CPWR 10-K & 10-Q changes, risk factors and insider trading

Russia’s military intervention in Ukraine and the internationalUS-Israel community’swar responseon Iran have created substantial political and economic disruption, uncertainty, and risk.

We are proposing a financial model for the development of individual projects that includes development financing provided by us, construction financing provided by equity investors in the specific projects, and project debt financing; the payment of a development fee to us at the time of construction; and continuing equity participation by us throughout the plant’s operation. We have not used this model in the financing or completion of any plant, and we cannot assure that the financial model and, therefore, the anticipated financial return to us will be acceptable to thoseparties that might provide the requisite external capital.

In order to successfully obtain debt financing for OTEC facilities, we must find engineering, procurement, and construction contractors willing to enter into fixed-price contracts at a pricingprice that is economically viable for us. Based on our preliminary discussions, we believe that engineering, procurement, and construction contractors may be willing to consider fixed-price arrangements for up to 10-MW OTEC facilities, but we have not yet discussed performance risk guarantees for OTEC plants greater than 10 MWs. The cost of construction for larger OTEC power systems may vary considerably, and these variances could include increased costs for construction, design, and component procurement. As we gain more experience, we may improve upon efficiencies and accuracy in pricing. Failure to procure engineering, procurement, and construction contractors willing to perform fixed-price contracts on facilities that produce more than 10 MWs may have a material adverse effect on our operations.

We intend to continue to develop the projects in our pipeline of opportunities and to construct and operate plants as we deem warranted and as we are able to finance. This is an ambitious growth strategy. Our growth and future success will depend on the successful completion of the expansion strategies and the sufficiency of demand for our energy products. The execution of our expansion strategies may also place a strain on our managerial, operational, and financial reserves. Should we fail to effectively implement suchour expansion strategies or should there be insufficient demand for our products and services, our business operations, financial performance, and prospects would be adversely affected.

We expect that any plant that we operate will provide power, cooling, desalinated water, or other products to a few or a limited number of key power purchasers that will use the power for specific commercial enterprises, such as resorts, manufacturing or processing plants, or similar large-scale operations. Accordingly, our ability to sell power and other outputs will be dependent on the economic viability of these purchasers. If one or more key purchasers were to fail, we would be required to obtain alternative purchasers for our power and other outputs, and there may be no or a limited number of alternative purchasers in the mergingemerging and developing markets where we anticipate our plants may be located. Accordingly, a failure of an output purchaser may result in the failure of our power plant project. We do not anticipate that we will be able to obtain insurance on acceptable terms to protect us against such a loss. Further, our project output purchasers may not comply with contractual payment obligations or may otherwise fail to perform their contracts, and they may have greater economic bargaining power and negotiating leverage as we seek to enforce our contractual rights. To the extent that any of our project power purchasers are, or are controlled by, governmental entities, our projects may also be subject to legislative, administrative, or other political action or policies that impair their contractual performance. Any failure of any key power purchasers to meet their contractual obligations for any reason could have a material adverse effect on our business and operations.

Pursuant to the laws inof some jurisdictions in whichwhere we may develop or operate plants, foreign governmental entities may have the authority to alter the terms of our contractual or financial rights or override the terms of privately negotiated agreements. In extreme circumstances, some foreign governments have taken the step of confiscating private property on the assertion that such action is necessary in the public interest of the country. If this were to occur, we may not be compensated fairly or at all. We cannot assure that we have complied, and will comply, with all the terms and obligations imposed on us under all foreign laws to which one or more of our operations and assets may be subject.

We must conduct our activities in or related to foreign companiescountries in compliance with the U.S. Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery laws that generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business. Enforcement officials interpret the FCPA’s prohibition on improper payments to government officials to apply to officials of state-owned enterprises, including state-owned enterprises with which we may develop or operate projects or to which we may sell plant outputs. While our employees and agents are required to acknowledge and comply with these laws, we cannot assure that our internal policies and procedures will always protect us from violations of these laws, despite our commitment to legal compliance and corporate ethics. The occurrence or allegation of these activities may adversely affect our business, performance, prospects, value, financial condition, reputation, and results of operations.

Our common stock is quoted on the OTCOTCID ExpertBasic Market operated by the OTC Markets Group, Inc., under the ticker symbol “CPWR.” Not being listed on an established securities exchange has an adverse effect on the liquidity of our common stock, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of our company. This may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and asked prices for our common stock. Historically, our common stock has been thinly traded, and there is no guarantee of the prices at which the shares will trade or of the ability of stockholders to sell their shares without having an adverse effect on market prices.

We have not paid dividends on our common stock to date, and we do not expect to be in a position to pay dividends in the foreseeable future. Our ability to pay dividends depends on our ability to successfully develop our OTEC business and generate revenue from future operations. Further, our initial earnings, if any, will likely be retained to repay debt and finance our growth. Any future dividends will depend upon our earnings, our then-existing financial requirements, and other factors and will be at the discretion of our board of directors.

We did not timely file our annual report for 2024 and our quarterly reports for the firstfirst, second and secondthird quarters of 2025. As a result, the OTC hashad identified the Company as delinquent in its SEC filings and our stock is only eligible to trade for unsolicited orders. WeAlthough arewe currentlyhave in the process of makingmade our delinquent filings but cannot guarantee that we will be able to do so or that if we do, that we will remain current in our filings, which would limit the public information available about the Company and negatively impact the liquidity and trading price of our stock.

During the year ended December 31, 2024,2025, we had salaries and compensation of $925,553,$197,424, compared to salaries and wagescompensation of $888,790$925,553 during 2024, a decrease of 79%, primarily due to the sameallocation periodof costs to cost of contracts and management’s continued cost cutting efforts for 2023,areas anwhich increaseare not specific to the fulfilment of 4.1%,the primarilyKwajalein drivenAtoll by increased activity and consultants for engineering and contract development.contract.

GeneralWe incurred general and administrative expenses wereof $116,268$71,694 during the year ended December 31, 2024,2025, compared to $138,048$116,268 for the same period in 2023,2024, a decrease of 15.8%38% due to the allocation of costs to cost of contracts and multiple factors includingassociated with management cost cuttingreduction efforts byfor management.ancillary services not directly related to the fulfilment of the Kwajalein Atoll contract.

Our interest expense was $2,504,722$2,872,050 for the year ended December 31, 2024,2025, compared to $2,278,347$2,504,722 for the same period of the previous year,2024, an increase of 9.9%15%. This change was due to an increase inincreased debt and higher interest rates on defaulted notes.notes payable.

OurThere amortizationwas of$54,440 debt discount and loan fee expenses was $2,245amortization for the year ended December 31, 2024,2025, compared to $88,540$2,245 for the previous year. The decreaseincrease is due to fullnew amortizationnotes ofpayable discountentered on debt that became dueinto during the periods.period.

Our operations used net cash of $562,627$93,395 in 2024,2025, as compared to $669,463$562,627 in the prior year. The decrease in cash used was primarily the result of an increase in the change in accounts payable and accrued expenses partiallyand offseta by an increasedecrease in loss, after adjusting for noncash activities.activities, partially offset by an increase in accounts receivable related to the Kwajalein Atoll contract.

Financing activities provided cash of $463,620$480,920 for our operations during the year ended December 31, 2024,2025, as compared to providing cash of $783,208$463,620 in the prior year. During the years ended December 31, 2025, and 2024, we received cash proceeds from the sale of preferred stockcommon and convertible notes payable. We also repaid working capital advances from related parties and made repayments of notes payable. During 2023, we received cash proceeds from the sale of preferred stock and working capital advances from related parties. We also made repaymentsissuance of notes payable which was the primary financing activity during the period.

Our consolidated financial statements have been prepared assuming we will continue as a going concern. We have experienced recurring losses from operations and have an accumulated deficit. Our ability to continue our operations as a going concern is dependent on the success of management’s plans, which include the raising of capital through debt and/or equity markets until such time that revenue provided by operations is sufficient to fund working capital requirements. We will require additional funding to finance the growth of our current and expected future operations as well as to achieve our strategic objectives The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

We arehave currentlyrecently executingcompleted a $3.5 million U.S. Army engineering and design contract in partnership with Johnson Controls for the U.S. Army Garrison-Kwajalein Atoll and are actively seeking to expand into additional Indo-Pacific markets such as Guam, Diego Garcia, and the Northern Marianas. Our potential project pipeline also includes commercial engagements in the Caribbean and Southeast Asia, including India and Indonesia.

Comparison of Three Months Ended MarchJune 31,30, 2026 and 2025

During the three months ended MarchJune 31,30, 2026, the Company recognized revenue of $403,517$92,403 compared to $173,037$846,382 for the firstsecond quarter of 2025. The increasedecrease is solely due to the completion of the Company’s contract to provide services to the United States Department of Defense relative to the design and engineering of an OTEC unit on Kwajalein Atoll.

During the three months ended MarchJune 31,30, 2026, we had $662,984$308,315 of direct cost of contracts compared to $128,763$629,827 for the 2025 period. The increasedecrease is solely due to costs incurred to service the Company’s contract to provide services to the United States Department of Defense relative to the design and engineering of an OTEC unit on Kwajalein Atoll.

During the three months ending MarchJune 31,30, 2026, we had salaries and compensation of $64,915,$66,082, compared to salaries and compensation of $201,955$218,580 for the three months ended MarchJune 31,30, 2025, a decrease of 68%,70%, primarily due to the allocation of costs to cost of contracts and management’s continued cost cutting efforts for areas which are not specific to the fulfilment of the Kwajalein Atoll contract.

During the three months ending MarchJune 31,30, 2026 and 2025, we recorded professional fees of $128,801$159,263 and $82,618,$111,645, respectively, an increase of 56%.43%. The increase was primarily related to legal fees related to completed litigation and audit and accounting fees.

We incurred general and administrative expenses of $34,489$42,598 during the three months ending MarchJune 31,30, 2026, compared to $6,505$14,518 for the firstsecond quarter of 2025, an increase of 430%193% due to various increases in insurance and other ancillary services not directly related to the fulfilment of the Kwajalein Atoll contract.

Our interest expense was $739,221$750,618 for the three months ended MarchJune 31,30, 2026, compared to $655,809$683,801 for the firstsecond quarter 2025, an increase of 13%.10%. This change was primarily due to highercompounded interest rates on defaulted notes payable.

There was $13,610an debt discount amortization for the three months ended March 31, 2026 and 2025 There was a decreaseincrease in the fair value of the derivative liability of approximately $63$4 million during the three months ended MarchJune 31,30, 2026, compared to aan $498,404approximately $94 million increase for the 2025 period, a 12,740%96% decrease. This change results primarily from the reductionchanges in the market valueprice of our common stock in 2026 compared to 2025.

We recognized gain on conversion of notes payable of $11,998 during the threesix months ended MarchJune 31,30, 2025, with no similar item in the 2026 period.

At MarchJune 31,30, 2026, our principal source of liquidity consisted of $166,220$33,265 of cash, as compared to $403,667 of cash at December 31, 2025. At MarchJune 31,30, 2026, we had negative working capital (current assets minus current liabilities) of approximately $51$57 million. In addition, our stockholders’ deficit was approximately $51$57 million at MarchJune 31,30, 2026. We are focusing our efforts on promoting and marketing our technology by developing and executing contracts. We are exploring external funding alternatives, as our current cash is insufficient to fund operations for the next 12 months.

Our operations used net cash of $237,177$389,862 during the threesix months ended MarchJune 31,30, 2026, as compared to using net cash of $161,907$65,859 during the threesix months ended MarchJune 31,30, 2025. The increase in net cash used in operations is primarily due to an increase in loss (after adjusting for non-cash items such as the change in the fair value of derivative liability) partially offset by a net increase attributable to working capital items such as accounts receivable and payable.

Financing activities usedprovided cash of $270$19,460 during the threesix months ended MarchJune 31,30, 2026, as compared to providing $150,230$189,460 of cash for the threesix months ended MarchJune 31,30, 2025. During the threesix months ended June 30, 2026 we received cash from subscriptions for preferred stock. During the six months ending MarchJune 31,30, 2025, we received cash proceeds from the sale of common and preferred stock and issuance of notes payable which was the primary financing activity during the period.

The accompanying unaudited condensed consolidated financial statements have been prepared on the assumption that we will continue as a going concern. As reflected in the accompanying unaudited condensed consolidated financial statements, we had a net loss from operations of $487,622$971,527 and used approximately $237,000$390,000 of cash in operating activities for the threesix months ended MarchJune 31,30, 2026. We had a working capital deficiency of approximately $51$57 million and a stockholders’ deficiency of approximately $51$57 million as of MarchJune 31,30, 2026. These factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to increase sales and obtain external funding for our projects under development. We continue to apply for grant funding from the U.S. Department of Energy. Our applications focus on desalinated water, ammonia, and hydrogen production from an OTEC facility. We plan to apply for funding to support projects where our technology would apply. The condensed consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

Management believes there have been no significant changes during the three months ended MarchJune 31,30, 2026 to the items that we disclosed as our critical accounting estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2025.