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What changed in Nauticus Robotics, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Nauticus Robotics, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+355 added−467 removedSource: 10-K (2025-04-15) vs 10-K (2024-04-10)

Top changes in Nauticus Robotics, Inc.'s 2024 10-K

355 paragraphs added · 467 removed · 223 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeNauticus will file for patent protection if the invention is believed to be patentable and the resulting patent will be beneficial in protecting the invention in the marketplaces. Consideration is also given, particularly with respect to software, as to the benefits of seeking a patent against the associated market risks of providing public exposure of the invention.
Biggest changeConsideration is also given, particularly with respect to software, as to the benefits of seeking a patent against the associated market risks of providing public exposure of the invention. In many cases with our software, Nauticus holds this code and algorithms as trade secrets. Nauticus has patented its re-configurable hull design for subsea vehicles.
Manufacturing and Suppliers As part of the original development of engineering prototypes, Nauticus has established supplier relationships with key commercial-off-the-shelf (“COTS”) and custom part manufacturers. Consideration is given within our international supply chain for redundancy, where possible. In cases of limited supplier options, Nauticus initiates procurement early in the manufacturing schedule to mitigate risk of supply interruption.
Manufacturing and Suppliers As part of the original development of engineering prototypes, Nauticus Robotics has established supplier relationships with key commercial-off-the-shelf (“COTS”) and custom part manufacturers. Consideration is given within our international supply chain for redundancy, where possible. In cases of limited supplier options, Nauticus Robotics initiates procurement early in the manufacturing schedule to mitigate risk of supply interruption.
On the Closing Date, CleanTech was renamed “Nauticus Robotics, Inc.,” and Nauticus Robotics Holdings was renamed “Nauticus Robotics Holdings, Inc.” As a result of the Closing, among other things, (a) each share of Nauticus Robotics Holdings preferred stock, par value $0.01 per share, that was issued and outstanding immediately prior to the Closing converted into Old Nauticus Common Stock, in accordance with the certificate of incorporation of Nauticus Robotics Holdings (the “Preferred Stock Conversion”); (b) each of the Old Nauticus Convertible Notes was converted into shares of Old Nauticus Common Stock in accordance with the terms of each such note (the “Convertible Note Conversion”); and (c) each share of Old Nauticus Common Stock (including shares of Old Nauticus Common Stock outstanding as a result of the Preferred Stock Conversion and Convertible Notes Conversion, but excluding shares of the holders who perfected rights of appraisal under Delaware law) was converted into the right to receive (i) the Per Share Merger Consideration and (ii) Earnout Shares.
On the Closing Date, CleanTech was renamed “Nauticus Robotics, Inc.,” and Nauticus Robotics Holdings was renamed “Nauticus Robotics Holdings, Inc.” 5 Table of Contents As a result of the Closing, among other things, (a) each share of Nauticus Robotics Holdings preferred stock, par value $0.01 per share, that was issued and outstanding immediately prior to the Closing converted into Old Nauticus Common Stock, in accordance with the certificate of incorporation of Nauticus Robotics Holdings (the “Preferred Stock Conversion”); (b) each of the Old Nauticus Convertible Notes was converted into shares of Old Nauticus Common Stock in accordance with the terms of each such note (the “Convertible Note Conversion”); and (c) each share of Old Nauticus Common Stock (including shares of Old Nauticus Common Stock outstanding as a result of the Preferred Stock Conversion and Convertible Notes Conversion, but excluding shares of the holders who perfected rights of appraisal under Delaware law) was converted into the right to receive (i) the Per Share Merger Consideration and (ii) Earnout Shares.
Currently, Nauticus manages a supply chain with many suppliers that specialize in parts aimed toward subsea vehicles. A key component of Aquanaut subsea vehicle is the energy storage system — a Li-ion battery. There are a variety of suppliers available to provide this battery subsystem. One battery, in particular, that Nauticus uses is from SubCTech, a German company.
Currently, Nauticus Robotics manages a supply chain with many suppliers that specialize in parts aimed toward subsea vehicles. A key component of the Aquanaut subsea vehicle is the energy storage system — a Li-ion battery. There are a variety of suppliers available to provide this battery subsystem. One battery that Nauticus Robotics uses is from SubCTech, a German company.
The Loans are convertible, in whole or in part, at the option of each Lender into shares of Common Stock until the date that the Loans are no longer outstanding, at a conversion rate equal to the outstanding principal amount of the Loans to be converted divided by a conversion price of $6.00 per share of Common Stock (the “Conversion Price”), subject to certain customary anti-dilution adjustments as described in the Term Loan Agreement.
The Loans are convertible, in whole or in part, at the option of each Lender into shares of Common Stock until the date that the Loans are no longer outstanding, at a conversion rate equal to the outstanding principal amount of the Loans to be converted divided by a conversion price of $216 per share of Common Stock (the “Conversion Price”), subject to certain customary anti-dilution adjustments as described in the Term Loan Agreement.
The Earnout Shares will be released and delivered to the Stockholder Earnout Group upon occurrence of the following (each, a “Triggering Event”): i. one-half of the Earnout Shares will be released if, within a 5-year period following the signing date of the Merger Agreement, the volume-weighted average price of our Common Stock equals or exceeds $15.00 per share over any 20 trading days within a 30-day trading period; ii. one-quarter of the Earnout Shares will be released if, within a 5-year period following the signing date of the Merger Agreement, the volume-weighted average price of our Common Stock equals or exceeds $17.50 per share over any 20 trading days within a 30-day trading period; and iii. one-quarter of the Earnout Shares will be released if, within a 5-year period following the signing date of the Merger Agreement, the volume-weighted average price of our Common Stock equals or exceeds $20.00 per share over any 20 trading days within a 30-day trading period.
The Earnout Shares will be released and delivered to the Stockholder Earnout Group upon occurrence of the following (each, a “Triggering Event”): i. one-half of the Earnout Shares will be released if, within a 5-year period following the signing date of the Merger Agreement, the volume-weighted average price of our Common Stock equals or exceeds $15.00 per share (on a pre Reverse Stock Split Basis) over any 20 trading days within a 30-day trading period; ii. one-quarter of the Earnout Shares will be released if, within a 5-year period following the signing date of the Merger Agreement, the volume-weighted average price of our Common Stock equals or exceeds $17.50 (on a pre Reverse Stock Split Basis) per share over any 20 trading days within a 30-day trading period; and iii. one-quarter of the Earnout Shares will be released if, within a 5-year period following the signing date of the Merger Agreement, the volume-weighted average price of our Common Stock equals or exceeds $20.00 (on a pre Reverse Stock Split Basis) per share over any 20 trading days within a 30-day trading period.
Such reports and other information filed by the Company with the SEC are available free of charge on our website at https://www.nauticusrobotics.com as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Our SEC filings are also available to the public from the SEC’s internet site at https://www.sec.gov. 12 Table of Contents
Such reports and other information filed by the Company with the SEC are available free of charge on our website at https://www.ir.nauticusrobotics.com as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Our SEC filings are also available to the public from the SEC’s internet site at https://www.sec.gov.
Earnout Shares Following the closing of the Merger, former holders of shares of Old Nauticus Common Stock (including shares received as a result of the Preferred Stock Conversion and the Convertible Notes Conversion, the “Stockholder Earnout Group”) shall be entitled to receive their pro rata share of up to 7,499,993 additional shares of Common Stock (the “Earnout Shares”).
Earnout Shares Following the closing of the Merger, former holders of shares of Old Nauticus Common Stock (including shares received as a result of the Preferred Stock Conversion and the Convertible Notes Conversion, the “Stockholder Earnout Group”) shall be entitled to receive their pro rata share of up to 208,333 additional shares of Common Stock (the “Earnout Shares”).
Where You Can Find More Information The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act are filed with the SEC.
The Company elected to fair value these Debentures. Where You Can Find More Information The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act are filed with the SEC.
The Company Lock-up Agreement expired on March 8, 2023. RCB Equities #1, LLC On July 14, 2023, the Company issued a secured promissory note to RCB Equities #1, LLC, a related party for $5,000,000. The promissory note included a 2.5% original issue discount or $125,000, bears interest at 15% per annum, and matures on September 9, 2026.
RCB Equities #1, LLC On July 14, 2023, the Company issued a secured promissory note to RCB Equities #1, LLC ("RCB") for $5,000,000. The promissory note included a 2.5% original issue discount or $125,000, bears interest at 15% per annum, and matures on September 9, 2026.
ATW, Material Impact Fund II, L.P., and the SLS Family Trust have subscribed for Debentures in the aggregate principal amount of $36,530,320 (out of the aggregate $40.0 million) which is convertible into 2,922,425 shares of our Common Stock and associated warrants for an additional 2,922,425 shares.
(MIF), and the SLS Family Trust (SLS) subscribed for Debentures in the aggregate principal amount of $36,530,320 (out of the aggregate $40.0 million) which is convertible into 2,922,425 shares of our Common Stock and associated warrants for an additional 2,922,425 shares. Our director, Adam Sharkawy, is the managing partner of Material Impact II, L.P.
On September 18, 2023, 10 Table of Contents the RCB Equities #1, LLC promissory note was rolled into the convertible senior secured term loan discussed below bearing interest at 12.5% per annum including the $125,000 exit fee.
On September 18, 2023, the RCB promissory note was rolled into the convertible senior secured term loan discussed below bearing interest at 12.5% per annum including the $125,000 exit fee.
The initial amount funded under the Convertible Senior Secured Term Loan Agreement was $11,600,000. The Convertible Senior Secured Term Loan Agreement included a 2.5% exit fee of $290,000, bearing interest at 12.50% per annum, payable quarterly in arrears on the first day of each calendar quarter commencing April 1, 2024.
The Convertible Senior Secured Term Loan Agreement included a 2.5% exit fee of $290,000, bearing interest at 12.50% per annum, payable quarterly in arrears on the first day of each calendar quarter commencing April 1, 2024. The exit fee is being provided for over the period of the loan.
The exit fee is being provided for over the period of the loan. The loan agreement included a 2.5% original issue discount of $125,000 from the RCB Equities #1, LLC promissory note. The loan includes assumed legal fees of $557,500 and deemed interest from convertible debentures of $378,118.
The loan agreement included a 2.5% original issue discount of $125,000 from the RCB, promissory note. The loan includes assumed legal fees of $577,500, and deemed interest from convertible debentures of $378,118. The debt discount is being accreted to interest expense over the period of the loan.
Convertible Senior Secured Term Loan On September 18, 2023, the Company entered into a convertible senior secured term loan agreement with ATW Special Situations II LLC as collateral agent (in such capacity, the “Collateral Agent”) and lender, and Transocean Finance Limited, ATW Special Situations I LLC, Material Impact Fund II, L.P, and RCB Equities #1, LLC, as lenders.
Convertible Senior Secured Term Loan On September 18, 2023, the Company entered into a convertible senior secured term loan agreement with ATW Special Situations II LLC as collateral agent and lender, and Transocean Finance Limited, ATW I, MIF, and RCB, as lenders.
First Amendment to Convertible Senior Secured Term Loan On December 31, 2023, Nauticus Robotics, Inc., a Delaware corporation (the “Company”), entered into a First Amendment to Senior Secured Term Loan Agreement, dated as of December 31, 2023 (the “First Amendment”), by and among the Company, the subsidiary guarantors (as defined in the First Amendment) and ATW Special Situations II LLC (“ATW II”), a Delaware limited liability company, which amended that certain Senior Secured Term Loan agreement dated as of September 18, 2023 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Term Loan Agreement”) with ATW II, as collateral agent (as replaced by Acquiom Agency Services LLC, in such capacity, the “Collateral Agent”) and lender, and Transocean Finance Limited (“Transocean Finance”), ATW Special Situations I LLC (“ATW I”), Material Impact Fund II, L.P.
First Amendment to Convertible Senior Secured Term Loan On December 31, 2023, the Company, entered into a First Amendment to Senior Secured Term Loan Agreement, dated as of December 31, 2023 (the “First Amendment”), by and among the Company, the subsidiary guarantors (as defined in the First Amendment) and ATW Special Situations II LLC (“ATW II”), a Delaware limited liability company, which amended that certain Senior Secured Term Loan agreement dated as of September 18, 2023 with ATW II, as collateral agent (as replaced by Acquiom Agency Services LLC, in such capacity, the “Collateral Agent”) and lender, and Transocean Finance Limited (“Transocean Finance”), ATW I, MIF, and RCB, as lenders (collectively, the “Initial Lenders”).
(“MIF”), and RCB Equities #1, LLC (“RCB”), as lenders (collectively, the “Initial Lenders”). The First Amendment provided the Company with an incremental loan in the aggregate principal amount of $695,000 (the “December 2023 Incremental Loan”), subject to the terms and conditions set forth in the Term Loan Agreement and the First Amendment.
The First Amendment provided the Company with an incremental loan in the aggregate principal amount of $695,000 (the “December 2023 Incremental Loan”), subject to the terms and conditions set forth in the Term Loan Agreement and the 7 Table of Contents First Amendment.
None of our employees are covered by collective bargaining agreements, and we have not experienced any strikes or work stoppages related to labor relations issues. We believe we have good relations with our employees. Our human capital resources objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees.
We had 47 employees as of December 31, 2024. None of our employees are covered by collective bargaining agreements, and we have not experienced any strikes or work stoppages related to labor relations issues. Our human capital strategies focus on identifying, recruiting, retaining, rewarding, and integrating both our existing and new employees.
We endeavor to recruit the best people for the position regardless of gender, ethnicity or other protected traits and it is our policy to fully comply with all laws applicable to discrimination in the workplace. Our diversity, equity and inclusion principles are also reflected in our employee training and policies.
We endeavor to recruit the most qualified individuals for each position regardless of gender, ethnicity or other protected characteristics. It is our policy to fully comply with all laws applicable to discrimination in the workplace.
In connection with the execution of the Merger Agreement, Nauticus and Nauticus Robotics Holdings entered into the Securities Purchase Agreement with certain investors purchasing up to an aggregate of $40.0 million in principal amount of Debentures and warrants (the “Securities Purchase Agreement”).
Company Securities Securities Purchase Agreement. On September 9, 2022, the Company entered into the Securities Purchase Agreement with certain investors purchasing up to an aggregate of $40.0 million in principal amount of Debentures and warrants (the “Securities Purchase Agreement”). ATW Special Situations I LLC (ATW I), Material Impact Fund II, L.P.
The December 2023 Incremental Loan would be made on the same terms as the Additional Term Loans funded on the Closing Date and be deemed to be Additional Term Loans for all purposes under the Term Loan Agreement. 11 Table of Contents The loan assumed legal fees of $30,000 which are being amortized to general and administrative expenses over the period of the loan.
The December 2023 Incremental Loan would be made on the same terms as the 2023 Term Loan and be deemed to be Additional Term Loans for all purposes under the Term Loan Agreement.
Nauticus utilizes a combination of the protections afforded to the owners of patents, copyrights, trade secrets, and trademarks to secure its intellectual property. In addition, Nauticus requires employment agreements which stipulate IP protections for the company. For external relationships, non-disclosure agreements and other contractual restrictions are used to establish and protect our intellectual property.
In addition, Nauticus requires employment agreements which stipulate IP protections for the company. For external relationships, non-disclosure agreements and other contractual restrictions are used to establish and protect our intellectual property. Nauticus will file for patent protection if the invention is believed to be patentable and the resulting patent will be beneficial in protecting the invention in the marketplaces.
In many cases with our software, Nauticus holds this code and algorithms as trade secrets. Nauticus has patented its reconfigurable hull design for subsea vehicles. This approach protects the Company’s vehicle configuration that enables it to transit long distances and then transform into a working robot once at the worksite.
This approach protects the Company’s vehicle configuration that enables it to transit long distances and then transform into a working robot once at the worksite. This capability is key to exploiting the vehicle architecture and its tetherless operational modes. Similarly, Nauticus also obtained patent protection for its all-electric, work class robotic manipulators.
The batteries are a long-lead-time item and are ordered well in advance of the time they are required to be integrated into the vehicle. As we progress toward more production of our ocean vehicles, trade studies will be conducted to identify subassembly outsourcing options that will reduce the number of parts required in-house for final assembly at our facility.
The batteries are a long-lead-time item and are ordered well in advance of the time they are required to be integrated into the vehicle. Nauticus Robotics is committed to exploring the options that will lead to the most capital-efficient manufacturing process and support our sales-driven build schedule.
The Convertible Senior Secured Term Loan Agreement provides the Company with up to $20.0 million of secured term loans. Any portion of the outstanding principal amount of the Loans is prepayable at the Company’s option pro rata to each Lender upon at least five days’ prior written notice to each Lender.
The Convertible Senior Secured Term Loan Agreement provides the Company with up to $20.0 million of secured term loans. The initial amount funded under the Convertible Senior Secured Term Loan Agreement was $11,600,000 (the "2023 Term Loan").
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Item 1. Business Nauticus Robotics, Inc. develops autonomous robots for the ocean industries. Autonomy requires the extensive use of sensors, artificial intelligence, and effective algorithms for perception and decision allowing the robot to adapt to changing environments.
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Item 1. Business Nauticus Robotics, Inc. (“Nauticus,” “Nauticus Robotics,” the "Company", "our", "us" or "we") is a technology-driven company specializing in the development of advanced fully electric autonomous robotic solutions for subsea applications.
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The company’s business model includes using robotic systems for service, selling vehicles and components, and licensing of related software to both the commercial and defense business sectors. Nauticus has designed and is currently testing and certifying a new generation of vehicles to reduce operational cost and gather data to maintain and operate a wide variety of subsea infrastructure .
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Our portfolio includes fully autonomous underwater vehicles (AUVs), robotic manipulators, an open robotic operating system, and related consulting and prototype services with a strong alignment to offshore energy and national security interests. Our technology solutions enable autonomous operations for both the commercial and defense sectors.
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Besides a standalone service offering and forward-facing products, Nauticus’ approach to ocean robotics has also resulted in the development of a range of technology products for retrofit/upgrading traditional ROV operations and other third-party vehicle platforms.
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Our addressable markets include upstream, midstream, and downstream oil and gas, defense, offshore renewables, seafloor telecommunications, aquaculture, port security, oceanographic research, and subsea mining. Currently, our primary focus is on oil and gas operations and defense applications.
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Nauticus’ services provide customers with the necessary data collection, analytics, and subsea manipulation capabilities to support and maintain assets while reducing their operational footprint, operating cost, and greenhouse gas emissions, to improve offshore health, safety, and environmental exposure.
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We were formed in September 2022 as the result of a business combination between Nauticus Robotics, Inc.’s predecessor (CleanTech) and Nauticus Robotics Holdings Inc. (formerly known as Houston Mechatronics, Inc.). We completed our first successful survey utilizing our autonomous subsea vehicle, Aquanaut, in the fourth quarter of 2024.
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Products, Services and Revenue Nauticus is in an industry that operates on a service-based daily rate model which requires a master service agreement. Nauticus optimizes asset utilization across different customers in the same geography by managing the scope of work with each customer to maximize asset utilization.
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Our principal executive offices are located at 17146 Feathercraft Lane, Suite 450, Webster, Texas 77598. Our phone number is (281) 942-9069. Our Common Stock trades on the Nasdaq Stock Market (“Nasdaq”) under the ticker symbol “KITT.” We maintain a website on the Internet with the address of https://ir.nauticusrobotics.com.
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The service and sales business model will be applied to the commercial fleet services aspect of our business. The ToolKITT software platform is intended to be licensed or, in some cases, sold to end customers through a perpetual license. In the latter case, end users are expected to be contracted for software support and maintenance.
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Copies of this Annual Report, previous and subsequent copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments thereto, are or will be available free of charge at our website as soon as reasonably practicable after they are filed with, or furnished to, the SEC.
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Although the sale of Nauticus’ products may occur on either point sales, rental or SaaS models, the fleet services and software (“ToolKITT”) are targeted for this type of recurring revenue sales. Other products (US Defense) and Olympic Arms (for existing ROVs) are anticipated to be sold through conventional sales contracts with accompanying software licenses.
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In addition, the “Governance Documents” section of our website contains copies of our Code of Business Ethics and Conduct Policy and other corporate policies and board committee charters. We make our website content available for informational purposes only. Information contained on our website is not part of this Annual Report and should not be relied upon for investment purposes.
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Aquanaut, the commercial subsea vehicle, may also be sold to selective customers, when those sales are not expected to cannibalize or compete with other Nauticus fleet services. Currently, Nauticus has not completed any material product sales, and many of its core products are still under development.
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The SEC maintains an Internet website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. Competitive Differentiation & Technology To effectively enter markets dominated by legacy solutions, Nauticus has developed innovative, value-driven technologies.
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Evolution of Aquatic Robotics The modern ocean robotic vehicles known as unmanned underwater vehicles (“UUVs”) can be traced to work performed by the U.S. Navy in the 1960’s.
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Our flagship autonomous fully electric vehicle, Aquanaut, provides advantages over conventional tethered Remotely Operated Vehicles (ROVs) and untethered Autonomous Underwater Vehicles (AUVs), including: • Enhanced capability to operate in deep and complex environments without the limitations of tether management. • Fully electric seven degrees of freedom patent protected manipulators. • Reduction in operational costs and carbon footprint using smaller deployment vessels and elimination of onboard generators. lower greenhouse gas emissions, and quieter operations to minimize ecological impact. • Increased mission efficiency through autonomous execution versus manual control, reducing crew requirements and improving safety. • Enhanced data collection, with higher fidelity providing actionable insight. • Capable of collecting physical samples, providing valuable data for regulatory compliance, asset integrity, and damage assessments. • Stealth capabilities in defense scenarios by eliminating surface vessel presence. 1 Table of Contents Aquanaut represents the next generation of subsea robotics integrating eight inde pendent thrusters to precisely propel and position a hull design to maximize efficiency and speed high-resolution data collection, and autonomous fully electric manipulation comparable to traditional ROV operations.
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As this technology developed through the 1970’s and 1980’s, the oil and gas industry began to utilize this technology to support exploration projects in water depths that exceeded the capability of human divers. Since these beginnings, remotely operated vehicles and autonomous underwater vehicles (“AUVs”) have expanded their reach into many fields beyond the ocean energy marketplace.
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Product Portfolio Aquanaut Autonomous Vehicles Nauticus Robotics has three autonomous vehicles. One vehicle is currently operational, a second vehicle is undergoing certification for operations and the third vehicle is still to be assembled. Aquanaut has demonstrated superior capabilities in safety assurance, operational efficiency, asset integrity, and regulatory compliance through its ability to collect high-resolution subsea data.
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These robotic vehicles have played a key role in exploration and discovery as well as ocean rescue missions. Today, these vehicles are routinely used to perform a wide variety of tasks in support of many fields of use, including offshore wind energy and aquaculture. UUVs generally have two missions: data gathering or manipulation.
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Aquanaut is engineered to operate to a depth of 3000 meters. ToolKITT Software Suite ToolKITT is a sophisticated software platform that governs Nauticus’ suite of robotic products. It enables robots to perceive their environment, navigate in three dimensions, make autonomous decisions, and execute tasks with minimal human intervention.
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They are operated in two distinct classifications — remotely operated or autonomous. The current vehicle designs are optimized and limited to performing one mission or the other. The long-range observation and data gathering missions are often oceanographic data, communication cable inspections, or subsea topographical surveys.
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ToolKITT relies on the Robot Operating System (ROS), leveraging an open-source framework to accelerate development and deployment. The software is hardware-agnostic, enabling adaptation across various robotic platforms. ToolKITT has been deployed on third party commercial ROVs and competing robotic platform s, enhancing Nauticus’ ability to offer advanced inspection and intervention services.
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These vehicles are usually AUVs and are non-hovering, tetherless, “submarine shaped” hulls optimized for long range cruising. Not only do these platforms neglect any manipulation, they are also less than ideally suited for tasks requiring high maneuverability. There are some hovering AUVs and even some that offer limited manipulation.
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This software also plays a critical role in next-generation inspection services, a key industry need for ensuring the integrity of subsea pipelines and offshore infrastructure. Olympic Arm Electric Manipulator The Olympic Arm is a fully electric subsea manipulator designed for complex intervention tasks on both work-class ROVs and Aquanaut.
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However, these hydraulic arms are very rudimentary add-on features incapable of complex coordination or more advanced concepts like goal directed, impedance-force control. On the other hand, most manipulation missions are performed by ROV designs. These tethered robots, which are specifically aimed at subsea manipulation, are attached to topside support vessels for power and communication.
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Its patented electric actuators replace traditional hydraulic systems, offering: • Greater precision and control for delicate operations. • An environmentally friendly design utilizing biodegradable oil. • Simplified deck-side repairs and extended operational reliability. • Engineered to work to a depth of 3000 meters. The next-generation Olympic Arm is currently in development with an emphasis on improving repair efficiency and durability.
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As such, they take advantage of high data rates and the power-rich environment afforded by the tether. Although operator fatigue is a notorious problem, most ROV operators are paid by the hour, and that has unfortunately held down advancing the state of 1 Table of Contents the art in operational efficiency, control, and manipulation sophistication.
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The Company intends to license the innovative design for external production. Defense Solutions Nauticus is a specialized technology and engineering services company focused on delivering innovative solutions to the defense sector including the Defense Innovation Unit (DIU) and Defense Advanced Research Agency (DARPA).
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And it is these technological advancements that are required in a communication-poor, power-limited environment. There is an emerging need for the hybrid operation: a highly maneuverable platform that can perform manipulation work and also travel efficiently for tens of kilometers.
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As a nimble and highly adaptive firm, the Company can bridge the gap between emerging commercial technologies and mission-critical ocean centric defense applications, ensuring that the U.S. military and government agencies stay ahead of global threats.
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This might include deployment from shore or from some other vehicle and then traveling large distances to then perform manipulation or observation work or both. Market Opportunity Although AUV and ROV technology have progressed over the years, the fundamental solution architecture has not changed from its beginning.
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Our core capabilities include: • Advanced R&D & Prototyping – Rapid development of next-generation technologies, from AI-driven analytics to autonomous systems. • Systems Integration – Adapting and integrating commercial technologies into existing defense infrastructure. • Unmanned Systems & Robotics – Developing and enhancing autonomous systems for defined mission applications. 2 Table of Contents • Agility & Innovation – As a small business, the Company operate with unmatched flexibility, rapidly pivoting to meet evolving defense needs and are unencumbered by legacy solutions.
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Servicing missions at depth requires a large surface ship and for intervention tasks, tether spooling systems to be mounted and controlled from the vessel. Beyond the obvious mobilization/demobilization and operating costs of the ship, the tether system introduces its own set of operational challenges and constraints to account for entanglement and sea current-induced disturbances.
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Our team has experience executing successful projects within DIU’s commercial technology initiatives and DARPA’s high-risk, high-reward programs. Nauticus announced on January 30, 2025, a Strategic Subsea Alliance with Leidos Holdings, Inc (NYSE: LDOS). The alliance builds on a successful prior collaboration between the two organizations, which was praised by their mutual customer for its seamless execution and constructive collaboration.
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The size and complexity of the tether system contribute to the size requirements of the vessel. The current paradigm typically includes onboard crew to operate the ROV, further increasing the vessel requirements.
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This new alliance aims to combine the companies’ complementary expertise to develop next-generation autonomous underwater systems capable of tackling increasingly complex missions. SeaTrepid ROV Services On March 5, 2025, we entered into an Asset Purchase Agreement to acquire substantially all of the assets and business of SeaTrepid International LLC and its affiliates ("Seatrepid").
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The current architecture drives the high cost of this service through the large size of the surface vessel combined with the encumbrance of the connecting cable between the surface vessel and the ROV. The Nauticus solution addresses the primary factors that drive the cost of the current servicing paradigm.
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SeaTrepid provides subsea robotic services to customers with ROVs. The ability of SeaTrepid’s ROVs and our Aquanaut to seamlessly communicate at depth unlocks new service opportunities, enabling two autonomous systems to collaborate in delivering cutting edge underwater solutions. The SeaTrepid acquisition closed on March 20, 2025.
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Eliminating the need for the several thousand meters of cable and therefore the onsite vessel and people using acoustic communications substantially reduces the cost of operations. In addition to removing the cost and maintenance of the cable, the surface vessel does not need to accommodate the size and complexity of this system, reducing its size and associated cost.
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Market Opportunity According to Research and Markets, published in October 2024, the global Offshore AUV & ROV Market grew from $1.39 billion in 2023 to $1.53 billion in 2024, with a projected compound annual growth rate (CAGR) of 10.18%, reaching $2.75 billion by 2030.
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Reducing the size of the surface vessel yields cost savings through reduced crew and vessel operating cost. Importantly, reducing the size of the surface vessel also substantially reduces the carbon expression during servicing operations.
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Nauticus Robotics is posit ioned to capitalize on this expanding market by offering disruptive technology solutions that improve data quality, safety, emissions reduction, and cost efficiency. Our autonomous systems and AI-driven analytics provide a competitive advantage as industries shift toward automation and sustainability in subsea operations.
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Removing the cable, which provides high-bandwidth communications between the surface and the ROV, while still performing dexterous manipulation tasks has been a central technical achievement of Nauticus. Increasing the autonomy of the ROV through artificial intelligence enables the full set of capabilities required by the market but achieved through low-bandwidth data links.
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Each of our product lines is complementary to the others working together as a system, and also can be marketed independently. The ToolKITT software is platform agnostic, and can be installed on third party ROVs. Similarly, the Olympic Arm can be installed and operate on third party ROVs.
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In this new control paradigm, high-bandwidth teleoperation gives way to low-bandwidth supervised autonomy. Taking the responsibility for robotic interventions from a real-time operator and placing it with the robot itself also improves performance of the system by reducing task completion times. This benefit results when the robot, not the operator, compensates for local disturbances while completing tasks in the workspace.
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International Operations The potential addressable market for Nauticus Robotics products and services is global. While current operations are concentrated in the United States, Nauticus Robotics is also actively pursuing business opportunities outside the United States, including opportunities in Brazil. Competition: All of the products and services provided by Nauticus Robotics operate in a highly competitive environment.
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Another key benefit provided by Nauticus’ Aquanaut is its unique ability to transform its hull to optimize performance during different phases of the mission. The AUV-style, hydrodynamically efficient hull configuration enables the robot to traverse long distances when performing subsea pipe or cable inspections.
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As a new market entrant, Nauticus Robotics generally faces competition from well-established competitors. Vehicle & Services Competitors Current ROV manufacturers and ROV services companies are the primary competitors to Nauticus inspection services conducted by Aquanaut. These companies include large multinational product manufacturers and service providers, as well as smaller local ROV service providers.
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After this transit, the vehicle can transform its shape to expose workclass-capable manipulators to interact with its environment. This ability to transit long distances and then perform manipulation tasks is enabled by both the vehicle design as well as the freedom from a cabled surface connection.
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Subsea Autonomy Software Competitors Competitors to ToolKITT include both ROV manufacturers supplying proprietary software operating systems for their ROVs, as well as independent software suppliers providing software solutions to enhance the capabilities of ROVs and other robotic systems. Competitors also include companies that offer data processing capabilities for data gathered in ROV operations.
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This unique capability of the Aquanaut brings new capacity to subsea robotic interventions and further disrupts the status quo. Nauticus believes that these new technical advances will redefine how ocean intervention services are performed. However, it is possible that these beliefs will prove incorrect.
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Electric Manipulators Competitors 3 Table of Contents Several companies specialize in the design and manufacture of subsea manipulators and robotic arms for ROVs and other underwater applications. These competitive products include both traditional hydraulic manipulators, as well as electric manipulators like the Olympic Arm. Maritime Defense Project Competitors Several companies specialize in subsea technology consulting for the defense industry.
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For additional discussion of risks relating to operational and financial projections, please see “ Risk Factors — Our operating and financial projections rely on management assumptions and analyses.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results. • We have limited experience commercializing our products at a large scale and may not be able to do so efficiently or effectively. • We may be unable to raise sufficient affordable capital needed to fund and grow our business. • We plan to dispose of assets to fund new opportunities and contracts but we may not be able get full book value or market value for those assets in dispositions. • Defects, glitches, or malfunctions in our products or the software that operates them, failure of our products to perform as expected, connectivity issues or operator errors could result in product recalls, lower than expected return on investment for customers, and could cause harm to operators and significant safety concerns, each of which could adversely affect our results of operations, financial condition and our reputation. • Our ability to manufacture products of sufficient quality on schedule is unproven, and delays in the design, production and launch of our products could harm our business, financial condition, results of operations, cash flows, reputation and prospects. 13 Table of Contents • We are or may be subject to risks associated with strategic alliances or acquisitions and may not be able to identify adequate strategic relationship opportunities, or form strategic relationships, in the future. • We are highly dependent on the services of our senior management and other key employees and if we are unable to attract and retain a sufficient number of qualified employees, our ability to design, manufacture and launch our products, operate our business and compete could be harmed. • We will incur significant increased expenses and administrative burdens as a public company, which could have a material adverse effect on our business, financial condition, result of operations, cash flows, reputation and prospects. • We may experience significant delays in the design, development, production and launch of our ocean robotic systems, which could harm our business, financial condition, results of operations, cash flows, reputation and prospects. • The period of time from initial design of our products to obtaining binding purchase commitments from customers is long and we are subject to the risk that customers who initially expressed an interest in our products during the design phase will not enter into binding commitments. • We are dependent on our suppliers, some of which are currently single or limited source suppliers, and the inability of these suppliers to deliver necessary components of our products at prices and volume and with specifications and performance characteristics acceptable to us, could have a material adverse effect on our business, financial condition, results of operations, cash flows, reputation and prospects.
Biggest changeIf these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results. • We may be unable to raise sufficient affordable capital needed to fund and grow our business. • If we are successful in commercializing our products and services, our revenue will be concentrated in a limited number of models and a limited number of operating units for the foreseeable future. • Defects, glitches, or malfunctions in our products or the software that operates them, failure of our products to perform as expected, connectivity issues or operator errors could result in product recalls, lower than expected return on investment for customers, and could cause harm to operators and significant safety concerns, each of which could adversely affect our results of operations, financial condition and our reputation. • Our ability to manufacture products of sufficient quality on schedule is unproven, and delays in the design, production and launch of our products and services could harm our business, financial condition, results of operations, cash flows, reputation and prospects. 10 Table of Contents • We are or may be subject to risks associated with strategic alliances or acquisitions and may not be able to identify adequate strategic relationship opportunities, or form strategic relationships, in the future. • We are highly dependent on the services of our senior management and other key employees and if we are unable to attract and retain a sufficient number of qualified employees, our ability to design, manufacture and launch our products, provide services, operate our business and compete could be harmed. • We incur significant expenses and administrative burdens as a public company, which could have a material adverse effect on our business, financial condition, result of operations, cash flows, reputation and prospects. • We are dependent on our suppliers, some of which are currently single or limited source suppliers, and the inability or other failure of these suppliers to deliver necessary components of our products at prices and volume and with specifications and performance characteristics acceptable to us, could have a material adverse effect on our business, financial condition, results of operations, cash flows, reputation and prospects.
Even if we successfully market our products and services to customers, the purchase or subscription, adoption, and use of the products and services may be materially and negatively impacted if our customers resist or delay their use and adoption our novel technology products and service offerings.
Even if we successfully market our products and services to customers, the purchase or subscription, adoption, and use of the products and services may be materially and negatively impacted if our customers resist or delay their use and adoption of our novel technology products and service offerings.
Concerns over environmental pollution and climate change have produced significant legislative and regulatory efforts on a global basis, and we believe this will continue both in scope and in the number of countries participating.
Concerns over environmental pollution and climate change have produced significant legislative and regulatory efforts on a global basis, and we believe this will continue both in scope and in the number of countries participating.
These changes could directly increase the cost of energy, which may have an effect on the way we manufacture products or utilize energy to produce our products. In addition, any new regulations or laws in the environmental area might increase the cost of raw materials or key components we use in our products.
These changes could directly increase the cost of energy, which may have an effect on the way we manufacture products or utilize energy to produce our products. In addition, any new regulations or laws in the environmental area might increase the cost of raw materials or key components we use in our products.
Environmental regulations may require us to reduce product energy usage, monitor and exclude an expanding list of restricted substances and participate in recovery and recycling of our products or components. We are unable to predict how any future changes will impact us and if such impacts will be material to our business.
Environmental regulations may require us to reduce product energy usage, monitor and exclude an expanding list of restricted substances and participate in recovery and recycling of our products or components. We are unable to predict how any future changes will impact us and if such impacts will be material to our business.
Further, climate change laws, environmental regulations, and other similar measures may have an effect on the operating activities of our customers, which may, in turn, reduce the demand for our products and services.
Further, climate change laws, environmental regulations, and other similar measures may have an effect on the operating activities of our customers, which may, in turn, reduce the demand for our products and services.
To the extent increasing concentrations of greenhouse gases in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, floods and other climatic events, such events could have a material adverse effect on the Company and potentially subject the Company to further regulation.
To the extent increasing concentrations of greenhouse gases in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, floods and other climatic events, such events could have a material adverse effect on the Company and potentially subject the Company to further regulation.
See “ Risk Factors ,” “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and “ Cautionary Note Regarding Forward-Looking Statements .” Whether actual operating and financial results and business developments will be consistent with our expectations and assumptions as reflected in our forecast depends on a number of other factors, many of which are outside our control, including, but not limited to: • whether we can obtain sufficient capital to sustain and grow our business; • our ability to manage our growth; 19 Table of Contents • the contractual terms of one or more agreements with third-party manufacturers; • whether we can manage relationships with key suppliers and partners; • the timing and costs of the required marketing and promotional efforts; • whether customers and their employees will adopt the ocean robotic systems offered by us; • the timing required and success of customer testing of our technology; • competition, including from established and future competitors; • our ability to retain existing key management, to attract additional leaders, to integrate recent hires and to attract, retain, and motivate qualified personnel, including engineers, design and production personnel, and service technicians; • the overall strength and stability of domestic and international economies; • demand for currently available and future ocean robots; • regulatory, legislative, and political changes; and • customer requirements and preferences.
See “ Risk Factors ,” “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and “ Cautionary Note Regarding Forward-Looking Statements .” Whether actual operating and financial results and business developments will be consistent with our expectations and assumptions as reflected in our forecast depends on a number of other factors, many of which are outside our control, including, but not limited to: • whether we can obtain sufficient capital to sustain and grow our business; 16 Table of Contents • our ability to manage our growth; • the contractual terms of one or more agreements with third-party manufacturers; • whether we can manage relationships with key suppliers and partners; • the timing and costs of the required marketing and promotional efforts; • whether customers and their employees will adopt the ocean robotic systems offered by us; • the timing required and success of customer testing of our technology; • competition, including from established and future competitors; • our ability to retain existing key management, to attract additional leaders, to integrate recent hires and to attract, retain, and motivate qualified personnel, including engineers, design and production personnel, and service technicians; • the overall strength and stability of domestic and international economies; • demand for currently available and future ocean robots; • regulatory, legislative, and political changes; and • customer requirements and preferences.
Our continued development and manufacturing of our commercially available robotic system, Aquanaut, and of future models of our products, are and will be subject to risks, including with respect to: • costs to be incurred by us and/or any third-party manufacturing partners in meeting our specifications and design tolerances; • hiring and retaining a sufficient number of qualified employees, which are challenges that have contributed to us being historically understaffed • long- and short-term durability of our ocean robotic systems to withstand day-to-day wear and tear; • delays in delivery of final systems and components by our suppliers; • manufacturing of robotic systems units in excess of demand due to contractual requirements or unexpected changes in demand; • shifts in demand for future models; • quality controls, particularly as we plan to expand our production capabilities; • delays or disruptions in our supply chain, or the need to order supplies in excess of demand due to batch number requirements or price thresholds; 25 Table of Contents • work stoppages, labor strikes and other labor disputes or shortages affecting us or our suppliers, third-party manufacturers and other partners; and • other delays and cost overruns.
Our continued development and manufacturing of our commercially available robotic system, Aquanaut, and of future models of our products, are and will be subject to risks, including with respect to: • costs to be incurred by us and/or any third-party manufacturing partners in meeting our specifications and design tolerances; • hiring and retaining a sufficient number of qualified employees, which are challenges that have contributed to us being historically understaffed • long- and short-term durability of our ocean robotic systems to withstand day-to-day wear and tear; • delays in delivery of final systems and components by our suppliers; • manufacturing of robotic systems units in excess of demand due to contractual requirements or unexpected changes in demand; • shifts in demand for future models; • quality controls, particularly as we plan to expand our production capabilities; 21 Table of Contents • delays or disruptions in our supply chain, or the need to order supplies in excess of demand due to batch number requirements or price thresholds; • work stoppages, labor strikes and other labor disputes or shortages affecting us or our suppliers, third-party manufacturers and other partners; and • other delays and cost overruns.
We expect our expansion to include: • expanding the management, engineering, and product teams; 18 Table of Contents • identifying and recruiting individuals with the appropriate relevant experience; • hiring and training new personnel; • launching commercialization of new products and services; • forecasting production and revenue and ERP modifications; • entering into relationships with one or more third-party design-for-manufacturing partners and third-party manufacturers and/or expanding our internal manufacturing capabilities; • controlling expenses and investments in anticipation of expanded operations; • carrying out acquisitions and entering into collaborations, in-licensing arrangements, joint ventures, strategic alliances, or partnerships; • expanding and enhancing internal information technology, safety, and security systems; • establishing or expanding sales, customer service, and maintenance and servicing facilities; • conducting demonstrations of ocean robotic systems; • entering into agreements with suppliers and service providers; and • implementing and enhancing administrative infrastructure, systems, and processes.
We expect our expansion to include: 15 Table of Contents • expanding the management, engineering, and product teams; • identifying and recruiting individuals with the appropriate relevant experience; • hiring and training new personnel; • launching commercialization of new products and services; • forecasting production and revenue and ERP modifications; • entering into relationships with one or more third-party design-for-manufacturing partners and third-party manufacturers and/or expanding our internal manufacturing capabilities; • controlling expenses and investments in anticipation of expanded operations; • carrying out acquisitions and entering into collaborations, in-licensing arrangements, joint ventures, strategic alliances, or partnerships; • expanding and enhancing internal information technology, safety, and security systems; • establishing or expanding sales, customer service, and maintenance and servicing facilities; • conducting demonstrations of ocean robotic systems; • entering into agreements with suppliers and service providers; and • implementing and enhancing administrative infrastructure, systems, and processes.
If demand does not develop as expected or if we cannot accurately forecast pricing, adoption rates and sales cycles of our products, our business, results of operations and financial condition will be adversely affected. The benefits of our products to customers and projected return on investment have not been substantiated through long-term trials or use.
If demand does not develop as expected or if we cannot accurately forecast pricing, adoption rates and sales cycles of our products, our business, results of operations and financial condition will be adversely affected. The benefits of our products and services to customers and projected return on investment have not been substantiated through long-term trials or use.
For the reasons discussed above, the nature of current and future contracts with the U.S. government will limit our ability to disclose sensitive terms such as contract scope, schedules, and budgets, and, in some cases, the specific end user. We are committed to complying with our disclosure obligations under federal securities laws.
For the reasons discussed above, the nature of future contracts with the U.S. government will limit our ability to disclose sensitive terms such as contract scope, schedules, and budgets, and, in some cases, the specific end user. We are committed to complying with our disclosure obligations under federal securities laws.
If the government terminates a contract for default, the defaulting party may be liable for any extra costs incurred by the government in procuring undelivered items from another source. Some of our federal government contracts are subject to the approval of appropriations being made by the U.S. Congress to fund the expenditures under these contracts.
If the government terminates a contract for default, the defaulting party may be liable for any extra costs incurred by the government in procuring undelivered items from another source. Some of our federal government contracts may be subject to the approval of appropriations being made by the U.S. Congress to fund the expenditures under these contracts.
We have government customers, which subjects us to risks including early termination, audits, investigations, sanctions and penalties. We derive a substantial portion of our revenue from contracts with U.S. Department of Defense agencies and may enter into additional contracts with the U.S. or foreign governments in the future.
We have government customers, which subjects us to risks including early termination, audits, investigations, sanctions and penalties. We expect to derive a substantial portion of our revenue from contracts with U.S. Department of Defense agencies and may enter into additional contracts with the U.S. or foreign governments in the future.
As a result of these events, we have become subject to a number of additional costs and risks, including unanticipated costs for accounting and legal fees in connection with or related to the restatement and the remediation of our ineffective disclosure controls and procedures and material weakness in internal control over financial reporting.
As a result of these events, we have become subject to additional costs and risks, including unanticipated costs for accounting and legal fees in connection with or related to the restatement and the remediation of our ineffective disclosure controls and procedures and material weakness in internal control over financial reporting.
Even if our products perform properly and are used as intended, if operators sustain any injuries while using our products, we could be exposed to liability and our results of operations, financial condition, and reputation may be adversely affected. Our products contain complex technology and must be used as designed and intended in order to operate safely and effectively.
Even if our products perform properly, if operators sustain any injuries while using our products, we could be exposed to liability and our results of operations, financial condition, and reputation may be adversely affected. Our products contain complex technology and must be used as designed and intended in order to operate safely and effectively.
Any actual or perceived security breach or security incident, or any systems outages or other disruption to systems used in our business, could interrupt our operations, result in loss or improper access to, or acquisition or disclosure of, data 37 Table of Contents or a loss of intellectual property protection, harm our reputation and competitive position, reduce demand for our products, damage our relationships with customers, partners, collaborators, or others, or result in claims, regulatory investigations, and proceedings and significant legal, regulatory, and financial exposure, and any such incidents or any perception that our security measures are inadequate could lead to loss of confidence in us and harm to our reputation, any of which could adversely affect our business, financial condition, and results of operations.
Any actual or perceived security breach or security incident, or any systems outages or other disruption to systems used in our business, could interrupt our operations, result in loss or improper access to, or acquisition or disclosure of, data or a 25 Table of Contents loss of intellectual property protection, harm our reputation and competitive position, reduce demand for our products, damage our relationships with customers, partners, collaborators, or others, or result in claims, regulatory investigations, and proceedings and significant legal, regulatory, and financial exposure, and any such incidents or any perception that our security measures are inadequate could lead to loss of confidence in us and harm to our reputation, any of which could adversely affect our business, financial condition, and results of operations.
Competition for individuals with experience designing, producing, and servicing dexterous ocean robots and their software is intense, and we may not be able to attract, integrate, train, motivate, or retain additional highly qualified personnel.
Competition for individuals with experience designing, producing, operating and servicing dexterous ocean robots and their software is intense, and we may not be able to attract, integrate, train, motivate, or retain additional highly qualified personnel.
We will incur significant legal, accounting and other expenses as a public company, and these expenses may increase even more after we are no longer an emerging growth company, as defined in Section 2(a) of the Securities Act.
We incur significant legal, accounting and other expenses as a public company, and these expenses may increase even more after we are no longer an emerging growth company, as defined in Section 2(a) of the Securities Act.
Should achieved market penetration warrant, we intend to continue to hire a significant number of additional personnel, including engineers, design and production personnel, and service technicians for our ocean robotic systems and services.
Should achieved market penetration warrant, we intend to continue to hire a significant number of additional personnel, including engineers, design and production personnel, and operators and service technicians for our ocean robotic systems and services.
If we are unable to sell our products to these customers, our business, financial condition, results of operations, cash flows, reputation and prospects will be materially and adversely affected.
If we are unable to sell our products and services to these customers, our business, financial condition, results of operations, cash flows, reputation and prospects will be materially and adversely affected.
Because we became a public reporting company by means of consummating the Business Combination rather than by means of a traditional underwritten initial public offering, there was no independent third-party underwriter involved in the going public process of the combined company, and, accordingly, our stockholders did not have the benefit of an independent review and investigation of the type normally performed by an unaffiliated, independent underwriter in an initial public securities offering.
Because we became a public reporting company by means of consummating a de- SPAC business combination rather than by means of a traditional underwritten initial public offering, there was no independent third-party underwriter involved in the going public process of the combined company, and, accordingly, our stockholders did not have the benefit of an independent review and investigation of the type normally performed by an unaffiliated, independent underwriter in an initial public securities offering.
We are dependent on our suppliers, some of which are currently single or limited source suppliers, and the inability of these suppliers to deliver necessary components of our products at prices and volume and with specifications and performance characteristics acceptable to us, could have a material adverse effect on our business, financial condition, results of operations, cash flows, reputation and prospects.
We are dependent on our suppliers, some of which are currently single or limited source suppliers, and the inability or other failure of these suppliers to deliver necessary components of our products at prices and volume and with specifications and performance characteristics acceptable to us, could have a material adverse effect on our business, financial condition, results of operations, cash flows, reputation and prospects.
We cannot ensure that any such acquisition, partnership, or joint venture will not have a material adverse effect on our business, financial condition, and results of operations. 39 Table of Contents If we are unable to adapt to and satisfy customer demands in a timely and cost-effective manner, our ability to grow our business may suffer.
We cannot ensure that any such acquisition, partnership, or joint venture will not have a material adverse effect on our business, financial condition, and results of operations. 33 Table of Contents If we are unable to adapt to and satisfy customer demands in a timely and cost-effective manner, our ability to grow our business may suffer.
We pursue U.S. government contracts, which often are only partially funded, subject to immediate termination, and heavily regulated and audited. The termination or failure to fund, or negative audit findings for, one or more of these contracts could have an adverse impact on our business, financial condition, results of operations and cash flows.
Risks Related to Government Contracts We pursue U.S. government contracts, which often are only partially funded, subject to immediate termination, and heavily regulated and audited. The termination or failure to fund, or negative audit findings for, one or more of these contracts could have an adverse impact on our business, financial condition, results of operations and cash flows.
Risks Related to Our Securities We may issue a significant number of shares or equity-linked securities in the future in connection with investments or acquisitions. We may issue securities in the future in connection with investments or acquisitions or otherwise.
Risks Related to Our Securities We may issue a significant number of shares or equity-linked securities in the future in connection with investments or acquisitions.
If we fail to respond to commercial industry cycles in terms of our cost structure, manufacturing capacity, and/or personnel needs, our business could be seriously harmed. The timing, length, and severity of the up-and-down cycles in the commercial subsea, ocean surface, and defense industries are difficult to predict.
If we fail to respond to commercial industry cycles in terms of our cost structure, manufacturing capacity, and/or personnel needs, our business could be seriously harmed. The timing, length, and severity of the up-and-down cycles in the offshore energy, commercial subsea, ocean surface, and defense industries are difficult to predict.
Our ability to become profitable in the future will not only depend on our ability to complete the design and development of our robotic vehicles to meet projected performance metrics, identify and investigate new areas of demand and successfully market our robotic systems and ToolKITT subscription model, but also to sell, whether outright or through subscriptions, our ocean systems at prices needed to achieve our expected margins and control our costs, including the risks and costs associated with operating, maintaining and financing our robotic systems.
Our ability to become profitable in the future will not only depend on our ability to complete the design and development of our robotic vehicles to meet projected performance metrics, identify and investigate new areas of demand and successfully market our robotic systems and ToolKITT software, but also to sell, whether outright or through subscriptions, our ocean systems at prices needed to achieve our expected margins and control our costs, including the risks and costs associated with operating, maintaining and financing our robotic systems.
We have only recently added personnel with the necessary skills to oversee these risks and the ability is concentrated in few individuals. Our target markets are largely international and require skills, knowledge and competencies in foreign exchange, taxation, legal, export controls, anti-bribery and other fields.
We have added personnel with the necessary skills to oversee these risks and the ability is concentrated in few individuals. Our target markets are largely international and require skills, knowledge and competencies in foreign exchange, taxation, legal, export controls, anti-bribery and other fields.
Moreover, international sales of certain of our products are subject to U.S. laws, regulations and policies like the International Traffic in Arms Regulations (“ITAR”) and other export laws and regulations and may be subject to first 38 Table of Contents obtaining licenses, clearances or authorizations from various regulatory entities.
Moreover, international sales of certain of our products are subject to U.S. laws, regulations and policies like the International Traffic in Arms Regulations (“ITAR”) and other export laws and regulations and may be subject to first 26 Table of Contents obtaining licenses, clearances or authorizations from various regulatory entities.
The terms of certain of our current and likely future contracts are highly sensitive and we are limited in our ability to disclose such terms.
The terms of certain of our likely future contracts are highly sensitive and we are limited in our ability to disclose such terms.
Changes in laws or regulations concerning our offshore activities, the cost or availability of 30 Table of Contents insurance, and decisions by clients, governmental agencies or other industry participants could reduce demand for our services or increase our costs of operations, which could have a negative impact on our financial position, results of operations or cash flows, but we cannot reasonably or reliably estimate that such changes will occur, when they will occur or if they will impact us.
Changes in laws or regulations concerning our offshore activities, the cost or availability of insurance, and decisions by clients, governmental agencies or other industry participants could reduce demand for our services or increase our costs of operations, which could have a negative impact on our financial position, results of operations or cash flows, but we cannot reasonably or reliably estimate that such changes will occur, when they will occur or if they will impact us.
The projected financial and operating information appearing elsewhere in this Annual Report on Form 10-K reflect estimates of future performance and is based on multiple financial, technical, and operational assumptions, including hiring of additional skilled personnel in a timely manner to support continued development and commercialization of the core products; the, timing of commercial launch of our ocean robotic system; the level of demand for our ocean robotic systems; the performance of our ocean robotic systems; the utilization of the ocean robot fleet; the useable life of the ocean robotic systems; the, cost of manufacturing; the cost and availability of adequate supply of components; the nature and length of the sales cycle; and the costs of, maintenance and servicing and refurbishing of our ocean robotic systems.
The projected financial and operating information appearing elsewhere in this Annual Report on Form 10-K reflect estimates of future performance and is based on multiple financial, technical, and operational assumptions, including hiring of additional skilled personnel in a timely manner to support continued development and commercialization of the core products; the level of demand for our ocean robotic systems; the performance of our ocean robotic systems; the utilization of the ocean robot fleet; the useable life of the ocean robotic systems; the cost of manufacturing; the cost and availability of adequate supply of components; the nature and length of the sales cycle; and the costs of, maintenance and servicing and refurbishing of our ocean robotic systems.
To the extent any (i) outstanding Public Warrants, Private Warrants, SPA Warrants or New SPA Warrants are exercised; (ii) Debentures are converted; (iii) outstanding Nauticus Options are exercised; or (iv) Earnout Shares are released, additional shares of 49 Table of Contents Common Stock will be issued, which will result in dilution to the then-existing holders of our Common Stock and increase the number of shares of Common Stock eligible for resale in the public market.
To the extent any (i) outstanding Public Warrants, Private Warrants, SPA Warrants or New SPA Warrants are exercised; (ii) Debentures are converted; (iii) outstanding Nauticus Options are exercised; or (iv) Earnout Shares are released, additional shares of Common Stock will be issued, which will result in dilution to the then-existing holders of our Common Stock and increase the number of shares of Common Stock eligible for resale in the public market.
We expect that many of our potential customers will be large, multinational corporations with substantial negotiating power relative to us and, in some instances, may have internal solutions that are competitive to our products. These large, multinational corporations also have significant development al resources, which may allow them to acquire or develop independently, or in partnership with others, competitive technologies.
We expect that many of our potential customers will be large, multinational corporations with substantial negotiating power relative to us and, in some instances, may have internal solutions that are competitive to our products. These large, multinational corporations also have significant developmental resources, which may allow them to acquire or develop independently, or in partnership with others, competitive technologies.
If we do not develop and maintain a strong brand, our business, financial condition, results of operations, cash flows, reputation and prospects will be materially and adversely impacted. 28 Table of Contents In addition, if negative incidents occur or are perceived to have occurred, whether or not such incidents are our fault, we could be subject to adverse publicity.
If we do not develop and maintain a strong brand, our business, financial condition, results of operations, cash flows, reputation and prospects will be materially and adversely impacted. In addition, if negative incidents occur or are perceived to have occurred, whether or not such incidents are our fault, we could be subject to adverse publicity.
Any actual or perceived inability of the Company to adequately address privacy and security concerns or comply with applicable laws, rules and regulations relating to privacy, data protection or data security, or applicable privacy notices, could lead to investigations, claims, and proceedings by governmental entities and private parties, damages for contract breach, and other significant costs, penalties, and other liabilities.
Any actual or perceived 24 Table of Contents inability of the Company to adequately address privacy and security concerns or comply with applicable laws, rules and regulations relating to privacy, data protection or data security, or applicable privacy notices, could lead to investigations, claims, and proceedings by governmental entities and private parties, damages for contract breach, and other significant costs, penalties, and other liabilities.
The consolidated financial statements included in this Annual Report have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The consolidated financial statements included in this Annual Report have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) assuming the Company will continue as a 12 Table of Contents going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
In addition, our management, with the participation and under the supervision of our former Chief Executive Officer and former Chief Financial Officer, performed a re-evaluation of the effectiveness of our disclosure controls and procedures as of the end of the 2022 Restated Period.
In addition, our management, with the participation and under the supervision of our former Chief Executive Officer and former Chief Financial Officer, performed a re-evaluation of the effectiveness of our disclosure controls and procedures as of the end of the 2023 Restated Period.
Manufacturing or design defects, glitches, malfunctions, connectivity issues between the central processing unit and peripheral vehicle subsystems, unanticipated use of our robotic systems, operator errors or inadequate disclosure of risks relating to the use of ocean 23 Table of Contents robotic systems, among other things, can lead to injury, property damage, or other adverse events.
Manufacturing or design defects, glitches, malfunctions, connectivity issues between the central processing unit and peripheral vehicle subsystems, unanticipated use of our robotic systems, operator errors or inadequate disclosure of risks relating to the use of ocean robotic systems, among other things, can lead to injury, property damage, or other adverse events.
Product defects or recalls could also result in negative publicity, damage to our reputation or, in the event of regulatory developments, delays in new product acceptance. Our products incorporate sophisticated computer software. Complex software frequently contains errors, especially when first introduced. Our software may experience errors or performance problems in the future.
Product defects or recalls could also result in negative publicity, damage to our reputation or, in the event of regulatory developments, delays in new product acceptance. 20 Table of Contents Our products incorporate sophisticated computer software. Complex software frequently contains errors, especially when first introduced. Our software may experience errors or performance problems in the future.
For some contracts, we are a subcontractor and not the prime contractor, and in those arrangements, the U.S. government could terminate the prime contractor for convenience without regard for our 42 Table of Contents performance as a subcontractor. We can give no assurance that one or more of our U.S. government contracts will not be terminated under those circumstances.
For some contracts, we are a subcontractor and not the prime contractor, and in those arrangements, the U.S. government could terminate the prime contractor for convenience without regard for our performance as a subcontractor. We can give no assurance that one or more of our U.S. government contracts will not be terminated under those circumstances.
We expect we will continue to incur operating and net losses in future periods as we: • continue to design, develop, manufacture and commercialize our ocean robotic systems; • continue to explore new relationships with third-party partners for supply, design-to-manufacturing and manufacturing; • investigate the potential outsourcing of the manufacturing of our ocean robotic systems; 15 Table of Contents • build up inventories of parts and components for ocean robotic systems; • mature maintenance and servicing capacity, capabilities, and replacement parts inventory; • manufacture an inventory of ocean robotic systems; • increase sales and marketing activities and enhance sales and distribution infrastructure; • further develop remote monitoring, updating, and other cloud-based services; • refine safety measures for the ocean robotic systems; • expand technology infrastructure and cybersecurity measures, policies, and controls; and • increase general and administrative functions to support growing operations as a public company.
We expect we will continue to incur operating and net losses in future periods as we: • continue to design, develop, manufacture and commercialize our ocean robotic systems; • continue to explore new relationships with third-party partners for supply, design-to-manufacturing and manufacturing; • build up inventories of parts and components for ocean robotic systems; • mature maintenance and servicing capacity, capabilities, and replacement parts inventory; • manufacture an inventory of ocean robotic systems; • increase sales and marketing activities and enhance sales and distribution infrastructure; • further develop remote monitoring, updating, and other cloud-based services; • refine safety measures for the ocean robotic systems; • expand technology infrastructure and cybersecurity measures, policies, and controls; and • increase general and administrative functions to support growing operations as a public company.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. This assessment includes disclosure of any material weaknesses identified by our management in its assessment of and report on our internal control over financial reporting.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. This assessment includes disclosure of any material weaknesses identified by our management in its assessment of 31 Table of Contents and report on our internal control over financial reporting.
Additionally, we maintain sensitive and 36 Table of Contents proprietary information relating to our business, such as our own proprietary information and personal data relating to our employees. An increasing number of organizations have disclosed breaches of their information security systems and other information security incidents, some of which have involved sophisticated and highly targeted attacks.
Additionally, we maintain sensitive and proprietary information relating to our business, such as our own proprietary information and personal data relating to our employees. An increasing number of organizations have disclosed breaches of their information security systems and other information security incidents, some of which have involved sophisticated and highly targeted attacks.
Adverse events such as product defects or legal claims with respect to competing or similar products could cause reputational harm to the ocean robotics market on the whole and, accordingly, to our business. Our target markets are largely international and require skills, knowledge and competencies in foreign exchange, taxation, legal, export controls, anti-bribery and other fields.
Adverse events such as product defects or legal claims with respect to competing or similar products could cause reputational harm to the ocean robotics market on the whole and, accordingly, to our business. Our target markets include international markets which require skills, knowledge and competencies in foreign exchange, taxation, legal, export controls, anti-bribery and other fields.
In addition, we cannot be sure that we will be able to predict all the ways in which use or misuse of the products can lead to injury or damage to property, and our training resources may not be successful at preventing all incidents.
In addition, we cannot be sure that we will be able to predict all the ways in which use of the products can lead to injury or damage to property, and our operating procedures and training resources may not be successful at preventing all incidents.
In addition, potential customers could have 32 Table of Contents long-standing or contractual relationships with competitors. Potential customers may be reluctant to adopt our products, particularly if they compete with or have the potential to compete with, or diminish the need/utilization of products or technologies supported through these existing relationships.
In addition, potential customers could have long-standing or contractual relationships with competitors. Potential customers may be reluctant to adopt our products, particularly if they compete with or have the potential to compete with, or diminish the need/utilization of products or technologies supported through these existing relationships.
Further, we have restated our unaudited condensed consolidated financial statements as of and for the quarterly period ended March 30, 2023 (the “2023 Restated Period”).
Previously, we have restated our unaudited condensed consolidated financial statements as of and for the quarterly period ended March 30, 2023 (the “2023 Restated Period”).
We previously identified a material weakness in our internal control over financial reporting which we are working to remediate. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
We identified material weaknesses in our internal control over financial reporting which we are working to remediate. This material weaknesses could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
If one or more of the targeted markets experience a shift in customer or prospective customer demand, our products may not compete as effectively, if at all, and they may not be fully developed into commercial products.
If one or more of the targeted markets experience a shift in customer or prospective customer demand, our 18 Table of Contents products may not compete as effectively, if at all, and they may not be fully developed into commercial products.
Failure to comply with applicable regulations and requirements could lead to fines, penalties, repayments, or compensatory or treble damages, or suspension or debarment from U.S. government contracting or subcontracting for a period of time or indefinitely.
Failure to comply with applicable regulations and requirements could lead to fines, penalties, repayments, or compensatory or treble damages, or suspension or debarment from U.S. government contracting or subcontracting for a period of time or 35 Table of Contents indefinitely.
We believe that we will continue to incur operating and net losses each quarter until at least the first quarter of 2025.
We believe that we will continue to incur operating and net losses each quarter until at least the first quarter of 2026.
Any future exercise of such warrants or conversion of the Debentures would increase the number of shares of Common Stock eligible for future resale in the public market and result in dilution to our stockholders.
Any future exercise of such warrants or conversion of the Debentures and the Series A Preferred Stock would increase the number of shares of Common Stock eligible for future resale in the public market and result in dilution to our stockholders.
The existence of any material weakness would require management to 33 Table of Contents devote significant time and incur significant expense to remediate any such material weakness, and management may not be able to remediate any such material weakness in a timely manner.
The existence of any material weakness would require management to devote significant time and incur significant expense to remediate any such material weakness, and management may not be able to remediate any such material weakness in a timely manner.
The market price of our Common Stock has been and is likely to continue to be volatile and may be subject to wide fluctuations in response to a variety of factors, including the following: • results of operations that vary from the expectations of securities analysts and investors; • results of operations that vary from those of our competitors; • changes in expectations regarding the Company’s future financial performance, including financial estimates and investment recommendations by securities analysts and investors; • the inability to maintain the listing of shares of Common Stock on Nasdaq; • the inability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, our ability to grow and manage growth profitably, and retain our key employees; • declines in the market prices of stocks generally; • strategic actions (or inaction) by us or our competitors, including lack of action; • announcements by us or our competitors of significant contracts, product development, acquisitions, joint ventures, other strategic relationships or capital commitments; • the gain or loss of key personnel; • changes in general economic or market conditions or trends in Nauticus’ industry or target markets, including as a result of a general economic slowdown or a recession, increased interest rates and changes in monetary policy or inflationary pressures; • changes in business or regulatory conditions, include new laws or regulations or new interpretations of existing laws or regulations applicable to us; • litigation involving Nauticus, its industry, or both, or investigations by regulators into our or our competitors’ operations; • risks relating to the uncertainty of our projected financial information; and • risks related to the organic and inorganic growth of our business and the timing of expected business milestones.
The market price of our Common Stock has been and is likely to continue to be volatile and may be subject to wide fluctuations in response to a variety of factors, including the following: • results of operations that vary from the expectations of securities analysts and investors; • results of operations that vary from those of our competitors; • changes in expectations regarding the Company’s future financial performance, including financial estimates and investment recommendations by securities analysts and investors; • the inability to maintain the listing of shares of Common Stock on Nasdaq; • declines in the market prices of stocks generally; • strategic actions (or inaction) by us or our competitors, including lack of action; • announcements by us or our competitors of significant contracts, product development, acquisitions, joint ventures, other strategic relationships or capital commitments; • the gain or loss of key personnel; • changes in general economic or market conditions or trends in Nauticus’ industry or target markets, including as a result of a general economic slowdown or a recession, increased interest rates and changes in monetary policy or inflationary pressures; • changes in business or regulatory conditions, include new laws or regulations or new interpretations of existing laws or regulations applicable to us; • litigation involving Nauticus, its industry, or both, or investigations by regulators into our or our competitors’ operations; • risks relating to the uncertainty of our projected financial information; and • risks related to the organic and inorganic growth of our business and the timing of expected business milestones.
The amount of shares of common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to our stockholders.
The amount of shares of Common Stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of Common Stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to our stockholders and such dilution could be significant.
If and when the Public Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If and when the Public Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the 41 Table of Contents underlying securities for sale under all applicable state securities laws.
In addition, we may incur significant costs servicing, maintaining and refurbishing our robotic ocean vehicles, and we expect that the cost to repair and service our robotic systems will increase over time as our vehicles age.
In addition, we may incur significant costs servicing, maintaining and refurbishing our robotic ocean 29 Table of Contents vehicles, and we expect that the cost to repair and service our robotic systems will increase over time as our vehicles age.
It is not certain that the Company’s cash and other current assets and forecasted operating cash flows currently expected to be generated from the ongoing activity will provide the Company with sufficient financial resources to fund operations and meet our capital and operating requirements and anticipated obligations as they become due in the next twelve month s.
We believe that the Company’s cash and other current assets and forecasted operating cash flows currently expected to be generated from the ongoing activity will provide the Company with sufficient financial resources to fund operations and meet our capital and operating requirements and anticipated obligations as they become due in the next twelve month s.
Risks Related to Our Securities • We may issue a significant number of shares or equity-linked securities in the future in connection with investments or acquisitions. • If certain holders of Common Stock sell a significant portion of their securities, it may negatively impact the market price of the shares of our Common Stock and such holders still may receive significant proceeds. • If we are unable to regain and maintain compliance with Nasdaq’s listing criteria, including their minimum bid price rule and minimum market value requirement, Nasdaq may delist the Company’s stock. • We are an emerging growth company and smaller reporting company, and as such are subject to various risks unique only to emerging growth companies, including, but not limited to, risks associated with taking advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, which could, among other things, make our securities less attractive to investors and may make it more difficult to compare our performance with certain public companies. • We may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to investors, thereby making Public Warrants worthless. • Currently outstanding Public Warrants, Private Warrants, SPA Warrants and New SPA Warrants are exercisable for shares of Common Stock.
Risks Related to Our Securities • We may issue a significant number of shares or equity-linked securities in the future in connection with investments or acquisitions or other efforts to raise capital. • If certain holders of Common Stock sell a significant portion of their securities, it may negatively impact the market price of the shares of our Common Stock and such holders still may receive significant proceeds. • If we are unable to maintain compliance with Nasdaq’s listing criteria, including their minimum bid price rule and minimum market value and stockholder equity requirement, Nasdaq may delist the Company’s stock. • We are an emerging growth company and smaller reporting company, and as such are subject to various risks unique only to emerging growth companies, including, but not limited to, risks associated with taking advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, which could, among other things, make our securities less attractive to investors and may make it more difficult to compare our performance with certain public companies. • We may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to investors, thereby making Public Warrants worthl ess.
These companies have products that are commercially available and in development. We expect some products currently in development to become commercially available in the next few years and present a competitive threat to our products. Our competitor base may change or expand as we continue to develop and commercialize our robotic systems in the future.
We expect some products currently in development to become commercially available in the next few years and present a competitive threat to our products. Our competitor base may change or expand as we continue to develop and commercialize our robotic systems in the future.
Risks Relating to our Business and Industry We are an early-stage company with a history of losses, and we expect to incur significant expenses for the foreseeable future. We incurred a net loss of $50.7 million and $28.3 million for the years ended December 31, 2023 and 2022, respectively.
Risks Relating to our Business and Industry We are an early-stage company with a history of losses, and we expect to incur significant expenses for the foreseeable future. We incurred a net loss of $134.9 million and $50.7 million for the years ended December 31, 2024 and 2023, respectively.
Due to such errors, the Company’s management and the Audit Committee concluded that our previously issued financial statements for the 2022 Restated Period should no longer be relied upon.
Due to such errors, the Company’s management and the Audit Committee concluded that our previously issued financial statements for the 2024 Restated Periods should no longer be relied upon.
Customers may resist or delay the adoption of our products and services for several reasons, including lack of confidence in autonomous and semi-autonomous ocean vehicles. We will spend significant time and resources on beta units of our Aquanaut for customer testing.
Customers may resist or delay the adoption of our products and services for several reasons, including lack of confidence in autonomous and semi-autonomous ocean vehicles. We will spend significant time and resources of our Aquanauts for customer testing.
We have only recently added personnel with the necessary skills to oversee these risks and the ability is concentrated in few individuals. Our financial results may vary significantly from period to period due to fluctuations in our operating costs, product demand and other factors.
We have only recently added personnel with the necessary skills to oversee these risks and the ability is concentrated in few individuals. Our financial results may vary significantly from period to period due to fluctuations in our operating costs, demand for our products and services, seasonal variation and other factors.
Our business, financial condition, results of operations, cash flows, reputation and prospects depend significantly on our ability to build the Nauticus brand. We may not succeed in continuing to establish, maintain and strengthen the Nauticus brand, and our brand and reputation could be harmed by negative publicity regarding us or our products.
We may not succeed in continuing to establish, maintain and strengthen the Nauticus brand, and our brand and reputation could be harmed by negative publicity regarding us or our products. Our business, financial condition, results of operations, cash flows, reputation and prospects are heavily dependent on our ability to develop, maintain and strengthen the Nauticus brand.
Such challenges may result in the delay of the 22 Table of Contents anticipated commercial launch of one or more of the products and services, which would adversely affect our financial and operating results.
Such challenges may result in the delay of the anticipated commercial launch or continued growth of one or more of the products and services, which would adversely affect our financial and operating results.
Redemption of the outstanding Public Warrants could force a warrant holder: (i) to exercise its warrants and pay the exercise price therefor at a time when it may be disadvantageous for it to do so, (ii) to sell its warrants at the then-current market price when it might otherwise wish to hold its Public Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Public Warrants are called for redemption, will be substantially less than the market value of its Public Warrants. 48 Table of Contents Our warrants may never be in the money, and they may expire worthless.
Redemption of the outstanding Public Warrants could force a warrant holder: (i) to exercise its warrants and pay the exercise price therefor at a time when it may be disadvantageous for it to do so, (ii) to sell its warrants at the then-current market price when it might otherwise wish to hold its Public Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Public Warrants are called for redemption, will be substantially less than the market value of its Public Warrants.
Based on such re-evaluation, our former Chief Executive Officer and former Chief Financial Officer concluded that, as a result of the identified material weakness, our disclosure controls and procedures were ineffective as of the end of the 2022 Restated Period.
Based on such re-evaluation, our Chief Executive Officer and Interim Chief Financial Officer concluded that, as a result of the identified material weakness, our disclosure controls and procedures were ineffective as of the end of the 2024 Restated Periods.
Any decreased use of our robotic systems, and any limitation on our ability to export or market our robotic systems would likely adversely affect our business, financial condition, results of operations, cash flows, reputation and prospects.
Any decreased use of our robotic systems, and any limitation on our ability to export or market our robotic systems would likely adversely affect our business, financial condition, results of operations, cash flows, reputation and prospects. Our business, financial condition, results of operations, cash flows, reputation and prospects depend significantly on our ability to build the Nauticus brand.
Our robotic systems use bespoke lithium-ion battery cells, which, if not appropriately handled, controlled, or stored, could catch fire or vent smoke and flame. The battery packs within our robotic systems use bespoke lithium-ion cells.
Our robotic systems use batteries that rely on lithium-ion chemistry, which, if not appropriately handled, controlled, or stored, could catch fire or vent smoke and flame. The battery packs within our robotic systems use lithium-ion cells.
If we fail to successfully select, execute, or integrate our acquisitions, our business, results of operations and financial condition could be materially adversely affected, and our stock price could decline. Failure to successfully identify, complete, manage and integrate acquisitions could materially and adversely affect our business, financial condition and results of operations and could cause our stock price to decline.
If we fail to successfully select, execute, or integrate our acquisitions, our business, results of operations and financial condition could be materially adversely affected, and our stock price could decline.
In particular, the False Claims Act’s “whistleblower” 44 Table of Contents provisions also allow private individuals, including present and former employees, to sue on behalf of the U.S. government. Any penalties, damages, fines, suspension, or damages could adversely affect our ability to operate our business and our financial results.
In particular, the False Claims Act’s “whistleblower” provisions also allow private individuals, including present and former employees, to sue on behalf of the U.S. government. Any penalties, damages, fines, suspension, or damages could adversely affect our ability to operate our business and our financial results. Sales to government entities are subject to a number of risks.
Volatility in our share price could subject us to securities class action litigation. In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities, or following periods of market volatility generally.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities, or following periods of market volatility generally.
In addition, our management, with the participation and under the supervision of our former Chief 16 Table of Contents Executive Officer and former Chief Financial Officer, performed a re-evaluation of the effectiveness of our disclosure controls and procedures as of the end of the 2023 Restated Period.
In addition, our management, with the participation and under the supervision of our Chief Executive Officer and Interim Chief Financial Officer, performed a re-evaluation of the effectiveness of our disclosure controls and procedures as of the end of the 2024 Restated Period.
A material portion of our current revenue may be generated by sales to government entities, which are subject to a number of uncertainties, challenges, and risks. We currently have a limited number of customers.
A significant amount of our revenues is derived from a limited number of customers. A material portion of our current revenue may be generated by sales to government entities, which are subject to a number of uncertainties, challenges, and risks. We have a limited number of customers.
Risks relating to our supply chain include: • “Buy American” or other similar requirements that may be imposed on government contractors; • an increase in the cost, or decrease in the available supply, of semiconductor chips, electrical components, commodity materials and specialty alloys; • disruption in the supply of lithium-ion batteries due to quality issues or recalls; and • fluctuations in the value of any foreign currencies in which manufactured parts, commercial components and related raw material purchases are or may be denominated against the U.S. dollar.
Risks relating to our supply chain include: • “Buy American” or other similar requirements that may be imposed on government contractors; • an increase in the cost, or decrease in the available supply, of semiconductor chips, electrical components, commodity materials and specialty alloys; • disruption in the supply of lithium-ion batteries due to quality issues or recalls; • the imposition of additional duties, tariffs and other charges or quotas on imports; and • fluctuations in the value of any foreign currencies in which manufactured parts, commercial components and related raw material purchases are or may be denominated against the U.S. dollar. 28 Table of Contents Our business is also dependent on the continued supply of lithium-ion battery cells.
These requirements include, for example: • specialized disclosure and accounting requirements unique to government contracts; • financial and compliance audits that may result in potential liability for price adjustments, recoupment of government funds after such funds have been spent, civil and criminal penalties, or administrative sanctions such as suspension or debarment from doing business with the U.S. government; • public disclosures of certain contract and company information; and • mandatory socioeconomic compliance requirements, including labor requirements, non-discrimination and affirmative action programs and environmental compliance requirements.
These requirements include, for example: • specialized disclosure and accounting requirements unique to government contracts; • financial and compliance audits that may result in potential liability for price adjustments, recoupment of government funds after such funds have been spent, civil and criminal penalties, or administrative sanctions such as suspension or debarment from doing business with the U.S. government; • public disclosures of certain contract and company information; and • mandatory socioeconomic compliance requirements, including labor requirements, non-discrimination and affirmative action programs and environmental compliance requirements. 36 Table of Contents Government contracts are also generally subject to greater scrutiny by the government, which can initiate reviews, audits, and investigations regarding our compliance with government contract requirements.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

7 edited+0 added−0 removed9 unchanged
Biggest changeOn a regular basis, our IT Director will report to our board of directors on cybersecurity matters, including key risks, the potential impact of those exposures on our business, financial condition, results of operations, cash flows, reputation and prospects, and the programs and steps implemented by our management team to monitor and mitigate risks. 50 Table of Contents Cybersecurity Risks Our cybersecurity risk management processes are integrated into our overall approach to risk management.
Biggest changeOn a regular basis, our Vice President of Corporate Development & Administration will report to o ur board of directors on cybersecurity matters, including key risks, the potential impact of those exposures on our business, financial condition, results of operations, cash flows, reputation and prospects, and the programs and steps implemented by our management team to monitor and mitigate risks.
Our IT Director is responsible for the day-to-day management of the cybersecurity program, including the prevention, detection, investigation, response to, and recovery from cybersecurity threats and incidents, and is regularly engaged to help ensure the cybersecurity program functions effectively in the face of evolving cybersecurity threats.
Our IT Systems Administrator is responsible for the day-to-day management of the cybersecurity program, including the prevention, detection, investigation, response to, and recovery from cybersecurity threats and incidents, and is regularly engaged to help ensure the cybersecurity program functions effectively in the face of evolving cybersecurity threats.
We maintain a Cybersecurity Policy, which includes an Incident Response Plan in the event of a significant cybersecurity incident. In the event of a significant cybersecurity incident, our IT Director will chair an incident response team to handle the incident.
We maintain a Cybersecurity Policy, which includes an Incident Response Plan in the event of a significant cybersecurity incident. In the event of a significant cybersecurity incident, our IT Systems Administrator will chair an incident response team to handle the incident.
Board Oversight In its oversight role, our board of directors is expected to specifically consider risks, including with respect to privacy, information technology and cybersecurity and threats to technology infrastructure.
Board Oversight In its oversight role, our board of directors considers risks, including with respect to privacy, information technology and cybersecurity and threats to technology infrastructure.
Given our nature and size, we do not have a dedicated enterprise risk function, but our management team regularly considers and evaluates risks.
Cybersecurity Risks Our cybersecurity risk management processes are integrated into our overall approach to risk management. Given our nature and size, we do not have a dedicated enterprise risk function, but our management team regularly considers and evaluates the cybersecurity risks.
Our Chief Technology Officer oversees the IT Director and briefs our board of directors on cybersecurity matters, including the nature and design of our cybersecurity program, and threats, events, and program enhancements.
Our Vice President of Corporate Development & Administration oversees the IT Systems Administrator and briefs our board of directors on cybersecurity matters, including the nature and design of our cybersecurity program, and threats, events, and program enhancements.
Governance Management Oversight The controls and processes employed to assess, identify and manage material risks from cybersecurity threats are implemented and overseen by our IT Director. Our IT Director has over 10 years of experience addressing cybersecurity risks.
Governance Management Oversight 43 Table of Contents The controls and processes employed to assess, identify and manage material risks from cybersecurity threats are implemented and overseen by our IT Systems Administrator. Our IT Systems Administrator has 15 years in total network and system administration experiences, 8 of which are experience addressing cybersecurity risks.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeShould we need additional space, we believe we will be able to obtain additional space on commercially reasonable terms.
Biggest changeWe believe our current office space and service facilities are adequate and suitable for our current operations. Should we need additional space, we believe we will be able to obtain additional space on commercially reasonable terms.
Item 2. Properties We operate in a corporate and manufacturing facility in Webster, Texas, USA. We currently occupy a facility that has approximately 30,000 square feet of office, development, and manufacturing space pursuant to a lease that we expect will expire in April 2027. We believe our current office space is adequate for our current operations.
Item 2. Properties We operate in a corporate and manufacturing facility in Webster, Texas, USA. We currently occupy a facility that has approximately 30,000 square feet of office, development, and manufacturing space pursuant to a lease that we expect will expire in April 2027.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+1 added−0 removed0 unchanged
Biggest changeItem 3. Legal Proceedings From time to time, the Company is involved in various civil actions as part of its normal course of business. The Company is not a party to any litigation that we believe is material to ongoing operations as of December 31, 2023. Item 4. Mine Safety Disclosures Not applicable. 51 Table of Contents PART II
Biggest changeItem 3. Legal Proceedings From time to time, the Company is involved in various civil actions as part of its normal course of business. The Company is not a party to any litigation that it believes is material to ongoing operations as of the date of this annual report. Item 4.
Added
Mine Safety Disclosures Not applicable. 44 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+1 added−1 removed4 unchanged
Biggest changeRefer to Note 13 to the consolidated financial statements included in this annual report for additional information relating to restricted stock units. Recent Sales of Unregistered Securities We sold $700,000 of our equity securities within the fourth quarter of the fiscal year covered by the report.
Biggest changeRefer to Note 13 - Stock-Based Compensation to the consolidated financial statements included in this annual report for additional information relating to restricted stock units.
Our common stock is quoted on The Nasdaq Capital Market under the symbol “KITT.” Our redeemable warrants are quoted on The Nasdaq Capital Market under the symbol “KITTW.” Shareholders As of the date of this report, there are approximately 37 shareholders of record of our common stock based upon our transfer agent’s report.
Our Common Stock is quoted on The Nasdaq Capital Market under the symbol “KITT.” Our redeemable warrants are quoted on The Nasdaq Capital Market under the symbol “KITTW.” Shareholders As of the date of this Annual Report, there are approximately 38 shareholders of record of our Common Stock based upon our transfer agent’s report.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers We made no purchases of our equity securities within the fourth quarter of the fiscal year covered by the report. 52 Table of Contents Item 6. [Reserved] Not applicable.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers We made no purchases of our equity securities within the fourth quarter of the fiscal year covered by the report. Item 6. [Reserved] 45 Table of Contents
The Omnibus Incentive Plan provides for the grant of options, stock appreciation rights, RSUs, restricted stock and other stock-based awards, any of which may be performance-based, and for incentive bonuses, which may be paid in cash, Common Stock or a combination thereof. At December 31, 2023, 7,651,662 equity units were available for future grants under the Omnibus Incentive Plan.
The Omnibus Incentive Plan provides for the grant of options, stock appreciation rights, RSUs, restricted stock and other stock-based awards, any of which may be performance-based, and for incentive bonuses, which may be paid in cash, Common Stock or a combination thereof. At December 31, 2024, 258,424 equity units were available for future grants under the Omnibus Incentive Plan.
Warrants At December 31, 2023, there were 43,524,241 warrants outstanding, including the SPA Warrants, for the purchase of Company common stock. Refer to Note 12 to the consolidated financial statements included in this annual report for additional information relating to outstanding warrants.
Warrants At December 31, 2024, there were 545,519 warrants outstanding, including the SPA Warrants, for the purchase of Company Common Stock. Refer to Note 12 to the consolidated financial statements included in this annual report for additional information relating to outstanding warrants.
Refer to Note 13 to the consolidated financial statements included in this annual report for additional information relating to outstanding options. At December 31, 2023, there were 2,371,973 restricted stock units outstanding for the right to receive one share of Company common stock.
Refer to Note 13 - Stock-Based Compensation to the consolidated financial statements included in this annual report for additional information relating to outstanding options. At December 31, 2024, there were 317,064 restricted stock units outstanding for the right to receive one share of Company Common Stock.
During the vesting period, holders have no rights of a stockholder with respect to the shares of Common Stock subject to an option and the options may not be sold, assigned, transferred, pledged, or otherwise encumbered. Unvested options are forfeited upon termination of employment. At December 31, 2023, there were 3,011,247 options outstanding for the purchase of Company common stock.
During the vesting period, holders have no rights of a stockholder with respect to the shares of Common Stock subject to an option and the options may not be sold, assigned, transferred, pledged, or otherwise encumbered. Unvested options are forfeited upon termination of employment.
Outstanding options vest assuming continuous service to the Company with 25% of the options vesting one year after grant and the balance vesting in a series of 36 successive equal monthly installments measured from the first anniversary of the grant.
At December 31, 2024, there were 19,439 options outstanding for the purchase of Company Common Stock. Outstanding options vest assuming continuous service to the Company with 25% of the options vesting one year after grant and the balance vesting in a series of 36 successive equal monthly installments measured from the first anniversary of the grant.
Removed
At the Closing Date of the Business Combination, Nauticus Robotics Holdings had 279,464 options outstanding for the purchase of its common stock. The outstanding options were converted into 3,970,266 options to purchase shares of our Common Stock.
Added
Recent Sales of Unregistered Securities During the year ended December 31, 2024, we did not have any sales of equity securities that were not registered under the Securities Act of 1933, as amended, that have not been reported on Form 8-K or Form 10-Q.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

30 edited+17 added−30 removed13 unchanged
Biggest changeOur future capital needs may require us to sell additional equity or debt securities that may dilute our stockholders or introduce covenants that may restrict our operations or our ability to pay dividends,” “Risks Related to Our Business and Industry — With our service offering still being commercialized at a large scale, we have limited current customers, and there is no assurance that expected customer demand will result in binding orders or subscriptions,” “Risks Related to Our Business and Industry — If we are successful in commercializing our products and services, our revenue will be concentrated in a limited number of models for the foreseeable future,” “Risks Related to Our Business and Industry — We may be unable to adequately control the costs associated with our operations.” 54 Table of Contents Results of Operations Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table sets forth summarized consolidated financial information: For The Year Ended December 31, Change $ Change % 2023 2022 Revenue Service $ 6,605,852 $ 11,210,559 $ (4,604,707) -41 % Service - related party 500 224,400 (223,900) -100 % Total revenue 6,606,352 11,434,959 (4,828,607) -42 % Costs and Expenses Cost of revenue (exclusive of items shown separately below) 11,928,931 11,863,862 65,069 1 % Depreciation 729,412 516,949 212,463 41 % Research and development 1,399,560 2,376,912 (977,352) -41 % General and administrative 18,271,832 15,040,603 3,231,229 21 % Severance 1,476,636 15,962 1,460,674 9151 % Impairment of property and equipment 25,354,791 - 25,354,791 - % Loss on contract 2,542,913 - 2,542,913 - % Total costs and expenses 61,704,075 29,814,288 31,889,787 107 % Operating loss (55,097,723) (18,379,329) (36,718,394) 200 % Other (income) expense: Other expense (income), net 627,580 (33,247) 660,827 -1988 % Loss on lease termination 453,162 - 453,162 - % Foreign currency transaction loss (gain) 44,020 (260,615) 304,635 -117 % Loss on exchange of warrants 590,266 - 590,266 - % Change in fair value of warrant liabilities (14,902,427) 6,461,087 (21,363,514) -331 % Interest expense, net 8,776,277 3,714,017 5,062,260 136 % Total other (income) expense, net (4,411,122) 9,881,242 (14,292,364) -145 % Net loss $ (50,686,601) $ (28,260,571) $ (22,426,030) 79 % Revenue.
Biggest changeOur future capital needs may require us to sell additional equity or debt securities that may dilute our stockholders or introduce covenants that may restrict our operations or our ability to pay dividends,” “Risks Related to Our Business and Industry — With our service offering still being commercialized at a large scale, we have limited current customers, and there is no assurance that expected customer demand will result in binding orders or subscriptions,” “Risks Related to Our Business and Industry — If we are successful in commercializing our products and services, our revenue will be concentrated in a limited number of models for the foreseeable future,” “Risks Related to Our Business and Industry — We may be unable to adequately control the costs associated with our operations.” 46 Table of Contents Results of Operations Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 The following table sets forth summarized consolidated financial information: For The Year Ended December 31, Change $ Change % 2024 2023 Revenue: Service $ 1,807,472 $ 6,605,852 $ (4,798,380) -73 % Service - related party - 500 (500) -100 % Total revenue 1,807,472 6,606,352 (4,798,880) -73 % Costs and expenses: Cost of revenue (exclusive of items shown separately below) 9,732,205 11,928,931 (2,196,726) -18 % Depreciation 1,736,828 729,412 1,007,416 138 % Research and development 82,850 1,399,560 (1,316,710) -94 % General and administrative 13,370,486 18,271,832 (4,901,346) -27 % Severance - 1,476,636 (1,476,636) -100 % Impairment of property and equipment - 25,354,791 (25,354,791) -100 % Loss on contract - 2,542,913 (2,542,913) -100 % Total costs and expenses 24,922,369 61,704,075 (36,781,706) -60 % Operating loss (23,114,897) (55,097,723) 31,982,826 -58 % Other (income) expense: Other (income) expense, net 110,361 627,580 (517,219) -82 % Loss on lease termination 18,721 453,162 (434,441) -96 % Foreign currency transaction loss 61,597 44,020 17,577 40 % Loss on extinguishment of debt 127,605,940 - 127,605,940 100 % Loss on exchange of warrants - 590,266 (590,266) -100 % Change in fair value of warrant liabilities (13,559,010) (14,902,427) 1,343,417 -9 % Change in fair value of New Convertible Debentures (7,989,948) - (7,989,948) 100 % Change in fair value of November 2024 Debentures 435,864 - 435,864 100 % Interest expense, net 5,108,227 8,776,277 (3,668,050) -42 % Total other (income) expense, net 111,791,752 (4,411,122) 116,202,874 -2634 % Net loss $ (134,906,649) $ (50,686,601) $ (84,220,048) 166 % Revenue.
The Company believes with this investor support that there will be sufficient resources to continue as a going concern for at least one year from the date that the consolidated financial statements contained in this Form 10-K are issued. Indebtedness.
The Company believes that with this investor support there will be sufficient resources to continue as a going concern for at least one year from the date that the consolidated financial statements contained in this Form 10-K are issued.
The Private Warrants and Public Warrants were initially recorded at their estimated fair value on the Closing Date and are then revalued at each reporting date thereafter, with changes in the fair value reported in the consolidated statements of operations.
The Private Warrants and Public Warrants were initially recorded at their estimated fair value on issuance and are then revalued at each reporting date thereafter, with changes in the fair value reported in the consolidated statements of operations.
The SPA Warrants were initially recorded at their estimated fair value on the Closing Date and are then re-valued at each reporting date thereafter, with changes in the fair value reported in the consolidated statements of operations.
The SPA Warrants were initially recorded at their estimated fair value on issuance and are then re-valued at each reporting date thereafter, with changes in the fair value reported in the consolidated statements of operations.
The Company has limited product sales as its core products are still under development. A performance obligation is a promise in a contract to transfer distinct goods or services to a customer. The products and services in our contracts are typically not distinct from one another. Accordingly, our contracts are typically accounted for as one performance obligation.
The Company has limited product sales as its core products are still under development. A performance obligation is a promise in a contract to transfer distinct goods or services to a customer. The products and services in our contracts are typically not distinct from one another.
A substantial portion of our current revenue is generated by sales to government entities, which are subject to a number of uncertainties, challenges, and risks,” “Risks Related to Our Business and Industry — Our business plans require a significant amount of capital.
A substantial portion of our current revenue may be generated by sales to government entities, which are subject to a number of uncertainties, challenges, and risks,” “Risks Related to Our Business and Industry — Our business plans require a significant amount of capital.
The Company’s performance obligations under service agreements generally are satisfied over time as the service is provided. Revenue under these contracts is recognized over time using an input measure of progress (typically costs incurred to date relative to total estimated costs at completion).
Accordingly, our contracts are typically accounted for as one performance obligation. 49 Table of Contents The Company’s performance obligations under service agreements generally are satisfied over time as the service is provided. Revenue under these contracts is recognized over time using an input measure of progress (typically costs incurred to date relative to total estimated costs at completion).
Critical Accounting Policies and Estimates The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates, assumptions and judgments that can significantly impact the amounts we report as assets, liabilities, revenue, costs and expenses and the related disclosures.
Off-Balance Sheet Arrangements As of December 31, 2024, we had no material off-balance sheet arrangements. Critical Accounting Policies and Estimates The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates, assumptions and judgments that can significantly impact the amounts we report as assets, liabilities, revenue, costs and expenses and the related disclosures.
The Company may require additional liquidity to continue its operations over the next twelve months to sufficiently alleviate or mitigate the conditions and events noted above, which a current investor has committed to the Company.
The Company may require additional liquidity to continue its operations over the next twelve months, which a current investor has committed to support.
Stock-Based Compensation - Nauticus recognizes the cost of stock-based awards granted to its employees and directors based on the grant-date fair value of the awards. Cost is recognized on a straight-line basis over the service period, which is the vesting period of the award. Nauticus elected to recognize the effect of forfeitures in the period they occur.
Cost is recognized on a straight-line basis over the service period, which is the vesting period of the award. Nauticus elected to recognize the effect of forfeitures in the period they occur.
For the year ended December 31, 2023, net revenue decreased by $4,828,607, or 42%, as compared to 2022. The decrease in revenue is primarily attributable to the reduction in government contracts in 2023. Cost of revenue. For the year ended December 31, 2023, cost of revenue increased by $65,069, or 1% as compared to 2022.
For the year ended December 31, 2024 , net revenue decreased by $4,798,880, or 73%, as compared to 2023 . The decrease in revenue is primarily attributable to t he reduction in government contracts in 2024. Cost of revenue. For the year ended December 31, 2024, cost of revenue decreased by $2,196,726, or 18% as compared to 2023 .
All intercompany balances and transactions have been eliminated in preparation of these consolidated financial statements. Liquidity — Total cash and cash equivalents on hand as of December 31, 2023 was $753,398. The Company has incurred recurring losses each year since its inception. The Company continues to develop its principal products and conduct research and development activities.
All intercompany balances and transactions have been eliminated in preparation of these consolidated financial statements. Liquidity — Total cash and cash equivalents on hand as of December 31, 2024 was $1,186,047. The Company has incurred recurring losses each year since its inception and currently does not generate sufficient revenue to cover operating expenses, working capital and capital expenditures.
Derivative warrant liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. At the Closing Date, the SPA Warrants’ fair value upon issuance was estimated using a Monte Carlo valuation model (a Level 3 measurement).
Derivative warrant liabilities are classified 50 Table of Contents in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
See the sections entitled “Risks Related to Our Business and Industry — Almost all our revenues in 2022 and 2023 were derived from three customers.
See the sections entitled “Risks Related to Our Business and Industry — A significant amount of our revenues in 2024 and 2023 was derived from a limited number of customers.
Firm-fixed price contracts present the risk of unreimbursed cost overruns, potentially resulting in lower-than-expected contract profits and margins. This risk is generally lower for cost plus fixed fee contracts which, as a result, generally have a lower margin. Service revenue includes equipment operating lease income recognized based on the contractual cash lease payments for the period.
Firm-fixed price contracts provide products or services generally over an agreed upon time frame for a predetermined amount. Firm-fixed price contracts present the risk of unreimbursed cost overruns, potentially resulting in lower-than-expected contract profits and margins. This risk is generally lower for cost plus fixed fee contracts which, as a result, generally have a lower margin.
Throughout the contract term, on at least a quarterly basis, we monitor and assess the effects of those risks on its estimates of sales and total costs to complete the contract.
Throughout the contract term, on at least a quarterly basis, we monitor and assess the effects of those risks on its estimates of sales and total costs to complete the contract. Changes in these estimates could have a material effect on the Company’s results of operations. Cost plus fixed fee contracts are largely used for development projects.
For the year ended December 31, 2023, total research and development expenses decreased by $977,352, or 41%, as compared to 2022. The decrease was due primarily to the Company meeting technological feasibility on both hardware and software development that has been capitalized throughout fiscal year 2023. 55 Table of Contents General and administrative.
For the year ended December 31, 2024, total research and development expenses decreased by $1,316,710, or 94%, as compared to 2023 . The decrease was due primarily to the Company achieving technological feasibility in both hardware and software development and focusing on bringing its products to market. General and administrative.
The decrease is partially related to the decline in activity offset by increased equipment, facility and direct travel costs. Depreciation. For the year ended December 31, 2023, depreciation increased by $212,463, or 41%, as compared to 2022 primarily due to increased investment in operational assets. Research and development .
The decrease is primarily attributable to the decline in activity partially offset by costs relating to the commercialization of the Aquanaut vehicle. 47 Table of Contents Depreciation. For the year ended December 31, 2024 , depreciation increased by $1,007,416, or 138%, as compared to 2023 primarily due to the increase in property and equipment. Research and development .
In December 2023, the Company started negotiations to exit a lease for office space. An exit fee agreement was reached with the lessor in March 2024, resulting in a loss on lease termination of $453,162. Loss on contract .
For the year ended December 31, 2023, the loss on lease termination of $453,162 relates to the exit of office space for which an exit fee arrangement was agreed with the lessor. Loss on extinguishments of debt.
Contract assets include unbilled amounts typically resulting from sales under contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. Contract assets are recorded at the net amount expected to be billed and collected. Contract liabilities include billings in excess of revenue recognized and accrual of certain contract obligations.
Service revenue includes equipment operating lease income recognized based on the contractual cash lease payments for the period. Contract assets include unbilled amounts typically resulting from sales under contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer.
Our capital requirements will depend on many factors, including sales volume, the timing and extent of spending to support R&D efforts, investments in technology, the expansion of sales and marketing activities, and market adoption of new and enhanced products and features.
Our capital requirements will depend on many factors, investments in technology, the expansion of sales and marketing activities, and market adoption of new and enhanced products and features. To date, our principal sources of liquidity have been proceeds received from the issuance of debt and equity funding and cash flow from our operations. Indebtedness.
The Company accrued $2,542,913 of contract liability costs in the year ended December 31, 2023 associated with the expected loss on a current contract. Change in fair value of warrant liabilities.
For the year ended December 31, 2023, contract liability costs of $2,542,913 were accrued associated with the expected loss on a current contract. There were no contract liability costs reported for the year ended December 31, 2024. Other expense, net. For the year ended December 31, 2024 , other expense, net decreased by $517,219 as compared to 2023.
The Earnout Shares are considered legally issued and outstanding shares of Common Stock subject to restrictions on transfer and potential forfeiture pending the achievement of the earnout targets. The Company evaluated the Earnout Shares and concluded that they meet the criteria for equity classification.
The Earnout Shares will be released upon occurrence of a Triggering Event within five years from September 9, 2022. The Earnout Shares are considered legally issued and outstanding shares of Common Stock subject to restrictions on transfer and potential forfeiture pending the achievement of the earnout targets.
For the year ended December 31, 2023, impairment of property and equipment increased by $25,354,791 and related mainly to partial impairment of the Aquanaut vehicles, Olympic Arms and Hydronaut vessels.
There were no severance costs reported for the year ended December 31, 2024. Impairment of property and equipment . There were no impairments for the year ended December 31, 2024. I mpairment of property and equipment for the year ended December 31, 2023 included partial impairments of the Aquanaut vehicles, Olympic Arms and Hydronaut vessels. Loss on contract.
For the year ended December 31, 2023, the Company reported a fair value gain of warrant liabilities of $14,902,427 compared to a fair value loss of warrant liabilities of $6,461,087 for the year ended December 31, 2022.
For the years ended December 31, 2024 and 2023, the Company reported a gain in change of fair value of warrant liabilities of $13,559,010 and $14,902,427 respectively. Change in f air value of New Convertible Debentures. For the year ended December 31, 2024, a gain on the fair value of the new convertible debentures of $7,989,948 was reported.
The Company’s indebtedness at December 31, 202 3 is presented in Item 8, “Financial Statements – Note 7 – Notes Payable” and our lease obligations are presented in Item 8, “Financial Statements—Note 8 – Leases.” Also, see Item 8, “Financial Statements – Note 18 – Subsequent Events” for additional information about additional indebtedness incurred by the Company after December 31, 2023.
The Company’s indebtedness at December 31, 2024 is presented in Item 8, “Financial Statements - Note 7 - Notes Payable” and our lease obligations are presented in Item 8, “Financial Statements - Note 8 - Leases.” There are no other new accounting pronouncements that are expected to have a material impact on our consolidated financial statements.
The Earnout Shares were classified in 58 Table of Contents stockholders’ equity, recognized at fair value upon the closing of the Business Combination and will not be subsequently remeasured. Their estimated fair value upon issuance was determined using a Monte Carlo valuation model (a Level 3 measurement). Item 7A.
The Company evaluated the Earnout Shares and concluded that they meet the criteria for equity classification. The Earnout Shares were classified in stockholders’ equity, recognized at fair value upon issuance and will not be subsequently remeasured. Item 7A. Quantitative and Qualitative Disclosure About Market Risk Not required for smaller reporting companies. 51 Table of Contents
We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law. Explanatory Note On the Closing Date, we consummated the Business Combination with Merger Sub, and Nauticus Robotics Holdings, Inc.
We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law. Overview Nauticus Robotics, Inc. (the "Company", "our", "us" or "we") is a technology-driven company specializing in the development of advanced fully electric autonomous robotic solutions for subsea applications.
The Company may require additional liquidity to continue its operations over the next twelve months to sufficiently alleviate or mitigate the conditions and events noted above, which a current investor has committed to the Company, so the Company believes with the support that there will be sufficient resources to continue as a going concern within one year after the date that the consolidated financial statements contained in this Annual Report are issued.
The Company believes that with this investor support there will be sufficient resources to continue as a going concern for at least one year from the date that the consolidated financial statements contained in this Form 10-K are issued. As of December 31, 2024, we had $1,186,047 of cash and cash equivalents. The cash equivalents consist of money market funds.
For the year ended December 31, 2023, total general and administrative expenses increased by $3,231,229 or 21% , as compa red to 2022. General and administrative expenses increased primarily due to an increase in company headcount, sales and marketing expenses, professional fees and other costs associated with being a public company. Impairment of property and equipment .
For the year ended December 31, 2024 , total general and administrative expenses decreased by $4,901,346 or 27% , as compa red to 2023 . The decrease was driven by headcount reductions and a concerted effort to reduce costs. Severance. Severance costs for the year ended December 31, 2023 related primarily to the change in management team.
Removed
Pursuant to the terms of the Merger Agreement, a business combination between CLAQ and Nauticus Robotics Holdings was effected through the merger of Merger Sub with and into Nauticus Robotics Holdings, with Nauticus Robotics Holdings surviving the merger as a wholly owned subsidiary of CLAQ.
Added
Our portfolio includes fully autonomous underwater vehicles (AUVs), robotic manipulators, an open robotic operating system, and related consulting and prototype services with a strong alignment to offshore energy and national security interests. Our technology solutions enable autonomous operations for both the commercial and defense sectors.
Removed
On the Closing Date, CLAQ was renamed “Nauticus Robotics, Inc.” and the Nauticus Robotics Holdings’ predecessor was renamed “Nauticus Robotics Holdings, Inc.” The Business Combination was accounted for as a reverse recapitalization under GAAP. Nauticus Robotics Holdings, Inc. was determined to be the accounting acquirer and CLAQ was treated as the acquired company for financial reporting purposes.
Added
Our addressable markets include upstream, midstream, and downstream oil and gas, defense, offshore renewables, seafloor telecommunications, aquaculture, port security, oceanographic research, and subsea mining. Currently, our primary focus is on oil and gas operations and defense applications. Basis of Presentation – The Company’s consolidated financial statements have been prepared in accordance with U.S. GAAP.
Removed
Accordingly, the financial statements of Nauticus represent a continuation of the financial statements of Nauticus Robotics Holdings, Inc. Overview Nauticus Robotics, Inc. (the “Company,” “our,” “us” or “we”) is a developer of ocean robots, cloud software and services delivered to the ocean industry. We were initially incorporated as CleanTech Acquisition Corp.
Added
The Company continues to develop its principal products and conduct research and development activities. The Company currently funds its operations with cash on hand, availability under the November 2024 Debentures (see Note 7 - Notes Payable) and the offer and sale of additional shares of Common Stock under the At The Market Offering Agreement (see Note 18 - Subsequent Events).
Removed
(“CLAQ”) under the laws of the State of Delaware on June 18, 2020. The Company’s principal corporate offices are located in Webster, Texas.
Added
The year ended December 31, 2023 included an accrual for a state sales tax assessment of $600,000 . Loss on lease termination . For the year ended December 31, 2024, a loss on lease termination of $18,721 was reported primarily driven by the early termination of leased office space in Norway.
Removed
Our services provide customers with the necessary data collection, analytics, and subsea manipulation capabilities to support and maintain assets while reducing their operational footprint, operating cost, and greenhouse gas emissions, as well as to improve offshore health, safety, and environmental exposure.
Added
For the year ended December 31, 2024, loss on the extinguishments of debt of $127,605,940 was reported driven by the Amendment and Exchange Agreement. See Note 7 "Notes Payable". Change in fair value of warrant liabilities.
Removed
Our subsea robotic product, Aquanaut, is a vehicle that begins its mission in a hydrodynamically efficient configuration that enables efficient transit to the worksite (i.e., operating as an autonomous underwater vehicle, or “AUV”). During transit (operating in survey mode), Aquanaut’s sensor suite provides the capability to observe and inspect subsea assets or other subsea features.
Added
Change in fair value of November 2024 Debentures. For the year ended December 31, 2024, a loss on the fair value of the November 2024 debentures of $435,864 was reported. Interest expense, net. For the year ended December 31, 2024, interest expense, net decreased by $(3,668,050) as compared to 2023.
Removed
Once it arrives at the worksite, Aquanaut transforms its hull configuration to expose two work-class capable, electric manipulators that can perform dexterous tasks with (supervised), or without (autonomous), direct human involvement. In this intervention mode, the vehicle has capabilities similar to a conventional remotely operated vehicle (“ROV”).
Added
Interest expense, net decreased due to no interest on the New Convertible Debentures or the November 2024 Debentures because this interest was included in the fair value of these instruments.
Removed
The ability to operate in both AUV and ROV modes is a quality unique to our subsea robot and is protected under a U.S. patent.
Added
This was offset by interest on the convertible senior secured term loans which were received in the second half of 2023 and first half of 2024 and debt discount relating to the New Convertible Debentures being fully amortized due to the conversions to Common Stock and Series A Preferred Stock.
Removed
To take advantage of these special configuration qualities, we have developed underwater acoustic communication technology, called Wavelink, our over-the-horizon remote connectivity solution, which removes the need for long umbilicals to connect the robot with topside vessels.
Added
Interest expense, net included $4 million associated with liquidated damages and interest arising out of the RRA. Liquidity and Capital Resources The Company has incurred recurring losses each year since its inception and currently does not generate sufficient revenue to cover operating expenses, working capital and capital expenditures.
Removed
Eliminating these umbilicals and communicating with the robot through acoustic or other latent, laser, or RF methods reduces much of the system infrastructure currently required for ROV servicing operations and is core to our value proposition. The component technologies that comprise the Aquanaut are also marketable to the existing worldwide ROV fleet.
Added
The Company continues to develop its principal products and conduct research and development activities.
Removed
Aquanaut’s perception and machine learning software technologies combined with its perception and electric manipulators can be retrofitted on existing ROV platforms to improve their ability to perform subsea maintenance activities. 53 Table of Contents Our key technologies are autonomous platforms, acoustic communications networks, electric manipulators, AI-based perception and control software, and high-definition workspace sensors.
Added
The Company currently funds its operations with cash on hand, availability under the November 2024 Debentures (see Item 8, "Financial Statements - Note 7 - Notes Payable") and the offer and sale of additional shares of Common Stock under the At The Market Offering Agreement (see Item 8, "Financial Statements - Note 18 - Subsequent Events").
Removed
Implementation of these technologies enables operators to reduce costs relative to conventional methods. Basis of Presentation – The Company’s consolidated financial statements have been prepared in accordance with U.S. GAAP. The Business Combination was accounted for as a reverse business combination with Nauticus Robotics Holdings, Inc. as the accounting acquirer and CLAQ as the accounting acquiree.
Added
The Company may require additional liquidity to continue its operations over 48 Table of Contents the next twelve months, which a current investor has committed to support.
Removed
For the year ended December 31, 2022, our audited consolidated financial statements reflect the financial condition, results of operations, cash flows and changes in stockholders’ equity (deficit) of Nauticus Robotics Holdings for periods until September 9, 2022, the Closing Date of the Business Combination, and the consolidated results of operations, cash flows and changes in stockholders’ equity (deficit) of Nauticus Robotics, Inc. and its consolidated subsidiary, Nauticus Robotics Holdings for the period from September 10, 2022 through December 31, 2022.
Added
Significant sources and uses of cash during the year ended December 31, 2024. Sources of cash: • The Company received net proceeds of $24,496,163 from debt and equity financings comprising of additional convertible secured term loans, convertible debentures and an At The Market Offering (see Item 8, "Financial Statements - Note 7 - Notes Payable" and "Note 11 - Equity").
Removed
Supply chain disruptions instigated production delays and have continued to impact the Company’s ability to deploy its products and realize rental or product sale revenues. Currently, the Company does not generate sufficient revenue to cover operating expenses, working capital and capital expenditures.
Added
Uses of cash: • Cash used in operating activities was $24,201,567, of which $2,559,532 was used to increase working capital. • Cash used in investing activities related to capital expenditures of $501,600 partially offset by proceeds from the sale of Assets Held For Sale of $676,177. Future sources and uses of cash.
Removed
We do not have any commitments for equity funding at this time, and additional funding may not be available to us on favorable terms, if at all. If additional financing is not raised, it would likely lead to the company reducing discretionary spending and other cost cutting measures. The Company has embarked on cost-cutting measures to continue to preserve cash.
Added
Contract assets are recorded at the net amount expected to be billed and collected. Contract liabilities include billings in excess of revenue recognized and accrual of certain contract obligations. Stock-Based Compensation - Nauticus recognizes the cost of stock-based awards granted to its employees and directors based on the grant-date fair value of the awards.
Removed
The fair value of the Aquanaut Mark 2 vehicles was determined by considering the value of similar vehicles in the market place, commercial invoices, insurable values and a discounted value of future potential cash generation less an estimate of costs to complete vehicles 1 and 3.
Added
On issuance, the SPA Warrants’ fair value upon issuance was estimated using a Monte Carlo valuation model (a Level 3 measurement).
Removed
The fair value of Hydronaut vessels 2 and 3 was determined based on an offer for sale. The Drix and Hydronaut 1 assets were valued at marketed sales price. Olympic Arms 1 – 3 are fully impaired based on no realizable value. Loss on lease termination .
Added
Earnout Shares – Following the closing of the Merger between CleanTech, Merger Sub and Nauticus Robotics Holdings on September 9, 2022, former holders of shares of Nauticus Robotics Holdings’ Common Stock (including shares received as a result of the Nauticus Preferred Stock Conversion and the Nauticus Convertible Notes Conversion) are entitled to receive their pro rata share of up to 208,333 Earnout Shares which are held in escrow.
Removed
This is driven by the change in mark-to-market value of the SPA warrants and public and private warrants assumed by the Company in the Business Combination. Other expense, net. For the year ended December 31, 2023, other expense, net increased by $660,827 as compared to 2022.
Removed
The increase was mainly driven by a state sales tax assessment of $0.6 million that the Company has reduced from $12 million in the fourth quarter of 2023. The sales tax audit is currently ongoing and the Company plans to contest the updated estimate from the governmental entity, Texas Comptroller of Public Accounts. Interest expense, net.
Removed
For t he year ended December 31, 2023, interest expense, net increased by $5,062,260 as compared to 2022. Interest expense, net increased primarily due to a settlement for liquidated damages of $3,685,629, net, and an increase in indebtedness entered into by the Company during the third quarter of 2022 and 2023.
Removed
Liquidity and Capital Resources As of December 31, 202 3 , we had $753,398 of cash and cash equivalents. The cash equivalents consist of demand deposits and money market funds. Significant sources and uses of cash during the year ended December 31, 202 3 .
Removed
Sources of cash: • The Company received net proceeds of $11,248,614 from debt and equity financings and $5,000,000 proceeds from the sale of short-term investments. Uses of cash: • Cash used in operating activities was $21,687,926, of which $3,781,040 was provided by working capital.
Removed
Cash used in operating activities varied from operating net loss primarily due to the impairment of property and equipment. • Capital expenditures were $11,633,153. Future sources and uses of cash.
Removed
To date, our principal sources of liquidity have been proceeds received from the issuance of debt and equity funding and cash flow from our operations. 56 Table of Contents The Company has incurred recurring losses each year since its inception. The Company continues to develop its principal products and conduct research and development activities.
Removed
Supply chain disruptions instigated production delays and have continued to impact the Company’s ability to deploy its products and realize rental or product sale revenues. Currently, the Company does not generate sufficient revenue to cover operating expenses, working capital and capital expenditures. The Company has embarked on cost-cutting measures to continue to preserve cash.
Removed
Recent accounting pronouncements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses , which replaces the existing incurred loss impairment model with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. We adopted this standard on January 1, 2022.
Removed
There was no impact from the adoption of this standard on our consolidated financial statements. There are no other new accounting pronouncements that are expected to have a material impact on our consolidated financial statements. Off-Balance Sheet Arrangements As of December 31, 2023, we had no material off-balance sheet arrangements.
Removed
Changes in these estimates could have a material effect on the Company’s results of operations. 57 Table of Contents Cost plus fixed fee contracts are largely used for development projects. Firm-fixed price contracts provide products or services generally over an agreed upon time frame for a predetermined amount.
Removed
Earnout Shares – Earnout shares, issuable to former holders of Nauticus Robotics Holdings’ Common Stock, are held in escrow. The Earnout Shares will be released upon occurrence of a Triggering Event within five years of the Closing Date.
Removed
Quantitative and Qualitative Disclosure About Market Risk Not required for smaller reporting companies. 59 Table of Contents

Other KITT 10-K year-over-year comparisons