Executive Officer, Chief Financial Officer and Secretary/Treasurer |
Peter H. Wolfson |
| 61 |
| Director |
Antoinette K. Hempstead |
| 61 |
| Director |
Jeremy P. Feakins has served as chairman of our board and our chief executive officer, chief financial officer, and secretary/treasurer since March 2015. Mr. Feakins has over 40 years of experience as an entrepreneur and investor, having founded two technology-based companies. Between 1990 and 2006, Mr. Feakins was the chairman and chief executive officer of Medical Technology & Innovations, Inc. (MTI), a developer and manufacturer of a microprocessor-based, vision-screening device and other medical devices located in Lancaster, Pennsylvania. In 1996, he managed the public listing of MTI on the over-the-counter markets and subsequently structured the sale of the rights to MTI’s vision-screening product to a major international eyewear company. Between 1998 and 2006, he was a managing member of Growth Capital Resources LLC, a venture capital company located in Lancaster, Pennsylvania, where he successfully managed the public listings for four small companies on the over-the-counter market. Between 2005 and 2008, he served as executive vice chairman and member of the board of directors of Caspian International Oil Corporation (OTC: COIC), an oil exploration and services company located in Houston, Texas, and Almaty, Kazakhstan, and managed its public listing. Since 2008, Mr. Feakins has been the chairman and managing partner of the JPF Venture Fund 1, LP, a venture capital company located in Lancaster, Pennsylvania, focused on companies involved with humanitarian and/or sustainability projects. Since 2014, Mr. Feakins has been chairman and chief executive officer of JPF Venture Group, Inc., which provides strategic and operational business assistance to start-up, early-stage, and middle-market high-growth businesses and is a principal stockholder of our stock. Mr. Feakins graduated from the Defense College of Logistics and Personnel Administration, Shrivenham, United Kingdom, and served seven years in the British Royal Navy. He is a member of the Institute of Directors in the United Kingdom and the British American Business Council in the United States. Based on his background in the technology industry and his financial and management background, the board of directors has concluded that Mr. Feakins is qualified to serve as a director.
Peter Wolfson has served as one of our directors since March 2015. Mr. Wolfson is a qualified commercial pilot and has been actively flying with Delta Airlines, a major U.S.-owned international airline company, since 1996. In addition, Mr. Wolfson is the founder and currently involved as president, and chief executive officer of Hans Construction, a developer and builder of upscale homes located in Lancaster, Pennsylvania, organized in 2005. He also has 10 years’ experience as a financial consultant with a subsidiary of Mass Mutual, developing financial strategies and tax planning. He holds a Bachelor of Science degree in Science, Technology, and Business from Embry Riddle Aeronautical University and Edison State College. Based on his financial background, the board of directors has concluded that Mr. Wolfson is qualified to serve as director.
Antoinette Knapp Hempstead was appointed as a director in February 2017. Prior to that, Ms. Hempstead served as our chief executive officer and president from April 2013 until March 2015 and as our deputy chief executive officer and vice president from August 2002 until March 2015. Currently, she is an IT Project Management Professional for Hexcel Corporation, an international carbon fiber manufacturing company. Ms. Hempstead has over 30 years’ experience in management, software management, software development, and finance. Ms. Hempstead has also served as adjunct faculty for University of Idaho where she taught Computer Science courses. Ms. Hempstead has a Master of Science degree in Computer Science from the University of Idaho and a Bachelor of Science degree in Applied Mathematics from the University of Idaho. Ms. Hempstead provides experience in software development and project management, as well as experience in financial statement preparation and regulatory reporting, to our board of directors. Based on her technical background, the board of directors has concluded that Ms. Hempstead is qualified to serve as a director.
| 30 |
| Table of Contents |
Family Relationships
There are no family relationships between any director and executive officer.
Involvement in Certain Legal Proceedings
During the past 10 years, none of our directors and executive officers has been involved in any of the events described in Item 401(f) of Regulation S-K.
Shareholder Nominations to the Board
Our board of directors, acting as the nominating committee, will consider shareholder nominations to the board of directors.
Committees of the Board
Due to the small size of our board of directors, we currently do not have nominating, compensation, or audit committees or committees performing similar functions, and we do not have a written nominating, compensation, or audit committee charter. Our board of directors believes that it is not necessary to have these committees, at this time, because the directors can adequately perform the functions of such committees.
Code of Ethics
We have adopted a code of ethics and business conduct that applies to our directors and officers (including our chief executive and financial officer). Our code of ethics is reasonably designed to deter wrongdoing and to promote: (1) honest and ethical conduct; (2) full and accurate disclosure in reports that we file with the SEC; (3) compliance with applicable governmental laws, rules and regulations; (4) the prompt internal reporting of violations of the code to our chief compliance officer; and (5) accountability for adherence to the code. Our code of ethics is filed as an exhibit to this annual report.
Insider Trading Arrangements and Policies
We have adopted an insider trading policy that governs the ability of our directors, officers and employees to purchase, sell or dispose of stock or other securities of the Company. Under the policy, our board members and executive officers are only permitted to trade in our stock during prescribed “open window” periods and generally only after obtaining pre-clearance for the transaction. Our insider trading policy is filed as an exhibit to this annual report. None of our directors or executive officers traded our shares or related securities, or entered into an arrangement to trade our securities, in 2025.
| 31 |
| Table of Contents |
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years ended December 31, 2025 and 2024, the dollar value of all cash and noncash compensation earned by Jeremy P. Feakins, our principal executive officer, or PEO, and our only executive officer in 2025 and 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-Equity |
|
| Non-Qualified |
|
| All |
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Incentive |
|
| Deferred |
|
| Other |
|
|
|
| |||||||||||
|
| Year Ended |
| Salary(1) |
|
| Bonus |
|
| Stock Awards |
|
| Option Awards |
|
| Plan Compensation |
|
| Compensation Earnings |
|
| Compensation(2) |
|
| Total |
| ||||||||
Name and Principal Position |
| December 31, |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||
Jeremy P. Feakins |
| 2025 |
|
| 604,793 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 20,808 |
|
|
| 625,601 |
|
Principal Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Financial Officer |
| 2024 |
|
| 587,748 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 23,598 |
|
|
| 611,346 |
|
(1) | For the fiscal year ended December 31, 2025, $525,626 of Mr. Feakins’ salary was accrued, but unpaid. For 2024, all of Mr. Feakins’ salary was accrued, but unpaid. |
(2) | Represents health care premiums of $7,128 in 2025 and $9,918 in 2024, and an automobile allowance of $13,680 in both years. |
Narrative Disclosure to Summary Compensation Table
On January 1, 2011, we entered into a five-year employment agreement with Mr. Feakins to serve as our chief executive officer. The employment agreement provides for successive one-year term renewals unless it is expressly cancelled by either party 100 days prior to the end of the term. Under the agreement, Mr. Feakins will receive an annual salary of $350,000, a car allowance of $12,000, and company-paid health insurance. The agreement also provides for bonuses equal to one times Mr. Feakins’ annual salary plus 500,000 shares of common stock for each additional project that generates $25 million or more revenue to us. Mr. Feakins is entitled to receive severance pay in the lesser amount of three years’ salary or 100% of the remaining salary if the remaining term is less than three years. In addition to any severance pay, Mr. Feakins is entitled to an additional change in control payment equal to three times his annual salary if, in connection with a “change in control” (as defined in the agreement), Mr. Feakins terminates his employment with the Company or the Company terminates him. On June 3, 2019, we issued 1,000,000 shares of Series C Preferred Stock to Mr. Feakins, with a fair value of $69,277, to compensate him for his performance.
Effective June 9, 2022, we entered into a second addendum to Mr. Feakins’ employment contract. Among other provisions, the addendum extends the employment agreement through December 31, 2025, and increases the annual salary to $454,738 from $388,220.
Effective January 1, 2023, the board of directors approved an increase in Mr. Feakins’ annual salary for 2023 to $568,422 from $454,738. Pursuant to the terms of the contract and board of directors approval, Mr. Feakins’ annual salary was increased to $587,748 for 2024 and to $604,793 for 2025. Mr. Feakins has agreed to defer substantially all payment to permit the Company to conserve cash.
Outstanding Equity Awards at Fiscal Year-End
No stock option awards were outstanding as of December 31, 2025, for any executive officer. Because the Company does not have an equity plan providing for the issuance of stock options, we do not have policies and practices addressing the timing of option awards in relation to the disclosure of material nonpublic information by the Company.
| 32 |
| Table of Contents |
Director Compensation
For 2025, our non-employee directors earned the following:
Name |
| Fees Earned or Paid in Cash ($) |
|
| Stock Awards ($) |
|
| Option Awards ($) |
|
| Non-Equity Incentive Plan Compensation ($) |
|
| Non-Qualified Deferred Compensation Earnings ($) |
|
| All Other Compensation ($) |
|
| Total ($) |
| |||||||
Antoinette Hempstead |
|
| 40,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 40,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter H. Wolfson |
|
| 40,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 40,000 |
|
All 2025 director fees were accrued but unpaid at December 31, 2025.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth, as of March 15, 2026, the name and shareholdings of: each person that owns of record, or was known by us to own beneficially, 5% or more of the common stock currently outstanding; each of our named executive officers and director; and the shareholdings of all executive officers and directors as a group. Unless indicated otherwise in the footnotes, each person named below has, to the best of our knowledge, sole voting and investment power with respect to all shares of common stock shown as beneficially owned by each person:
|
|
|
|
|
| Common |
|
|
|
|
| |||||||||
|
|
|
|
|
| Stock |
|
|
|
|
| |||||||||
|
|
|
| Voting |
|
| Underlying |
|
|
|
|
| ||||||||
|
| Common |
|
| Preferred |
|
| Convertible |
|
|
|
| Percent of |
| ||||||
Name and Address of Beneficial Owner(1) |
| Stock |
|
| Stock(3)(4) |
|
| Securities |
|
| Total |
|
| Class(2) |
| |||||
Directors and Named Executive Officers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Jeremy Feakins (4) |
|
| 7,253,374 |
|
|
| 102,200,000 |
|
|
| 10,919,075 |
|
|
| 120,372,449 |
|
|
| 39.7 | % |
Antoinette Hempstead (5) |
|
| 114,925 |
|
|
| - |
|
|
| 1,000,000 |
|
|
| 1,114,925 |
|
| * |
| |
Peter H. Wolfson (6) |
|
| 1,396,442 |
|
|
| - |
|
|
| 2,903,179 |
|
|
| 4,299,621 |
|
|
| 2.2 | % |
All directors and executive officers as a group (3 persons) |
|
| 8,764,741 |
|
|
| 102,200,000 |
|
|
| 14,822,254 |
|
|
| 125,786,995 |
|
|
| 41.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5% Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael D. Stauch (7) |
|
| - |
|
|
| 40,800,000 |
|
|
| 4,250,000 |
|
|
| 45,050,000 |
|
|
| 19.2 | % |
Paula Vitz (8) |
|
| 1,144,749 |
|
|
| 13,400,000 |
|
|
| 812,500 |
|
|
| 15,357,249 |
|
|
| 7.5 | % |
Joseph Layman (9) |
|
| 1,987,128 |
|
|
| 8,000,000 |
|
|
| 1,875,000 |
|
|
| 11,862,128 |
|
|
| 5.9 | % |
Gil Lyons (10) |
|
| 1,000,000 |
|
|
| 11,200,000 |
|
|
| - |
|
|
| 12,200,000 |
|
|
| 6.1 | % |
* Less than 1%
(1) | 3675 Market Street, Suite 200, Philadelphia PA 19104, is the address for all stockholders in the table. |
|
|
(2) | Based on 190,012,124 shares of common stock issued and outstanding as of March 15, 2026. |
|
|
(3) | Each share of Series D Preferred stock is convertible into 200,000 shares of common stock. Each share of Series D Preferred Stock votes with common stock on an as-if converted basis |
|
|
(4) | Includes 6,888,943 shares of common stock owned of record by Jeremy P. Feakins and 364,431 shares of common stock owned of record by JPF Venture Group, Inc., which is an investment entity that is majority-owned and controlled by Mr. Feakins and, as such, is deemed to be beneficially owned by him. Also includes 5,000,000 shares of our common stock issuable upon conversion of preferred stock within 60 days from March 15, 2026, and 5,919,075 shares of our common stock issuable upon conversion of notes within 60 days from March 15, 2026. Also includes 511 shares of Series D Preferred Stock, which is convertible into 102,200,000 shares of common stock (but not within 60 days of March 15, 2026) and votes with common stock on an as-if converted basis. |
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| Table of Contents |
(5) | Includes 226 shares of common stock owned of record by Antoinette Hempstead and 114,699 shares of common stock owned of record by A.R. Hempstead Revocable Trust, which is owned and controlled by Ms. Hempstead and, as such, is deemed to be beneficially owned by her. Also includes 1,000,000 shares of our common stock issuable upon conversion of preferred stock within 60 days from March 15, 2026. |
|
|
(6) | Includes 1,000,000 shares of our common stock issuable upon conversion of preferred stock within 60 days from February 28, 2026, and 1,903,179 shares of our common stock issuable upon conversion of notes within 60 days from March 15, 2026. |
|
|
(7) | Includes 4,250,000 shares of our common stock issuable upon conversion of notes within 60 days from March 15, 2026. Also includes 204 shares of Series D Preferred Stock, which is convertible into 40,800,000 shares of common stock (but not within 60 days of March 15, 2026) and votes with common stock on an as-if converted basis. |
|
|
(8) | Includes 312,500 shares of our common stock issuable upon conversion of preferred stock within 60 days from March 15, 2026, and 500,000 shares of our common stock issuable upon conversion of notes within 60 days from March 15, 2026. Also includes 67 shares of Series D Preferred Stock, which is convertible into 13,400,000 shares of common stock (but not within 60 days of March 15, 2026) and votes with common stock on an as-if converted basis. |
|
|
(9) | Includes 625,000 shares of our common stock issuable upon conversion of preferred stock within 60 days from March 15, 2026, and 1,250,000 shares of our common stock issuable upon conversion of notes within 60 days from March 15, 2026. Also includes 40 shares of Series D Preferred Stock, which is convertible into 8,000,000 shares of common stock (but not within 60 days of March 15, 2026) and votes with common stock on an as-if converted basis.
|
(10) | Includes 56 shares of Series D Preferred Stock, which is convertible into 11,200,000 shares of common stock (but not within 60 days of March 15, 2026) and votes with common stock on an as-if converted basis. |
Equity Compensation Plan Information
The employment agreement of Jeremy Feakins, our chief executive officer, provides that the Company will issue to Mr. Feakins 500,000 shares of common stock for each Company project that generates $25 million or more revenue to us. The employment agreement was not approved by the Company’s shareholders. The Company has no other equity compensation plans.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PERSONS, AND DIRECTOR INDEPENDENCE
Related-Party Transactions
In May 2023, we entered into a month-to-month agreement with a company controlled by our chief executive officer for shared use of an office and facilities in Lancaster, Pennsylvania. For the years ended December 31, 2025 and 2024, rent expense was $17,200 and $15,200, respectively.
For the years ended December 31, 2025 and 2024, we recorded charges incurred to a company controlled by our chief executive officer for reimbursement of accounting and administrative services provided to us by an employee of that company. For the years ended December 31, 2025 and 2024, we recorded expense of $146,995 and $135,378, respectively, to this company. At December 31, 2025 and 2024, we had a payable to the entity of $1,400 and $24,200, respectively.
From time to time, we enter into loans and notes payable with related parties. Refer to Note 4 for details on notes payable and convertible notes payable to related parties.
Accrued interest on related-party notes was $1,364,032 and $1,142,539 at December 31, 2025 and 2024, respectively.
| 34 |
| Table of Contents |
During each of the years ended December 31, 2025 and 2024, we repaid $1,080 in net working capital advances from OZ Fund, Inc., a company controlled by Mr. Feakins. During the year ended December 31, 2025, we repaid $20,500 in net working capital advances from Epaphus Global Energy LLC, a company controlled by Mr. Feakins.
During March 2025, an aggregate of 563,611 shares of common stock were borrowed from our chief executive officer to enable settlements of $10,000 of notes and $2,047 of related accrued interest. We have accrued a liability for the shares to be reissued to our chief executive officer in the amount of $169, the fair value of the shares on the date of conversion. The replacement shares have not been issued at December 31, 2025.
During 2022, an aggregate of 847,262 shares of common stock were borrowed from our chief executive officer to enable conversions of $15,000 of notes and $1,946 of related accrued interest. We have accrued a liability for the shares to be reissued to our chief executive officer in the amount of $11,014, the fair value of the shares on the date of conversion. The replacement shares have not been issued at December 31, 2025.
Director Independence
Peter Wolfson and Antoinette Hempstead are independent directors under Nasdaq Rule 5605. In determining his independence, we considered unpaid loans that Mr. Wolfson has made to the Company and concluded that they do not impact his independence. Our code of ethics requires board approval of any transaction between the Company and our directors or officers that presents a conflict of interest. Our board’s policy is that any transaction with a director, officer or other party related to the Company must be reviewed and approved by our board members who are not interested in the transaction. Although our board does not have a formal written policy governing the procedure and standard of review, our board will only approve a related party transaction if the board believes that the transaction is in the best interest of the Company and its shareholders.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Principal Accountant Fees and Services
The following table summarizes the approximate aggregate fees billed to us or expected to be billed to us by Victor Mokuolu, CPA PLLC our independent registered public accounting firm for our 2025 and 2024 fiscal years:
|
| Year Ended December 31, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Audit Fees (1) |
| $ | 60,000 |
|
| $ | 97,500 |
|
Total Fees |
| $ | 60,000 |
|
| $ | 97,500 |
|
_______________
(1) | Includes fees for: (i) audits of our consolidated financial statements for the fiscal years ended December 31, 2025 and 2024; (ii) review of our interim period financial statements for fiscal years 2025 and 2024; and (iii) fees related to services normally provided by the accountant in connection with statutory and regulatory filings or engagements. |
Audit and Non-Audit Service Preapproval Policy
In accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder, our board of directors has adopted an informal approval policy that it believes will result in an effective and efficient procedure to preapprove services performed by the independent registered public accounting firm. All services provided by our auditors to the Company in 2024 and 2023 were approved in advance by our board of directors.
Audit Services. Audit services include the annual financial statement audit (including quarterly reviews) and other procedures required to be performed by the independent registered public accounting firm to be able to form an opinion on our consolidated financial statements. The board of directors preapproves specified annual audit services engagement terms and fees and other specified audit fees. All other audit services must be specifically preapproved by the board of directors. The board of directors monitors the audit services engagement and may approve, if necessary, any changes in terms, conditions, and fees resulting from changes in audit scope or other items.
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| Table of Contents |
Audit-Related Services. Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements, which historically have been provided to us by the independent registered public accounting firm and are consistent with the SEC’s rules on auditor independence. All audit-related services must be preapproved by the board of directors. There were no audit-related services in 2025 or 2024.
Tax Services. The board of directors preapproves specified tax services that it believes would not impair the independence of the independent registered public accounting firm and that are consistent with SEC’s rules and guidance. The board of directors must specifically approve all other tax services. There were no tax services in 2025 or 2024.
All Other Services. Other services are services provided by the independent registered public accounting firm that do not fall within the established audit, audit-related, and tax services categories. The board of directors preapproves specified other services that do not fall within any of the specified prohibited categories of services. There were no other services in 2025 or 2024.
Procedures. All proposals for services to be provided by the independent registered public accounting firm, which must include a detailed description of the services to be rendered and the amount of corresponding fees, are submitted to the chairman of the board of directors and the chief financial officer. The chief financial officer authorizes services that have been preapproved by the board of directors. The chief financial officer submits requests or applications to provide services that have not been preapproved by the board of directors, which must include an affirmation by the chief financial officer and the independent registered public accounting firm that the request or application is consistent with the SEC’s rules on auditor independence, to the board of directors (or its chair or any of its other members pursuant to delegated authority) for approval.
| 36 |
| Table of Contents |
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) | The following financial statements are filed as part of this report: |
|
| Page |
|
|
|
|
|
Audited Consolidated Financial Statements for the Years Ended December 31, 2025 and 2024: |
|
|
|
Report of |
| F-1 |
|
Consolidated Balance Sheets as of December 31, 2025 and 2024 |
| F-3 |
|
Consolidated Statements of Operations for the Years Ended December 31, 2025 and 2024 |
| F-4 |
|
| F-5 |
| |
Consolidated Statements of Cash Flows for the Years Ended December 31, 2025 and 2024 |
| F-6 |
|
| F-7 |
|
| 37 |
| Table of Contents |
(b) | The following exhibits are filed as part of this report: |
Exhibit Number* |
| Title of Document |
| Location |
|
|
|
|
|
Item 3 |
| Articles of Incorporation and Bylaws |
|
|
| Articles of Incorporation of TetriDyn Solutions, Inc., dated May 15, 2006 |
| Incorporated by reference from the Current Report on Form 8-K filed June 7, 2006 | |
|
| Incorporated by reference from the Current Report on Form 8-K filed June 7, 2006 | ||
| Designation of Rights, Privileges, and Preferences of Series A Preferred Stock |
| Incorporated by reference from the Annual Report on Form 10-K for the year ended December 31, 2009, filed March 31, 2010 | |
|
| Incorporated by reference from the Current Report on Form 8-K filed December 12, 2016 | ||
|
| Incorporated by reference from the Current Report on Form 8-K filed December 12, 2016 | ||
| Certificate of Amendment to Articles of Incorporation dated May 8, 2018 |
| Incorporated by reference from the Current Report on Form 8-K filed May 12, 2018 | |
| Certificate of Designation filed with the Nevada Secretary of State on June 6, 2019 |
| Incorporated by reference from the Quarterly Report for the quarter ended June 30, 2019, filed August 13, 2019 | |
| Certificate of Amendment to Designation (Series D Convertible Preferred Stock) filed June 12, 2023 |
| Incorporated by reference from the Current Report on Form 8-K filed June 15, 2023 | |
Item 4 |
| Instruments Defining the Rights of Security Holders, including indentures |
|
|
|
| Incorporated by reference from the Registration Statement on Form S-8 filed August 25, 2018 | ||
Item 10 |
| Material Contracts |
|
|
|
| Incorporated by reference from the Annual Report on Form 10-K for the year ended December 31, 2009, filed March 31, 2010 | ||
| Consolidated Promissory Note for $394,350 dated December 31, 2014 |
| Incorporated by reference from the Current Report on Form 8-K filed June 8, 2015 | |
|
| Incorporated by reference from the Current Report on Form 8-K filed March 1, 2016 | ||
|
| Incorporated by reference from the Annual Report on Form 10-K for the year ended December 31, 2015, filed March 30, 2016 | ||
|
| Incorporated by reference from the Current Report on Form 8-K filed October 20, 2016 | ||
|
| Incorporated by reference from the Current Report on Form 8-K filed May 24, 2016 |
| 38 |
| Table of Contents |
| Amendment to Convertible Promissory Notes dated February 24, 2018 |
| Incorporated by reference from the Current Report on Form 8-K filed March 2, 2018 | |
|
| Incorporated by reference from the Current Report on Form 8-K filed March 10, 2018 | ||
|
| Incorporated by reference from the Current Report on Form 8-K filed January 3, 2018 | ||
|
| Incorporated by reference from the Current Report on Form 8-K filed January 3, 2018 | ||
|
| Incorporated by reference from the Current Report on Form 8-K filed January 3, 2018 | ||
|
| Incorporated by reference from the Current Report on Form 8-K filed February 23, 2018 | ||
| Senior Secured Promissory Note dated February 16, 2018, issued to L2 Capital, LLC |
| Incorporated by reference from the Current Report on Form 8-K filed February 23, 2018 | |
|
| Incorporated by reference from the Current Report on Form 8-K filed February 23, 2018 | ||
| Common Stock Purchase Warrant dated February 16, 2018, issued to L2 Capital, LLC |
| Incorporated by reference from the Current Report on Form 8-K filed February 23, 2018 | |
| Common Stock Purchase Warrant dated February 16, 2018, issued to Craft Capital Management, LLC |
| Incorporated by reference from the Current Report on Form 8-K filed February 23, 2018 | |
|
| Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019 | ||
| Employment Agreement with Jeremy P. Feakins dated January 1, 2011** |
| Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019 | |
|
| Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019 | ||
|
| Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019 | ||
| Promissory Note for $290,000 payable to Theodore Herman dated December 31, 2013 |
| Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019 | |
|
| Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019 | ||
|
| Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019 |
| 39 |
| Table of Contents |
|
| Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019 | ||
|
| Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019 | ||
|
| Incorporated by reference from the Current Report on Form 8-K filed October 20, 2016. | ||
| Promissory Note dated December 21, 2016, to JPF Venture Group |
| Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019 | |
| Promissory Note dated March 9, 2018, to Jeremy P. Feakins & Associates, LLC |
| Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019 | |
| Loan Agreement and Promissory Note with JPF Venture Group, Inc., dated November 6, 2018 |
| Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019 | |
|
| Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019. | ||
| Replacement Convertible Promissory Note to L2 Capital, LLC, dated December 14, 2018 |
| Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019 | |
|
| Incorporated by reference from the Annual Report for the year ended December 31, 2019, filed March 20, 2020 | ||
|
| Incorporated by reference from the Annual Report for the year ended December 31, 2019, filed March 20, 2020 | ||
|
| Incorporated by reference from the Annual Report for the year ended December 31, 2019, filed March 20, 2020 | ||
|
| Incorporated by reference from the Current Report on Form 8-K filed August 29, 2022. | ||
| Addendum to Chief Executive Officer Employment Agreement Effective June 9, 2022 |
| Incorporated by reference from the Quarterly Report for the quarter ended September 30, 2022, filed November 8, 2022 | |
|
| Incorporated by reference from the Annual Report for the year ended December 31, 2024, filed October 27, 2025 | ||
|
| Incorporated by reference from the Annual Report for the year ended December 31, 2024, filed October 27, 2025 |
| 40 |
| Table of Contents |
|
| Incorporated by reference from the Current Report on Form 8-K filed January 14, 2025. | ||
|
|
|
|
|
Item 14 |
| Code of Ethics |
|
|
| Ocean Thermal Energy Corporation Code of Ethics and Business Conduct |
| Incorporated by reference from the Annual Report for the year ended December 31, 2024, filed October 27, 2025 | |
Item 19 |
| Insider Trading Policies and Procedures |
|
|
|
| Incorporated by reference from the Annual Report for the year ended December 31, 2024, filed October 27, 2025 | ||
Item 21 |
| Subsidiaries of the Registrant |
|
|
|
| Incorporated by reference from Post-Effective Amendment No. 1/A to the Registration Statement on Form S-1 (Amendment No. 1) filed January 10, 2019 | ||
Item 31 |
| Rule 13a-14(a)/15d-14(a) Certifications |
|
|
| Certification of Principal Executive and Principal Financial Officer Pursuant to Rule 13a-14 |
| This filing | |
Item 32 |
| Section 1350 Certifications |
|
|
|
| This filing
| ||
Item 101 |
| Interactive Data Files*** |
|
|
101.INS |
| XBRL Instance Document |
| This filing |
101.SCH |
| XBRL Taxonomy Extension Schema |
| This filing |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase |
| This filing |
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase |
| This filing |
101.LAB |
| XBRL Taxonomy Extension Label Linkbase |
| This filing |
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase |
| This filing |
___________________________
* | All exhibits are numbered with the number preceding the decimal indicating the applicable SEC reference number in Item 601 and the number following the decimal indicating the sequence of the particular document. Omitted numbers in the sequence refer to documents previously filed as an exhibit. |
** | Identifies each management contract or compensatory plan or arrangement required to be filed as an exhibit, as required by Item 15(a)(3) of Form 10-K. |
*** | The XBRL related information in Exhibit 101 will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and will not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as will be expressly set forth by specific reference in such filing or document. |
| 41 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| OCEAN THERMAL ENERGY CORPORATION |
| |
|
|
| |
Dated: March 23, 2026 | By: | /s/ Jeremy P. Feakins |
|
|
| Jeremy P. Feakins |
|
|
| Principal Executive Officer and |
|
|
| Principal Financial Officer |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name |
| Title |
| Date |
|
|
|
|
|
/s/ Jeremy P. Feakins |
| Director, Chief Executive Officer and Chief |
| March 23, 2026 |
Jeremy P. Feakins |
| Financial Officer (Principal Executive Officer and Principal Financial Officer) |
|
|
|
|
|
|
|
/s/ Peter Wolfson |
| Director |
| March 23, 2026 |
Peter Wolfson |
|
|
|
|
|
|
|
|
|
/s/ Antoinette K. Hempstead |
| Director |
| March 23, 2026 |
Antoinette K. Hempstead |
|
|
|
|
| 42 |
| Table of Contents |
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT
We will furnish to the SEC, at the same time that it is sent to stockholders, any proxy or information statement that we send to our stockholders in connection with any annual stockholders’ meeting.
43 |
| Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and
Board of Directors of Ocean Thermal Energy Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Ocean Thermal Energy Corporation and Subsidiary (the “Company”) as of December 31, 2025, and December 31, 2024, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flow, for the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and December 31, 2024, and the results of its operations and its cash flows for the years ended December 31, 2025, and December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company's ability to continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the years ended December 31, 2025, and December 31, 2024, the Company had a net loss of $69,212,016, and $1,185,163, respectively. The Company had an accumulated deficit of $176,478,512 and $107,266,496 for the years ending December 31, 2025, and December 31, 2024, respectively. The Company has not established revenue to cover its operating costs for the next twelve (12) months. The Company’s ability to continue as a going concern is dependent on its ability to increase sales and obtain external funding for the projects under development. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provides a reasonable basis for our opinion.
| F-1 |
| Table of Contents |
Critical audit matter
The critical audit matter communicated below is a matter arising from the current audit of the financial statements that was communicated or required to be communicated to the Board of Directors and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
An audit of these elements is especially challenging and requires auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill or knowledge needed.
Accounting for instruments that result in Derivative Liability
As described in Note 5, Derivative Liability, the Company issued prefunded warrants in conjuction with the purchase of the Company’s common stock. Additionally, the Company issued warrants with convertible features in conjunction with the issuance of convertible notes payable. The Company evaluated the accounting treatment of the conversion features embedded in the convertible notes as well as the warrants issued in connection with the notes payable and common stock purchases. As the Company did not have sufficient authorized common shares available to settle these instruments, the conversion features and related warrants were accounted for as derivative liabilities in accordance with ASC 815-40. Accordingly, the Company recorded a derivative liability of $75,688,923 as of December 31, 2025. For the years ended December 31, 2025 and 2024, the Company recognized a loss of $66,210,028 and a gain of $2,868,111, respectively, from the change in fair value of the derivative liability.
Our audit procedures included, but were not limited to (1) a review of the assumptions by management and the guidance from the ASC (2) the derivative calculations, underlying assumptions to arrive at fair value, initial recognition and subsequent measurement at the balance sheet date and (3) the fair value model employed in the derivative calculations.
|
|
We have served as the Company’s auditor since 2025. |
|
March 23, 2026 PCAOB ID: |
|
| F-2 |
| Table of Contents |
OCEAN THERMAL ENERGY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2025 AND 2024
|
| December 31, 2025 |
|
| December 31, 2024 |
| ||
|
|
|
|
| ||||
ASSETS |
| |||||||
Current Assets |
|
|
|
|
|
| ||
Cash |
| $ |
|
| $ |
| ||
Accounts receivable, trade |
|
|
|
|
|
| ||
Prepaid expenses |
|
|
|
|
|
| ||
Total Current Assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Total Assets |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued expense |
| $ |
|
| $ |
| ||
Contract liabilities |
|
|
|
|
|
| ||
Notes payable - related party |
|
|
|
|
|
| ||
Convertible notes payable - related party, net |
|
|
|
|
|
| ||
Notes payable |
|
|
|
|
|
| ||
Convertible note payable, net |
|
|
|
|
|
| ||
Advances payable - related party, net |
|
|
|
|
|
| ||
Derivative liability |
|
|
|
|
|
| ||
Total Current Liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Convertible notes payable due after one year, net |
|
|
|
|
|
| ||
Total Liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Commitments and contingencies (See Note 8) |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Stockholders’ deficit |
|
|
|
|
|
|
|
|
Preferred Stock, Series B, $ |
|
|
|
|
|
| ||
Preferred Stock, Series C, $ |
|
|
|
|
|
| ||
Preferred Stock, Series D, $ |
|
|
|
|
|
| ||
Common stock, $ |
|
|
|
|
|
| ||
Common stock subscribed |
|
|
|
|
|
| ||
Additional paid-in capital |
|
|
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
Total Stockholders’ Deficit |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Deficit |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
| Table of Contents |
OCEAN THERMAL ENERGY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024
|
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Revenue |
| $ |
|
| $ |
| ||
Direct cost of contracts |
|
|
|
|
|
| ||
Gross profit |
|
|
|
|
|
| ||
|
|
|
|
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|
Operating Expenses |
|
|
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|
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|
Salaries and compensation |
|
|
|
|
|
| ||
Professional fees |
|
|
|
|
|
| ||
General and administrative |
|
|
|
|
|
| ||
Total Operating Expenses |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Loss from Operations |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Other Income (Expenses) |
|
|
|
|
|
|
|
|
Interest expense, net |
|
| ( | ) |
|
| ( | ) |
Amortization of debt discount |
|
| ( | ) |
|
| ( | ) |
Change in fair value of derivative liability |
|
| ( | ) |
|
|
| |
Gain on settlement of derivative liability |
|
|
|
|
|
| ||
Total Other Income (Expense) |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
Loss Before Income Taxes |
|
| ( | ) |
|
| ( | ) |
|
|
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|
|
Provision for Income Taxes |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Net Loss per Common Share – Basic and Diluted |
| $ | ( | ) |
| $ | ( | ) |
Weighted Average Number of Common Shares Outstanding – Basic and Diluted |
|
|
|
|
|
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
OCEAN THERMAL ENERGY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024
|
| Preferred Stock |
|
| Common Stock |
|
| Common |
|
| Additional |
|
|
|
| Total |
| |||||||||||||||
|
| Number of |
|
| Par |
|
| Number of |
|
| Par |
|
| Stock |
|
| Paid-in |
|
| Accumulated |
|
| Stockholders’ |
| ||||||||
|
| Shares |
|
| Value |
|
| Shares |
|
| Value |
|
| Subscribed |
|
| Capital |
|
| Deficit |
|
| Deficit |
| ||||||||
Balance December 31, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | ||||||
Common stock issued for conversion of note |
|
| - |
|
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|
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|
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| |||||||
Series D Preferred Stock issued for cash |
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net Loss |
|
| - |
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||
Balance December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||||
Common stock subscribed |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net Loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
Balance December 31, 2025 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
OCEAN THERMAL ENERGY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024
|
| 2025 |
|
| 2024 |
| ||
Cash Flows From Operating Activities: |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Change in fair value of derivative liability |
|
|
|
|
| ( | ) | |
Amortization of debt discount |
|
|
|
|
|
| ||
Gain on settlement of derivative liability |
|
| ( | ) |
|
| ( | ) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable, trade |
|
| ( | ) |
|
|
|
|
Contract liabilities |
|
|
|
|
|
| ||
Accounts payable and accrued expenses |
|
|
|
|
|
| ||
Net Cash Used In Operating Activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
Repayment of advances from related parties |
|
| ( | ) |
|
| ( | ) |
Repayment of notes payable |
|
|
|
|
| ( | ) | |
Common stock subscribed |
|
|
|
|
|
| ||
Proceeds from sale of convertible notes |
|
|
|
|
|
| ||
Proceeds from sale of preferred stock |
|
|
|
|
|
| ||
Net Cash Provided by Financing Activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
|
|
|
| ( | ) | |
Cash at beginning of period |
|
|
|
|
|
| ||
Cash at End of Period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
Cash paid for interest expense |
| $ |
|
| $ |
| ||
Cash paid for income taxes |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Initial value of derivative liability |
| $ |
|
| $ |
| ||
Common stock issued upon conversion of note |
| $ |
|
| $ |
| ||
Note payable converted to common stock |
| $ |
|
| $ |
| ||
Accrued interest converted to common stock |
| $ |
|
| $ |
| ||
Derivative liability extinguished upon conversion on note payable |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
| Table of Contents |
OCEAN THERMAL ENERGY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024
NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION
Ocean Thermal Energy Corporation (“OTEC” “Company” “us” “we”) is designing ocean thermal energy conversion power plants, seawater air conditioning and lake water air conditioning (“SWAC/LSC”) plants for large commercial properties, utilities, and municipalities. We believe these technologies provide practical solutions to mankind’s three oldest and most fundamental needs: clean drinking water, plentiful food, and sustainable, affordable energy without the use of fossil fuels. The Company plans to provide a clean technology that continuously extracts energy from the temperature differentials between warm surface ocean water and cold deep seawater. In addition to producing electricity, our technology can efficiently desalinate seawater producing thousands of cubic meters of fresh water every day for use in agriculture and human consumption. This cold, deep, nutrient-rich water can also be used to cool buildings and for fish farming or aquaculture.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary OCEES International Inc. (“OCEES”). Intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include the assumptions used in the valuation of equity-based transactions, valuation of derivative liabilities, and valuation of deferred tax assets.
Cash and Cash Equivalents
We consider all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. We had no cash equivalents at December 31, 2025 and 2024.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers. The Company’s primary source of revenue is a long-term fixed-price contract to provide engineering and technical development services related to the design and delivery of a renewable energy system.
The contract includes a series of activities such as site-specific modeling, mechanical and structural integration, and engineering validation that are delivered as part of a single, combined project outcome. These services are highly interrelated and not separately identifiable within the context of the contract. Accordingly, the Company determined that the arrangement contains a single performance obligation.
Revenue is recognized over time using the cost-to-cost input method. This method compares actual costs incurred to total estimated costs to determine the percentage of completion and is used to calculate revenue earned to date. The cost-to-cost method reflects the Company’s progress toward satisfying its performance obligation and is consistent with how the project is managed internally.
Contract assets are recorded when revenue recognized exceeds billings to date (referred to as costs in excess of billings). Contract liabilities are recorded when billings exceed revenue recognized (billings in excess of costs). These amounts are presented separately on the consolidated balance sheets.
| F-7 |
| Table of Contents |
Accounts Receivable
Accounts receivable consists of amounts invoiced to customers but not yet collected by the Company. The Company records an allowance for doubtful accounts to allow for any amounts that may not be recoverable, which is based on an analysis of the Company’s prior collection experience, customer creditworthiness, expected future losses and current economic trends. Accounts are considered delinquent when payments have not been received within the contractual payment terms and are written off when management determines that collection is not probable. There were no doubtful accounts as of December 31, 2025 and 2024.
Income Taxes
We use the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and on the amount of operating loss carry-forwards and are measured using the enacted tax rates and laws that will be in effect when the temporary differences and carry-forwards are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.
Our ability to use our net operating loss carryforwards may be substantially limited due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as similar state provisions. These ownership changes may limit the amount of net operating loss that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50.0% of the outstanding stock of a company by certain stockholders or public groups.
We have not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since we became a “loss corporation” under the definition of Section 382. If we have experienced an ownership change, utilization of the net operating loss carryforwards would be subject to an annual limitation under Section 382 of the Code, which is determined by first multiplying the value of our stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards before utilization. Further, until a study is completed and any limitation known, no positions related to limitations are being considered as an uncertain tax position or disclosed as an unrecognized tax benefit. Any carryforwards that expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation allowance. Due to the existence of the valuation allowance, it is not expected that any possible limitation will have an impact on our results of operations or financial position.
Business Segments
We operate in one segment and, therefore, segment information is not presented.
Fair Value
Financial Accounting Standards Board Accounting Standard Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value under GAAP, and enhances disclosures about fair value measurements. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
| · | Level 1-Pricing inputs are quoted prices available in active markets for identical assets or liabilities as of the reporting date. |
| · | Level 2-Pricing inputs are quoted for similar assets or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level 2 includes assets or liabilities valued at quoted prices adjusted for legal or contractual restrictions specific to these investments. |
| · | Level 3-Pricing inputs are unobservable for the assets or liabilities; that is, the inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. |
| F-8 |
| Table of Contents |
Management believes the carrying amounts of the short-term financial instruments, including cash and cash equivalents, prepaid expenses, accounts payable, accrued liabilities, notes payable, and other liabilities, reflected in the accompanying balance sheets, approximate fair value at December 31, 2025 and December 31, 2024, due to the relatively short-term nature of these instruments.
We accounted for derivative liability at fair value on a recurring basis under Level 3 at December 31, 2025 and 2024 (see Note 5).
Concentrations
Cash, cash equivalents, and restricted cash are deposited with major financial institutions, and at times, such balances with any one financial institution may be in excess of FDIC-insured limits. As of December 31, 2025, cash balances exceeded FDIC insured limits by approximately $
Loss per Share
Basic loss per share is calculated by dividing our net loss available to common shareholders by the weighted average number of common shares during the period. Diluted loss per share is calculated by dividing our net loss by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.
The following potentially dilutive securities have been excluded from the computation of diluted weighted average shares outstanding as of December 31, 2025 and 2024, as they would be anti-dilutive:
|
| Years Ended December 31, |
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| 2025 |
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Shares underlying options and warrants outstanding |
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Shares underlying convertible notes outstanding |
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Shares underlying convertible preferred stock outstanding |
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Recent Accounting Pronouncements
The Company currently believes there are no other issued and not yet effective accounting standards that are materially relevant to our consolidated financial statements.
NOTE 3 – GOING CONCERN
The accompanying audited consolidated financial statements have been prepared on the assumption that we will continue as a going concern. As reflected in the accompanying consolidated financial statements, we had a net loss of $
| F-9 |
| Table of Contents |
NOTE 4 – CONVERTIBLE NOTES AND NOTES PAYABLE
During November and December 2024, we sold an aggregate of $
During January and February 2025, we sold an aggregate of $
During March 2025, an aggregate of
During the year ended December 31, 2024, $
The following convertible notes and notes payable were outstanding at December 31, 2025:
Date of |
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| In |
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(1) | Maturity date is 90 days after demand. |
| F-10 |
| Table of Contents |
(2) | Bridge loans were issued at dates between December 2017 and May 2018. Principal is due on the earlier of 18 months from the anniversary date or the completion of L2 financing with gross proceeds of a minimum of $1.5 million. |
(3) | L2 - Note was drawn down in five tranches between 02/16/18 and 05/02/18. |
(4) | Loans were issued from 01/02/19 to 03/23/19. Principal and interest are due when funds are received from the litigation between Ocean Thermal Energy Corporation vs. Robert Coe, et al. |
(5) | Notes were issued between 10/14/19 and 11/05/19. The notes bear an interest rate of 8% and mature 10/31/21. They can be converted into 250,000 shares of common stock. They can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first. |
(6) | Notes were issued between 12/09/19 and 11/25/20. The notes bear an interest rate of 8% and mature 01/02/22. They can be converted into 250,000 shares of common stock. They can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first. |
(7) | Notes were issued between 11/02/20 and 03/18/21. The notes bear an interest rate of 10%. Repayment will be made as follows: (i) the principal and interest within five business days following our receipt of $25.5 million from the Robert Coe, et al. Phase One Litigation; and (ii) the additional payment within five business days following our actual receipt of any funds from the Robert Coe, et al, Phase Two Litigation, less legal fees accrued up to that date. Payment will be made as such funds are actually received by us and after deductions of accrued legal fees up to that date. |
(8) | Notes were issued between 05/14/20 and 08/11/20. The notes bear an interest rate of 8% and mature 05/12/22. They can be converted into 250,000 shares of common stock. They can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first. |
(9) | Notes were issued in November 2020 and during the first two quarters of 2021. The notes bear an interest rate of 8% and mature 09/01/22. They can be converted into 250,000 shares of common stock. They can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first. |
(10) | Notes were issued during the third quarter of 2021. The notes bear an interest rate of 8% and mature 08/30/23. They can be converted into 250,000 shares of common stock. They can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first. |
(11) | Note was issued during November of 2021. The note bears an interest rate of 8% and matures 11/30/23. It can be converted into 250,000 shares of common stock. It can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first. |
(12) | Notes were issued during November and December of 2024 and January and February of 2025. The Notes bear interest at the rate of 10% per year, compounded annually, and are due on January 4, 2027. The Notes will be converted into common stock of the Company automatically upon the Maturity Date at the lower of (a) $0.10 per share, or (b) 90% of the Market Price, which shall be the average closing price of the Company’s common stock on the ten trading days immediately preceding the date of conversion. However, if the United States Army has issued a contract for the supply of sustainable power and water from the Company-designed and built ocean thermal energy system prior to the Maturity Date, within five business days the Notes will automatically be converted depending on amount of Notes purchased by each holder. |
* | Default interest rate. |
The following convertible notes and notes payable were outstanding at December 31, 2024:
| F-11 |
| Table of Contents |
Date of |
|
| Maturity |
|
| Interest |
|
| In |
| Original |
|
| Principal at December 31, |
|
| Discount at December 31, |
|
| Carrying Amount at December 31, |
|
| Related Party |
|
| Non Related Party |
| |||||||||||||||||
Issuance |
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| Date |
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| Rate |
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| Default |
| Principal |
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| 2024 |
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| 2024 |
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| 2024 |
|
| Current |
|
| Long-Term |
|
| Current |
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| Long-Term |
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(1) | Maturity date is 90 days after demand. |
| F-12 |
| Table of Contents |
(2) | Bridge loans were issued at dates between December 2017 and May 2018. Principal is due on the earlier of 18 months from the anniversary date or the completion of L2 financing with gross proceeds of a minimum of $1.5 million. |
(3) | L2 - Note was drawn down in five tranches between 02/16/18 and 05/02/18. |
(4) | Loans were issued from 01/02/19 to 03/23/19. Principal and interest are due when funds are received from the litigation between Ocean Thermal Energy Corporation vs. Robert Coe, et al. |
(5) | Notes were issued between 10/14/19 and 11/05/19. The notes bear an interest rate of 8% and mature 10/31/21. They can be converted into 250,000 shares of common stock. They can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first. |
(6) | Notes were issued between 12/09/19 and 11/25/20. The notes bear an interest rate of 8% and mature 01/02/22. They can be converted into 250,000 shares of common stock. They can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first. |
(7) | Notes were issued between 11/02/20 and 03/18/21. The notes bear an interest rate of 10%. Repayment will be made as follows: (i) the principal and interest within five business days following our receipt of $25.5 million from the Robert Coe, et al. Phase One Litigation; and (ii) the additional payment within five business days following our actual receipt of any funds from the Robert Coe, et al. Phase Two Litigation, less legal fees accrued up to that date. Payment will be made as such funds are actually received by us and after deductions of accrued legal fees up to that date. |
(8) | Notes were issued between 05/14/20 and 08/11/20. The notes bear an interest rate of 8% and mature 05/12/22. They can be converted into 250,000 shares of common stock. They can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first. |
(9) | Notes were issued in November 2020 and during the first two quarters of 2021. The notes bear an interest rate of 8% and mature 09/01/22. They can be converted into 250,000 shares of common stock. They can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first. |
(10) | Notes were issued during the third quarter of 2021. The notes bear an interest rate of 8% and mature 08/30/23. They can be converted into 250,000 shares of common stock. They can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first. |
(11) | Note was issued during November of 2021. The note bears an interest rate of 8% and matures 11/30/23. It can be converted into 250,000 shares of common stock. It can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first. |
* | Default interest rate. |
| F-13 |
| Table of Contents |
NOTE 5 – DERIVATIVE LIABILITY
We measure the fair value of our assets and liabilities under the guidance of ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but its provisions apply to all other accounting pronouncements that require or permit fair value measurement.
We identified conversion features embedded within convertible debt issued. We have determined that the features associated with the embedded conversion option should be accounted for at fair value as a derivative liability. We have elected to account for these instruments together with our warrants and other fixed conversion price instruments as derivative liabilities as we cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. We value the derivative liabilities using the Black-Scholes option valuation model. The derivative liabilities are valued at each reporting date and the change in fair value is reflected as change in fair value of derivative liability.
Following is a description of the valuation methodologies used to determine the fair value of our financial liabilities, including the general classification of such instruments pursuant to the valuation hierarchy:
|
| Fair Value at December 31, |
|
| Quoted market prices for identical assets/liabilities (Level 1) |
|
| Significant other observable inputs (Level 2) |
|
| Significant unobservable inputs (Level 3) |
| ||||
Derivative Liability, December 31, 2025 |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Derivative Liability, December 31, 2024 |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
The reconciliation of the derivative liability for the years ended December 31, 2025 and 2024 is as follows:
|
| For the Years Ended December 31 |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Derivative liability as of January 1 |
| $ |
|
| $ |
| ||
Addition to derivative instruments |
|
|
|
|
|
| ||
Derivative liability extinguished upon conversion of notes payable |
|
| ( | ) |
|
| ( | ) |
Change in fair value of derivative liability |
|
|
|
|
| ( | ) | |
Derivative liability as of December 31 |
| $ |
|
| $ |
| ||
| F-14 |
| Table of Contents |
The fair value of the derivative liability was estimated using the Black-Scholes option-valuation model. The fair values at the remeasurement dates for our derivative liabilities were based upon the following management assumptions:
|
| For the Years Ended December 31 |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Expected dividends |
|
| % |
|
| % | ||
Expected volatility |
| % |
| % | ||||
Risk free interest rate |
| % |
| % | ||||
Expected term (in years) |
|
|
|
| ||||
The fair value at the remeasurement date is equal to the carrying value on the balance sheet.
NOTE 6 – STOCKHOLDERS’ DEFICIT
Common Stock and Common Stock Subscribed
During the year ended December 31, 2025, we entered into stock purchase agreements with a number of investors. The investors agreed to purchase
During the year ended December 31, 2024, we issued
Preferred Stock
On December 31, 2021, our board of directors approved a resolution authorizing the withdrawal of the certificate of designation of our Series A preferred stock. No shares were outstanding at the time of withdrawal.
On June 6, 2023, the board of directors agreed to amend the Certificate of Designation to authorize an additional
Series B Preferred Stock – We are authorized to issue
| F-15 |
| Table of Contents |
Series C Preferred Stock – We are authorized to issue
Series D Preferred Stock (authorized December 31, 2021) – We are authorized to issue
During the year ended December 31, 2024, we issued
Warrants and Options
The following table summarizes all options and warrants outstanding and exercisable for the years ended December 31, 2025 and 2024:
|
| Number of |
|
| Weighted Average |
| ||
|
| Warrants |
|
| Exercise Price |
| ||
Balance at December 31, 2023 |
|
|
|
| $ |
| ||
Granted |
|
|
|
|
|
| ||
Exercised |
|
| - |
|
|
|
| |
Forfeited/expired |
|
| - |
|
|
|
| |
Balance at December 31, 2024 |
|
|
|
| $ |
| ||
Granted |
|
|
|
|
|
| ||
Exercised |
|
| - |
|
|
|
| |
Forfeited/expired |
|
| - |
|
|
|
| |
Balance at December 31, 2025 |
|
|
|
| $ |
| ||
Exercisable at December 31, 2025 |
|
|
|
| $ |
| ||
During January and February 2025, we sold an aggregate of $
During November and December 2024, we sold an aggregate of $
During November 2023 we issued a common stock purchase option to a consultant to purchase
| F-16 |
| Table of Contents |
No options or warrants were exercised during the years ended December 31, 2025 and 2024. The options and warrants have an intrinsic value of approximately $
NOTE 7 – INCOME TAX
Our ability to use our net operating loss carryforwards may be substantially limited due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Code, as well as similar state provisions. These ownership changes may limit the amount of net operating loss that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50.0% of the outstanding stock of a company by certain stockholders or public groups.
We have not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since we became a “loss corporation” under the definition of Section 382. If we have experienced an ownership change, utilization of the net operating loss carryforwards would be subject to an annual limitation under Section 382 of the Code, which is determined by first multiplying the value of our stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards before utilization. Further, until a study is completed, and any limitation known, no positions related to limitations are being considered as an uncertain tax position or disclosed as an unrecognized tax benefit. Any carryforwards that expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation allowance. Due to the existence of the valuation allowance, it is not expected that any possible limitation will have an impact on our results of operations or financial position.
The actual tax benefit differs from the expected tax benefit for the years ended December 31, 2025 and 2024 (computed by applying the U.S. federal corporate tax rate of 21% to income before taxes), as follows:
|
| 2025 |
|
| 2024 |
| ||
Statutory federal income tax rate |
|
| ( | )% |
|
| ( | )% |
State income taxes, net of federal benefits |
|
| ( | )% |
|
| ( | )% |
Non-deductible items |
|
| % |
|
| ( | )% | |
Valuation allowance |
|
| % |
|
| % | ||
Effective income tax rate |
| % |
| % | ||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows:
|
| For the Years Ended December 31 |
| |||||
|
| 2025 |
|
| 2024 |
| ||
Impairment |
| $ |
|
| $ |
| ||
Accrued Compensation |
|
|
|
|
|
| ||
Operating loss carryforwards |
|
|
|
|
|
| ||
Gross deferred tax assets |
|
|
|
|
|
| ||
Valuation allowance |
|
| ( | ) |
|
| ( | ) |
Net deferred income tax asset |
| $ |
|
| $ |
| ||
We have net operating loss carryforwards for income tax purposes of approximately $
| F-17 |
| Table of Contents |
NOTE 8 – COMMITMENTS AND CONTINGENCIES
From time to time, the Company may be involved in legal proceedings and regulatory proceedings arising from its operations. Management established reserves for specific liabilities in connection with legal actions that management deems to be probable and estimable. Certain lawsuits, claims and proceedings are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. While the outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to the Company, management does not believe that the disposition of any such pending matters is likely to have a material adverse effect on the Company’s financial condition or operation, although the resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company’s results of operations for that period.
Accrued Salaries and Related Taxes
As of December 31, 2025, the Company has $
Professional Services Agreement
On January 7, 2025 the Company entered into a Professional Services Agreement with Johnson Controls Government Systems, LLC, which provided for the design, engineering and pricing estimation for an Ocean Thermal Energy Conversion and Ocean Water Desalinization Potable Water solution on the island of Kwajalein. The contract includes a fixed fee of $
Litigation
On May 4, 2018, we reached a settlement of the claims at issue in Ocean Thermal Energy Corp. v. Robert Coe, et al., Case No. 2:17-cv-02343SHL-cgc, before the United States District Court for the Western District of Tennessee. Between May 30 and July 19, 2018, we received three payments totaling $
| F-18 |
| Table of Contents |
On May 21, 2019, Theodore T. Herman filed a complaint against us in Theodore T. Herman v. Ocean Thermal Energy Corporation, Case No. CI-19-04780, in the Court of Common Pleas of Lancaster County, Pennsylvania, asserting that he is entitled to payment on the promissory note described in Note 4: Convertible Notes and Notes Payable. On July 1, 2019, we filed preliminary objections to the complaint, and subsequently filed an answer and new matter on August 20, 2019, to which the plaintiff filed a reply on September 9, 2019. Herman has not pursued this action since 2020, and on October 7, 2025, the court terminated the case with prejudice for failure to prosecute.
On August 22, 2018, Fugro USA Maine, Inc. (“Fugro”), filed suit against us in Fugro USA Marine, Inc. v. Ocean Thermal Energy Corp., Cause No. 2018-56396, in the District Court for Harris County, TX, 165th Judicial District, seeking approximately $
Agreement to Sell Subsidiary
On August 25, 2022, we entered into a Stock Purchase Agreement to sell OCEES to Epaphus Global Energy, LLC (“Epaphus”). Epaphus is controlled by Jeremy Feakins, our Chief Executive Officer and a director. The transaction was approved unanimously by our directors who do not have an interest in the transaction.
In exchange for the sale of OCEES, we will receive:
| • | $ |
| • | $ |
| • |
Under the terms of the purchase agreement, Epaphus has the unilateral right to return OCEES to us and receive a full refund of all portions of the purchase price paid as of the return of OCEES at any time for year following the date of the purchase agreement.
By mutual consent of the parties, the purchase agreement has not closed as of December 31, 2025, or through the date of filing of this report. As a result, it has not been reflected in these financial statements.
NOTE 9 – EMPLOYMENT AGREEMENTS
On January 1, 2011, we entered into a five-year employment agreement with our chief executive officer, which provides for successive one-year term renewals unless it is expressly cancelled by either party 100 days prior to the end of the term. Under the agreement, our chief executive officer will receive an annual salary of $
Effective January 1, 2023, the board of directors approved an increase in the chief executive officer’s annual salary for 2023 to $
| F-19 |
| Table of Contents |
NOTE 10 – RELATED-PARTY TRANSACTIONS
In May 2023,
For the years ended December 31, 2025 and 2024, we recorded charges incurred to a company controlled by our chief executive officer for reimbursement of accounting and administrative services provided to us by an employee of that company. For the years ended December 31, 2025 and 2024, we recorded expense of $
From time to time, we enter into loans and notes payable with related parties. Refer to Note 4 for details on notes payable and convertible notes payable to related parties.
Accrued interest on related-party notes was $
During the year ended December 31, 2025, we repaid $
During 2022, an aggregate of
During March 2025, an aggregate of
NOTE 11 – SUBSEQUENT EVENTS
As previously disclosed, on February 10, 2012, DCO Energy, LLC (“DCO”) loaned the Company $
On February 27, 2026, we signed a settlement agreement with DCO to resolve the dispute. Pursuant to the settlement agreement we agreed to pay DCO $
The settlement agreement did not extinguish the underlying loan obligation, and DCO retains the ability, subject to the terms of the forbearance arrangement, to pursue remedies in the event of future default, including the potential re-entry of judgment. We believe that the settlement allowed us to resolve outstanding disputes and continue pursuing our business objectives. All settlement amounts have been recorded in the financial statements as of December 31, 2025
| F-20 |