Item 1A. Risk Factors
You should carefully consider the following
risk factors in addition to the other information included in this Annual Report, including matters addressed in the section entitled
“Cautionary Statement Regarding Forward-Looking Statements and Risk Factor Summary.” We may face additional risks and uncertainties
that are not presently known to us, or that we currently deem immaterial, which may also impair our business, prospects, financial condition
or operating results. The following discussion should be read in conjunction with our consolidated financial statements and notes to
the consolidated financial statements included herein.
Risks Relating to RWT’s Status as an Emerging Company
RWT has a limited operating history and has not yet generated
any revenues, which makes it difficult to forecast its future results of operations.
As a result of RWT’s limited operating history, its ability to
accurately forecast the future results of operations is limited and subject to a number of uncertainties, including RWT’s ability
to plan for and model future growth. RWT’s ability to generate revenues will largely be dependent on its ability to develop and
improve ionization rainfall generation technology, and market and sell its services and products. RWT’s business model is in the
early stages of development and its technical roadmap may not be realized as quickly as hoped, or even at all. The development of RWT’s
business model will likely require the incurrence of significant costs, while RWT’s revenues will be impacted by technological,
go-to-market, and operational advancements which may not occur on the currently anticipated timetable or at all. Further, in future periods,
RWT’s growth could slow or decline for a number of reasons, including but not limited to slow market acceptance, increased competition,
competing technology, inability to develop, improve or effectively scale up RWT’s technology, a decrease in the growth of the overall
market, government regulation, or RWT’s failure, for any reason, to continue to take advantage of growth opportunities.
RWT will also encounter risks and uncertainties frequently experienced
by growing companies in rapidly changing industries. If RWT’s assumptions regarding these risks and uncertainties and its future
growth are incorrect or change, or if RWT does not address these risks successfully, RWT’s operating and financial results could
differ materially from its expectations, and its business could suffer. RWT’s success as a business ultimately relies upon fundamental
research and development breakthroughs in the coming years and decade. There is no certainty these research and development milestones
will be achieved as quickly as hoped, or even at all.
RWT expects to incur significant expenses and losses for the
foreseeable future.
RWT believes that it will incur operating and net losses until it is
able to grow its one-to-many business model at scale, deliver a robust, sustainable pipeline of clients and acquire long-term, multi-annual
contracts. Among other things, RWT will incur ongoing expenses in connection with the design, development and manufacturing of its technology,
conduct and expansion of its research and development activities, increases in its sales and marketing activities, development of its
distribution infrastructure, and increases in its general and administrative functions to support its growing operations.
RWT may find that these efforts are more expensive than it currently
anticipates or that these efforts may not result in revenues, which would further increase RWT’s losses. If RWT is unable to achieve
and/or sustain profitability, or if RWT is unable to achieve the growth that it expects, it could have a material effect on RWT’s
business, financial condition or results of operations. RWT’s business model is unproven and may never allow it to cover its costs.
RWT’s estimates of market opportunity and growth forecasts
may prove to be inaccurate.
Market opportunity estimates and growth forecasts, including those
RWT has generated itself, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate.
RWT’s business plan assumes a strong sales pipeline of actionable client targets that can be converted to revenue-generating clients
beginning in 2025. However, RWT does not currently have clients, and the variables that go into the calculation of RWT’s client
acquisition forecasts are subject to change over time. There is no guarantee that any particular number or percentage of clients or companies
covered by its estimates will purchase its products at all or generate any particular level of revenue for RWT. Any growth of RWT’s
business depends on a number of factors, including the cost, performance, and perceived value associated with its technology.
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RWT’s success will also depend upon its ability to expand, scale
its operations, and increase its sales capability. RWT’s business model allows for affordable installation and manufacturing costs,
expected to initially be approximately $280,000 per system, which price point will allow clients to be “laddered up” with
a “land and expand” sales strategy, which will also involve continued involvement with RWT as it expects to be the sole operator
for its rainfall generation services. The all-in cost is expected to be approximately $425,000 that includes labor, a meteorologist and
other related costs. However, RWT has not implemented such strategy with any clients as of the date of this Annual Report, and cannot
assure you that it will be successful. Further, unforeseen issues associated with scaling up the technology at commercially viable levels
could negatively impact RWT’s business, financial condition and results of operations.
RWT’s growth is dependent upon its ability to successfully
support and service its clients.
Because RWT’s platform is expected to be unique in certain respects,
its future clients will require particular support and service functions, some of which are not currently available, and may never be
available. If RWT is unable to attract and retain the service and support staff needed in its client locations, it may not be able to
successfully launch pilot projects or support and maintain the installation and operation of projects that have been sold. If RWT experiences
delays in adding such support capacity or servicing its future clients efficiently, or experiences unforeseen issues with the reliability
of its platform, it could overburden RWT’s servicing and support capabilities. Similarly, increasing the number of RWT products
and services would require it to rapidly increase the availability of these services. Failure to adequately support and service its future
clients may inhibit RWT’s growth and ability to expand.
RWT may not manage growth effectively.
RWT’s failure to manage growth effectively could harm its business,
results of operations and financial condition. RWT anticipates that a period of significant expansion will be required to address potential
growth. This expansion will place a significant strain on RWT’s management, operational and financial resources. Expansion will
require significant cash investments and management resources and there is no guarantee that they will generate additional sales of RWT’s
products or services, or that RWT will be able to avoid cost overruns or be able to hire additional personnel to support them. In addition,
RWT will also need to ensure its compliance with regulatory requirements in various jurisdictions applicable to the sale, installation
and servicing of its products. To manage the growth of its operations and personnel, RWT must establish appropriate and scalable operational
and financial systems, procedures and controls and establish and maintain a qualified finance, administrative and operations staff. RWT
may be unable to acquire the necessary capabilities and personnel required to manage growth or to identify, manage and exploit potential
strategic relationships and market opportunities.
RWT will need additional capital to pursue its business objectives
and respond to business opportunities, challenges or unforeseen circumstances, and it cannot be sure that additional financing will be
available.
RWT will need additional capital to pursue its
business objectives. RWT’s business and its future plans for expansion are capital-intensive and the specific timing of cash inflows
and outflows may fluctuate substantially from period to period. RWT management currently estimates approximately $6.3 million and approximately
$62 million in expenses for its one-year and five-year business plan.
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As of December 31, 2024, after Closing, the Company
had approximately $37,000 in cash. Additionally, the Company has a $7 million line of credit from an affiliate of Harry You, of which
$839,000 has been borrowed as of the date of this Annual Report. The Company has adjusted production ramp-up in order to align with the
available funding. RWT’s management has determined that the RWT system’s design is complete, requiring no additional R&D
in the near-term, and that the main cash requirement for operations in the next 12 months will be production cost of additional units,
staffing and operations. The Company’s management determined that the Company has access to funds under the Loan Agreement,
and the affiliate of Harry You has the financial ability to provide such funds, that are sufficient to fund the working capital needs
of the Company over the next 12 months from the date of issuance of this Annual Report. However, RWT expects to require additional capital
to pursue its business objectives in the future. RWT’s business and its future plans for expansion are capital-intensive and the
specific timing of cash inflows and outflows may fluctuate substantially from period to period. However, we cannot assure you that the
Company will be able to obtain additional capital for its five-year business plan.
RWT’s operating plan may change because of factors currently
unknown, and RWT may need to seek additional funds sooner than planned, through public or private equity or debt financings or other sources,
such as strategic collaborations. Such financings may result in dilution to stockholders, issuance of securities with priority as to liquidation
and dividend and other rights more favorable than common stock, imposition of debt covenants and repayment obligations or other restrictions
that may adversely affect its business. In addition, RWT may seek additional capital due to favorable market conditions or strategic considerations
even if it believes that it has sufficient funds for current or future operating plans. There can be no assurance that financing will
be available to RWT on favorable terms, or at all. The inability to obtain financing when needed may make it more difficult for RWT to
operate its business or implement its growth plans.
Risks Relating to RWT’s Business and Industry
There are many risks and uncertainties that may affect RWT’s
operations, performance, development and results. Many of these risks are beyond RWT’s control. The following is a description of
the important risk factors that may affect RWT’s business and industry. If any of these risks were to actually occur, RWT’s
business, financial condition or results of operations could be materially adversely affected. Additional risks and uncertainties not
currently known to RWT or that RWT currently considers to be immaterial may also materially adversely affect its business, financial condition
or results of operations.
We have identified a material weakness
in our internal control over financial reporting as of and for the year ended December 31, 2023 and determined that it had not been
remediated as of December 31, 2024. If we are unable to develop and maintain an effective system of internal control over financial reporting,
we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us
and materially and adversely affect our business and operating results.
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 accounting principles generally accepted
in the United States of America (“U.S. GAAP”). Our management is likewise required, on a quarterly basis, to evaluate the
effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those
internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will
not be prevented or detected on a timely basis.
We have identified a material weakness in our internal control over
financial reporting as of and for the year ended December 31, 2023 regarding the calculation of deferred tax assets and disclosure of
income taxes in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Classification (“ASC”)
Topic 740, “Income Taxes.”. This misstatement led to a change in accounting for the correction of the error in calculating
the gross deferred tax asset and the offsetting valuation allowance, as well as the omission of certain income tax disclosures. However,
it did not impact RWT’s liquidity, cash flows, or operating costs during the period covered by RWT’s audited consolidated
financial statements. RWT’s management determined that the material weakness had not been remediated as of December 31, 2024. For
a discussion of management’s consideration of the material weakness identified related to such issues, see “Note 2”
of RWT’s audited consolidated financial statements including in the prospectus filed with the SEC on December 12, 2024.
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A material weakness is a deficiency, or a combination of deficiencies,
in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or
interim consolidated financial statements will not be prevented, or detected and corrected on a timely basis. Effective internal controls
are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material
weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately
have the intended effects.
We intend to take steps to remediate this material
weakness, including plans to hire or engage a specialist to assist in the preparation of the income tax provision and disclosures. The
elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately
have the intended effects.
Efforts to remediate this material weakness may
not be effective or prevent any future material weakness or significant deficiency in Holdco’s internal control over financial reporting.
If Holdco’s efforts are not successful or other material weaknesses or control deficiencies occur in the future, Holdco may be unable
to report its financial results accurately on a timely basis, which could cause Holdco’s reported financial results to be materially
misstated and result in the loss of investor confidence and cause the market price of the Class A Common Stock to decline. Ineffective
internal controls could also cause investors to lose confidence in Holdco’s reported financial information, which could have a negative
effect on the trading price of its stock. Failure to implement and maintain effective internal controls over financial reporting could
also subject Holdco to potential delisting from Nasdaq or any other stock exchange on which its stock is listed or to other regulatory
investigations and civil or criminal sanctions.
We can give no assurance that the measures that Holdco plans to take
in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial
results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or
circumvention of these controls. Holdco is required, pursuant to Section 404 of the Sarbanes-Oxley Act, to annually furnish a report
by management on, among other things, the effectiveness of its internal control over financial reporting. This assessment needs to include
disclosure of any material weaknesses identified by Holdco’s management in its internal control over financial reporting. Holdco
is required to disclose changes made in its internal control and procedures on a quarterly basis. To comply with the requirements of being
a public company, Holdco may need to undertake various actions, such as implementing new internal controls and procedures and hiring accounting
or internal audit staff. If Holdco is unable to hire the additional accounting and internal audit staff necessary to comply with these
requirements, Holdco may need to retain additional outside consultants. If Holdco is unable to conclude that its internal controls over
financial reporting are effective, investors may lose confidence in Holdco’s financial reporting, which could negatively impact
the price of Holdco’s securities.
We may face litigation and other risks
as a result of the restatement of RWT’s pre-merger audited consolidated financial statements and the material weakness in
RWT’s internal control over financial reporting.
RWT’s management and its board of directors concluded that it
was appropriate to restate RWT’s pre-merger previously issued and audited consolidated financial statements as of and for the year
ended December 31, 2023. As discussed in “Note 2” of RWT’s audited consolidated financial statements including in the
prospectus filed with the SEC on December 12, 2024, RWT identified a material weakness in its internal controls over financial reporting
regarding the calculation of deferred tax assets and disclosure of income taxes in accordance with FASB ASC 740.
As a result of such material weakness, the restatement and other matters
raised or that may in the future be raised by the SEC, RWT incurred additional costs, including increased accounting and legal fees, and
RWT faces (and RWT and Holdco following the Business Combination face) potential for litigation or other disputes which may include, among
others, claims invoking the federal and state securities laws, or other claims arising from the restatement and material weaknesses in
RWT’s internal control over financial reporting and the preparation of RWT’s consolidated financial statements. As of the
date of Annual Report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation
or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect
on the business of Holdco and its results of operations and financial condition.
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RWT can provide no assurance of the effectiveness and success
of ionization rainfall generation technology in increasing precipitation.
Commercial applications of ionization rainfall generation technology
are still at the initial stages of development, and further development and extensive testing will be required to determine its technical
feasibility and commercial viability. The scientific community continues to debate whether rainfall generation technology has been able
to produce statistically significant results in augmenting rainfall or other types of precipitation, with some authors suggesting that
it remains a “pseudo-science”, whereas other authors have found statistically meaningful results. At this point in time, given
the complexities of attributing increased precipitation to weather modification technologies, scientists have neither conclusively proven
nor disproven that ionization rainfall generation technologies and/or other types of weather modification technologies augment and optimize
precipitation.
RWT’s success will depend on its ability to prove and demonstrate,
to potential clients and the broader community, scientific and technological advances and to translate such advances into commercially
competitive products. Failure can occur at any stage of the process. If the development of this technology is not successful or the market
is not convinced that ionization rainfall generation technologies lead to demonstrable results, RWT may invest substantial amounts of
time and money without developing revenue-producing products. As RWT eventually enters into more robust development and trials of the
technology, the data and results generated may not be as compelling as earlier results in previous trials done by third parties.
In light of the unproven technology involved and the other factors
described elsewhere in this Annual Report, there can be no assurance that RWT will be able to successfully complete the development, commercialization
or marketing of any new technology or products which could materially harm its business, results of operations and prospects.
RWT has not demonstrated it can develop rainfall generation technology
and faces barriers in replicating meaningful rainfall generation. If RWT cannot successfully overcome those barriers, its business will
be negatively impacted and could fail.
Rainfall generation is a difficult undertaking.
There are significant engineering, technology, operational and climatological challenges that RWT must overcome to deliver consistent
results with its platform. RWT is in the development stage and faces significant challenges in the development of its rainfall generation
platform and in producing the necessary technology and machines in commercial volumes. Some of the development challenges that could prevent
the introduction of RWT’s technology include, but are not limited to, failure to: find scalable ways to secure real estate to set
up and operate trials, secure paying client engagements, hire key team members with relevant water expertise, address any and all permitting
requirements, establish prototyping scalability and bespoke supply chains, find adequate construction partners, and grow, create and train
a productive sales force. Additionally, RWT may fail to achieve a high degree of repeat success in rainfall generation, which could lead
to a failure to ensure client retention. RWT may also fail to realize the potential of rainfall generation technology.
RWT has not demonstrated it can market and sell its rainfall
generation technology and faces market barriers to entry that it may not be able to overcome.
RWT’s rain enhancement ionization technology is not widely adopted
or accepted in the market. RWT may face difficulties overcoming skepticism about its ability to create rain, or creating too much rain,
or taking rain away from areas where it could naturally fall. RWT may need to educate the market to develop a broader understanding and
acceptance of the science underlying the technology, as well as convince clients that the benefits justify the investment and costs of
implementing its technology. RWT faces further challenges to streamline its go-to-market strategy, integrate its technology with other
products and services, build its brand and engender loyalty while improving the core technology offering.
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RWT may not be able to manufacture its technology at the pace,
scale and volume needed to generate and meet market demand.
RWT will need to develop the manufacturing process necessary to make
rainfall generation technology in high volume. RWT has not yet devised or validated a manufacturing process or acquired the tools or processes
that may be necessary to produce rainfall generation technology that meets all commercial requirements. If RWT is not able to overcome
these manufacturing hurdles in building its technology, RWT’s business is likely to fail.
Even if RWT completes development and achieves volume production of
its platform, if the cost, performance characteristics or other specifications of the rainfall generation technology fall short of RWT’s
projections, RWT’s business, financial condition and results of operations would be adversely affected.
Additionally, developing manufacturing techniques to produce the volume
required to achieve forecasted production could hinder profitability in the future. If RWT’s technology fails to achieve a broad
advantage in generating rainfall, its business, financial condition and future prospects may be harmed.
The markets for rainfall generation-related products are in nascent
stages, and RWT may have limited opportunities to license our technologies or sell its products.
The rainfall generation industry is in the early stage of commercializing
rainfall generation technology. Skepticism around the efficacy of the technology’s ability to enhance rainfall has hindered previous
adoption.
RWT’s success will depend upon its ability to expand, scale its
operations, and increase its sales capability, which may take longer or be more expensive than expected. Unforeseen issues associated
with scaling up and constructing RWT’s technology at commercially viable levels could negatively impact RWT’s business, financial
condition and results of operations. RWT’s growth is dependent upon its ability to successfully market and sell rainfall generation
technology. RWT does not have experience with the mass distribution and sale of rainfall generation technology. Its growth and long-term
success will depend upon the development of its sales and delivery capabilities.
RWT may be harmed by competing technologies.
The markets in which RWT operates are rapidly evolving to address increasing
global need for reliable access to water, creating additional investment in competition. There has been significant improvement in water
generation technologies such as desalination and chemical-based cloudseeding. As these markets continue to mature and new technologies
and competitors enter such markets, RWT expects competition to intensify. RWT could lose market share and its revenues could decline,
thereby affecting its earnings and potential for growth. In particular, although RWT does not plan to use chemicals in its manufacturing
and production process, chemical-based cloudseeding companies may provide additional competition due to the maturity of chemical-based
technology, more established historical operational data, stronger research groups, demonstrated effects in specific use cases, market
acceptance and funding by recognized institutions.
In the future, RWT’s technologies may also compete with other
emerging technologies. These technologies may be less expensive and provide higher or additional performance. Companies with these competing
technologies may also have greater resources. Technological change could render its technologies obsolete, and new, competitive technologies
could emerge that achieve broad adoption and adversely affect the use of its technologies and intellectual property.
RWT will be dependent on its suppliers and manufacturers, and
supply chain issues could delay the introduction of RWT’s product and negatively impact its business and operating results.
RWT has not yet entered into relationships with potential suppliers
and manufacturers. However, when RWT enters into relationships with suppliers and manufacturers, it may face delays in the introduction
of its product due to supply chain issues. The manufacture, installation, production and operation of the ionization rainfall generation
technology is expected to be dependent upon third party suppliers, service providers and networks. When RWT begins contracting with suppliers
and manufacturers, it may be adversely affected if it is not able to obtain the required materials, supplies and critical spare parts
required to build the machinery and operate our technology.
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Any of the following factors (and others) could have an adverse impact
on RWT’s operations:
● a failure to retain key technical staff;
● financial problems of either manufacturers or component suppliers;
If any of the aforementioned factors were to materialize, it could
cause RWT to halt production of its rainfall generation technology and/or entail higher manufacturing costs, any of which could materially
adversely affect RWT’s business, operating results, and financial condition and could materially damage relationships with future
clients.
RWT’s products may not achieve market success, but will
still require significant costs to develop.
RWT believes that it must continue to dedicate significant resources
to its research and development efforts before knowing whether there will be market acceptance of its RWT rainfall generation technologies.
Furthermore, the performance of these products is uncertain. RWT’s rainfall generation services could fail to attain sufficient
market acceptance, if at all, for many reasons, including:
● pricing and the perceived value of RWT’s platform relative to its cost;
● ability to produce products fit for their intended purpose;
● failures to accurately predict market or client demands;
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● negative publicity about the performance or effectiveness of RWT’s technology;
● strategic reaction of companies that market competitive products; and
● the introduction or anticipated introduction of competing technology.
To the extent RWT is unable to effectively develop and market its rainfall
generation technologies to address these challenges and attain market acceptance, its business, operating results and financial condition
may be adversely affected.
RWT intends to make significant investments in new products and
services that may not achieve technological feasibility or profitability or that may limit RWT’s revenue growth.
RWT intends to make significant investments in research, development,
and marketing of new technologies, products and services. Investments in new technologies are speculative and technological feasibility
may not be achieved. Commercial success depends on many factors including demand for innovative technology, availability of materials
and equipment, selling price the market is willing to bear, competition and effective licensing or product sales. RWT may not achieve
significant revenues from new product and service investments for a number of years, if at all. Moreover, new technologies, products and
services may not be profitable, and even if they are profitable, operating margins for new products and businesses may not be as high
as the margins we have experienced historically or originally anticipated.
RWT may fail to obtain statistically significant results that
demonstrate its ability to enhance rainfall.
RWT intends to create standardized measurement approaches and collect
climatological data in order to demonstrate statistically significant results indicating its ability to successfully achieve rainfall
generation. Its ability to achieve replicable statistically significant results is not yet proven, and failure to do so may affect its
commercial success. Currently, there is limited research and no historical basis for RWT’s ability to develop, manufacture, and
deliver this technology, as well as on its ability to implement this technology regardless of location. RWT may also experience increased
costs relating to obtaining, analyzing, and reviewing data that demonstrates statistical significance of this technology in increasing
rainfall.
RWT may not be able to accurately estimate the future supply
and demand for its rainfall generation technology, which could result in a variety of inefficiencies in its business and hinder its ability
to generate revenue. If RWT fails to accurately predict how clients will adopt its platform, it could incur additional costs or experience
delays.
It is difficult to predict RWT’s future revenues and appropriately
budget for its expenses, and RWT may have limited insight into trends that may emerge and affect its business. RWT anticipates being required
to provide forecasts of its demand to its current and future suppliers prior to the scheduled delivery of products and technology to potential
clients. Currently, there is limited research and no historical basis for making judgments on the demand for rainfall generation technology
or its ability to develop, manufacture, and deliver this technology, or RWT’s profitability, if any, in the future. If RWT overestimates
client adoption of its platform, its suppliers may have excess inventory, which indirectly would increase RWT’s costs. If RWT underestimates
its requirements, its suppliers may have inadequate inventory, which could interrupt manufacturing of its products and result in delays
in shipments and revenues. In addition, lead times for materials and components that RWT’s suppliers order may vary significantly
and depend on factors such as the specific supplier, contract terms and demand for each component at a given time. If RWT fails to accurately
qualify client adoption curves of its platform in the near- and medium-term period, which may cause failure to order sufficient quantities
of product components in a timely manner, the delivery of its technology to its potential clients could be delayed, which would harm RWT’s
business, financial condition and operating results.
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RWT may fail to accurately estimate the size and growth of client
demands.
There is no assurance that RWT will be able to ramp its business to
meet client demands about rainfall timing and predictability. Potential clients may require rapid increases in production on short notice.
RWT may not be able to purchase sufficient supplies or allocate sufficient manufacturing capacity to meet such increases in demand. Rapid
client ramp-up in the future and significant increases in demand may strain RWT’s resources or negatively affect its margins. Inability
to satisfy client demand in a timely manner may harm its reputation, reduce its other opportunities, damage its relationships with clients,
reduce revenue growth, and/or cause it to incur contractual penalties. Failure to grow at rates similar to that of other competitors in
the industry may adversely affect RWT’s operating results and ability to effectively compete within the industry.
RWT may fail to find adequate sites to operate its platform and
machinery.
RWT’s ability to meet its financial and operating objectives
depends on its ability to find adequate sites to operate its machines and platform, which can be difficult and expensive. The process
to find adequate sites (including leases) requires compliance with numerous zoning, environmental, and governmental requirements. Further,
the cost of operation, including leases, may become economically unfeasible causing RWT to abandon or cease operations at said site. RWT’s
ability to find such sites could hinder our financial operating objectives and adversely affect operating results.
RWT may be affected by failures of its clients, both private
and public, to meet their payment obligations.
A failure of RWT’s future clients to meet their payment obligations
may affect its ability to receive payments under its contracts. In addition to RWT’s potential contracts with private parties, RWT
intends to derive a portion of its revenues directly or indirectly from contracts with federal, state and city agencies, and other governmental
authorities of various countries, in areas relating to, among others, water resiliency, decarbonization, forest fire mitigation, agricultural
and other water infrastructure projects. The funding of these programs could be reduced or eliminated due to numerous factors beyond RWT’s
control, including lack of funding or budgetary constraints due to current political party views, geopolitical events, sovereign default,
and other macro- or micro-economic conditions. A reduction or elimination of government spending under RWT’s contracts could cause
a material adverse effect on its business, financial condition, results of operations and cash flow.
RWT’s clients may refuse to pay for rainfall generation
services that directly or indirectly benefit other nearby parties.
RWT expects its offerings to have an expansive
operating range, with rainfall occurring anywhere within an approximately 50-mile radius. Accordingly, there may be situations where a
party who has not paid for RWT’s technology could still benefit from nearby rain enhancement, particularly since the success of
the technology is linked to specific weather conditions. It is possible that RWT’s clients may not want and/or fail to meet some
or all of their payment obligations when the rain enhancement did not solely or directly benefit them or the specific area it was intended
to. This failure to collect payment owed may adversely harm RWT’s business, financial condition and operating results.
RWT’s future success depends in part on recruiting and
retaining key personnel and failure to do so may make it more difficult for us to execute the business strategy.
RWT is dependent upon the continued services of
key personnel, including members of its executive management team. The loss of any one of these individuals could disrupt our operations
or its strategic plans. Additionally, RWT’s future success will depend on, among other things, its ability to hire and retain the
necessary qualified sales, marketing and managerial personnel, for whom it competes with numerous other companies, academic institutions
and organizations. If RWT loses key employees, if it is unable to retain other qualified personnel, or if its management team is not able
to effectively manage it through these events, RWT’s business, financial condition, and results of operations may be adversely affected.
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RWT’s operations, projects and prospects will be located
in remote areas, and its production, processing and product delivery will rely on the infrastructure and skilled labor being adequate
and remaining available.
RWT’s success depends to a significant extent on its ability
to attract, hire, and train qualified employees, including its ability to attract employees with the necessary skills in the regions in
which it will operate. While very technical skills should not be required for basic construction and ongoing maintenance of RWT’s
platform, in order to successfully operate its technology, it will need to hire qualified project managers, engineers, and statisticians
who, respectively, can properly and self-sufficiently maintain and manage its technology suite, evaluate weather data, and have the required
expertise to improve system design and functionality. RWT could experience increases in its recruiting and training costs and decreases
in its operating efficiency, productivity and profit margins if it is unable to attract, hire and train a sufficient number of skilled
employees to support its operations.
RWT’s business is dependent on the international market
prices of energy and fiberglass, among other materials, which are both cyclical and volatile.
RWT expects that its business and financial performance will be affected
by the market prices of energy needed to power the platform. Although its cost and energy requirements are expected to be modest on a
per gallon basis, prices of energy have been subject to wide fluctuations and are affected by numerous factors beyond RWT’s control,
including international economic and political conditions, the cyclicality of consumption, actual or perceived changes in levels of supply
and demand, the availability and costs of substitutes, inventory levels maintained by users, actions of participants in the commodities
markets and currency exchange rates. Current or future semiconductor shortages could also affect production. In addition, market prices
and supply chain delays in obtaining fiberglass (the key material required for the apparatus design) could potentially inhibit production
schedules.
System security and data protection breaches, as well as cyber-attacks,
could disrupt RWT’s operations, which may damage RWT’s reputation and adversely affect its business.
In recent years, cyberattacks, including denial-of-service attacks,
ransomware attacks, business email compromises, computer malware, viruses, social engineering (including phishing) and other tactics designed
to gain access to and exploit sensitive information by breaching mission critical systems of large organizations have increased in volume
and sophistication. RWT’s information technology systems and automated machinery, which it will rely on to operate its business,
could be exposed to such tactics. RWT may also experience unavailable systems, unauthorized access or disclosure due to employee theft
or misuse, sophisticated nation-state and nation-state supported actors and advanced persistent threat intrusions. RWT may be unable to
implement adequate preventative measures or stop security breaches while they are occurring, and attackers may sabotage or to obtain unauthorized
access to RWT’s systems, networks, or physical facilities. Actual or perceived breaches of RWT’s security measures or the
accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about
RWT, its partners, its clients or third parties could expose us and the parties affected to a risk of loss or misuse of this information,
resulting in litigation and potential liability, paying damages, regulatory inquiries or actions, damage to the RWT brand and reputation
or other harm to the RWT business. Additionally, cyberattacks that impacts RWT’s ability to operate its platform could result in
production errors, processing inefficiencies and unscheduled downtime/degradation of operations, in turn causing the loss of sales and
clients, and decreased revenue and increased overhead costs, which could have a material adverse effect on our results of operations.
Unfavorable conditions in RWT’s industry or the global
economy, could limit RWT’s ability to grow its business and negatively affect its results of operations.
RWT’s results of operations may vary based on the impact of changes
in its industry or the global economy on RWT or its potential clients. Negative conditions in the general economy both in the United States
and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, international
trade relations, pandemics (such as the COVID-19 pandemic), political turmoil, natural catastrophes, warfare, and terrorist attacks on
the United States or elsewhere, could cause a decrease in business investments, including the progress on development of rainfall generation
technologies, and negatively affect the growth of RWT’s business. In addition, in challenging economic times, potential future clients
may experience cash flow problems and as a result may modify, delay or cancel plans to purchase RWT’s products and services. Additionally,
if RWT’s clients are not successful in generating sufficient revenue or are unable to secure financing, they may not be able to
pay, or may delay payment of, accounts receivable due to RWT. Moreover, RWT’s key suppliers may reduce their output or become insolvent,
thereby adversely impacting RWT’s ability to manufacture its products. Furthermore, uncertain economic conditions may make it more
difficult for RWT to raise funds through borrowings or private or public sales of debt or equity securities. RWT cannot predict the timing,
strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry.
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Holdco may invest in or acquire other businesses in the future,
which may or may not be complementary to the RWT business. Investing in or acquiring other businesses will require the devotion of a significant
amount of time and resources, may not be successful, and could negatively impact Holdco’s results of operations, financial condition
and liquidity.
Following the Closing, each of RWT (as the surviving
entity of the Company Merger) and Merger Sub 1 (as the surviving company of the SPAC Merger) are wholly-owned subsidiaries of Holdco.
We intend for the business of developing, improving, and commercializing ionization rainfall generation technology to continue to be conducted
by RWT as a subsidiary of Holdco.
Under the Holdco A&R Articles, Holdco may engage in any and all
lawful business for which a business corporation may engage in under the MBCA. In the future, Holdco, directly or indirectly, may acquire
additional businesses or assets which may or may not be complementary to the RWT business. The costs of such acquisitions may be substantial,
including as a result of professional fees and due diligence efforts. There is no assurance that the time and resources expended on pursuing
a particular acquisition will result in a completed transaction, or that any completed transaction will ultimately be successful. In addition,
Holdco may be unable to identify suitable acquisition or strategic investment opportunities, or may be unable to obtain any required financing
or regulatory approvals, and therefore may be unable to complete such acquisitions or strategic investments on favorable terms, if at
all.
Holdco may decide to pursue acquisitions with which its investors may
not agree and Holdco cannot assure investors that any acquisition or investment will be successful or otherwise provide a favorable return
on investment. If Holdco acquires a business or assets that are not complementary to the RWT business, such business or assets may not
be able to leverage our existing infrastructure or operational experience, which may increase the costs and risk associated with such
acquisitions, and we may determine in connection with such acquisition or afterward to separate the ownership of such business or assets
from that of RWT through a spin-off, split off or otherwise of RWT or of such business or assets.
In addition, acquisitions and the integration thereof will require
significant time and resources and place significant demands on Holdco’s management, as well as on its operational and financial
infrastructure. Risks related to the successful integration of an acquired business include:
● failure to retain key personnel; and
● delays or cost-overruns in the integration process.
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Holdco’s inability to manage its growth through acquisitions,
including the integration process, and to realize the anticipated benefits of an acquisition could have a material adverse effect on its
business, financial condition and results of operations.
Risks Relating to the Environment, Health and Safety
The efficacy of RWT’s machines could be materially adversely
affected by changes to weather conditions generally, as a result of climate change or otherwise.
The revenues expected to be generated by RWT’s
machines are correlated to weather conditions, and timing and predictability of its operations is subject to environmental conditions
that RWT cannot ultimately control. The technology does not allow rainfall to be created. It may enhance the amount and possibility of
rainfall when conditions are appropriate in the atmosphere and when cloud formation is underway in an approximately 40-mile radius, according
to third-party testing, thus this is dependent upon irradiance and weather conditions generally. Weather conditions have natural variations
from season to season and from year to year and may also undergo long-term or permanent change because of climate change or other factors.
While RWT may try to reduce such risks through studies of present or historical conditions or modeling of future conditions, projections
of rain depend on assumptions about weather patterns, shading and irradiance, which are inherently uncertain and may not be consistent
with actual conditions at the site. A sustained decline in weather conditions could lead to a material adverse change in the volume of
rain generated, revenues and cash flow.
Additionally, climate change may increase the frequency and severity
of adverse weather conditions, such as tropical storms, wildfires, droughts, floods, hurricanes, tornadoes, ice storms or extreme temperature,
and may have the long-term effect of changing weather patterns, which could result in more frequent and severe disruptions to our technology.
Such disruptions may include, among other things, damage to or destruction of our assets or to assets required for weather generation
or the impaired operation or forced shutdown of these assets.
Furthermore, because RWT’s platform will rely on appropriate
conditions, client satisfaction might be hindered by the factors such as wind speed, wind direction or lack of wind. If these machines
are unable to produce the levels the client want, demands for RWT’s services may decrease and its business may be adversely affected.
Clients may experience significant financial inputs from insufficient rain increases hindered by the weather.
Clients and others may hold RWT accountable for changing environmental
and/or weather conditions, including challenges resulting from excessive rain.
Changes in rainfall patterns may lead to extreme
weather conditions and unintended consequences, including, but not limited to, excessive rains, increased hail, natural disasters like
mudslides, flooding, changes in rainfall patterns, increased or decreased temperatures, and increased storm frequency and tendency. While
RWT does not believe that its product could lead to such extreme environmental conditions as RWT expects to be able to control when the
rain enhancement machines are turned off and on, changes in environmental conditions in the areas in which it operates could have a material
adverse effect on its reputation, which may adversely affect its operations. The RWT technology has a large target area coverage which
has the potential to generate excess rainfall outside or in extension to desired locations. Timing of targeted rainfall generation is
also highly variable, meaning that additional rain may occur at inopportune times, for example during the day in tourism-focused areas.
Clients and others dependent on RWT’s services may hold
RWT accountable for any failures to fulfill increased rainfall expectations.
RWT’s future rainfall generation technology may fail to meet
RWT’s projections for increased rainfall for a variety of reasons, including, but not limited to, technological malfunctioning,
regulatory impediments, and operational or financial conditions. Clients whose projects depend on increased rainfall may hold RWT accountable
for any failures to increase rainfall and the subsequent effect on their respective businesses, such as, a negative return on investments
in agricultural projects dependent on increased rainfall. RWT may suffer or be exposed to liability or costly litigation from its clients
or others whose dependency on increased rainfall is affected. In addition, RWT’s reputation may be adversely affected, which may
adversely affect RWT’s operations and financial condition.
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ESG issues, including those related to climate change and sustainability,
may have an adverse effect on RWT’s business, financial condition and results of operations and damage our reputation.
There is an increasing focus from certain investors, customers, consumers,
employees and other stakeholders concerning environmental, social, and governance matters (“ESG”). Additionally, public interest
and legislative pressure related to public companies’ ESG practices continue to grow, particularly as the SEC considers new rulemaking
related to ESG disclosure. If RWT’s ESG practices fail to meet regulatory requirements or investor, customer, consumer, employee
or other stakeholders’ evolving expectations and standards for responsible corporate citizenship in areas including environmental
stewardship, support for local communities, board of directors and employee diversity, human capital management, employee health and safety
practices, product quality, corporate governance and transparency, its reputation, brand and employee retention may be negatively impacted,
and its clients and suppliers may be unwilling to continue to do business with RWT.
Customers, consumers, investors and other stakeholders are increasingly
focusing on environmental issues, including climate change, dams, energy and water use, and other sustainability concerns. Concern over
climate change, in particular, may result in new or increased legal and regulatory requirements to reduce or mitigate impacts to the environment.
If RWT does not adapt to or comply with new regulations, or if it fails
to comply with disclosure requirements and consequently fail to meet evolving regulatory, investor, industry or stakeholder expectations
and concerns regarding ESG issues, investors may reconsider their capital investment in RWT, and customers and consumers may choose to
stop purchasing its products, which could have a material adverse effect on our reputation, business or financial condition.
Political, regulatory and social opposition to our activities
could adversely impact RWT’s business and reputation.
Disputes and protests related to the nature of RWT’s business
may arise from time to time. In some instances, lobbying by competitive chemical-based cloudseeding and desalination technologies could
slow RWT’s growth and ability to address target markets. Disagreements or disputes with research group, institutions, and lobbying
groups for competing technology could cause delays or interruptions to RWT’s operations, adversely affect its reputation or otherwise
hamper its ability to conduct our operations.
Certain individuals or groups opposed to ionization rainfall generation
technology may take actions to disrupt RWT’s operations and projects, and they may continue to do so in the future, which may harm
its operations and could adversely affect its business. Given the variety of rainfall generation approaches, competing claims regarding
the efficacy of each approach may make it difficult to delineate the relative impact each approach has on rainfall generation. Certain
individuals or groups may oppose RWT’s operations by accusing us of unsubstantiated claims regarding environmental pollution and/or
health risks, as well as point to RWT’s shorter operating history to create uncertainty around the statistical significance of the
historical results of its technology. Social demands and conflicts could have a material adverse effect on RWT’s business and results
of operations and areas in which it operates.
Risks Relating to Intellectual Property & Technology
Existing ionization rainfall generation technologies may largely
be in the public domain and RWT’s competitors could develop and commercialize products similar or identical to RWT’s, and
its ability to successfully commercialize its products may be adversely affected. Therefore, success of RWT’s business is dependent
on its ability to create and implement new technologies and to obtain and maintain patent protection for such technologies.
As existing ionization rainfall generation technologies are based on
approximately 70 years of technological efforts beginning in the 1950s, the current state-of-the-art of this technology may largely be
in the public domain. Therefore, RWT’s competitors could develop and commercialize products similar or identical to RWT’s,
and its ability to successfully commercialize its products may be adversely affected, and RWT’s success depends on its ability to
create and implement new or improved ionization rainfall generation technologies that are proprietary to RWT. RWT will devote significant
resources to developing new technologies and intends to seek patent protection to achieve a competitive advantage. RWT’s research
and development efforts may require long development cycles and a substantial investment before RWT can determine the commercial viability
of any resulting technologies. Moreover, there is no assurance that RWT can successfully develop, deploy and market new or improved technologies
in a timely or commercially acceptable fashion or obtain patent protection over such technologies. Even if RWT is able to obtain patents
covering such technologies, it is still uncertain whether these patents will be contested, circumvented, invalidated or limited in scope
in the future. The rights granted under any issued patents may not provide RWT with meaningful protection or competitive advantages, and
some foreign countries provide significantly less effective patent enforcement than in the United States, particularly in those countries
where RWT’s solutions are likely to be deployed, resulting in significant harm to RWT’s business, financial position, results
of operations and cash flows.
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If RWT fails to protect and enforce its existing and future technology
and intellectual property, its business will suffer.
RWT believes that its success will depend in large part on its ability
to protect its existing and future technology and intellectual property, including its ability to obtain intellectual property protection
in a timely manner, its ability to convince third parties of the applicability of its potential intellectual property rights to its products
and its ability to enforce its intellectual property rights. RWT intends to achieve the foregoing through a combination of license, development
and non-disclosure agreements and other contractual provisions and patent, trademark, trade secret and copyright laws However, regardless
of RWT’s efforts to protect its future technology and intellectual property, third parties may attempt to copy or otherwise obtain
and use such technology, including through the compromise of RWT’s trade secrets. Monitoring unauthorized use of RWT’s future
intellectual property may be difficult and costly, and the steps RWT will take to prevent misappropriation may not be sufficient. Any
enforcement efforts RWT undertakes, including litigation, could be time-consuming and expensive and could divert management’s attention,
which could harm its business, results of operations and financial condition. In addition, existing intellectual property laws and contractual
remedies may afford less protection than needed to safeguard RWT’s potential intellectual property, as patent, copyright, trademark
and trade secret laws vary significantly throughout the world. A number of foreign countries do not protect intellectual property rights
to the same extent as do the laws of the United States. Therefore, RWT’s potential intellectual property rights may not be as strong
or as easily enforced outside of the United States and efforts to protect against the unauthorized use of RWT’s intellectual property
rights, technology and other proprietary rights may be more expensive and difficult outside of the United States. If RWT fails to adequately
protect its future technology and intellectual property, its licensees and competitors may seek to use its technology and intellectual
property without the payment of license fees and royalties, which could weaken its competitive position, reduce its operating results
and increase the likelihood of costly litigation.
The intellectual property rights of others may prevent RWT from
commercializing its products or developing new technology or entering new markets, and RWT’s business may suffer or be exposed to
liability or costly litigation if third parties assert that RWT violates their intellectual property rights.
RWT’s success depends in part on its ability to commercialize
its products and continually adapt to incorporate new technologies and to expand into markets that may be created by new technologies.
However, RWT may become subject to intellectual property disputes that prevent it from commercializing its products, introducing new technologies
or expanding into new markets. Therefore, RWT’s success depends, in part, on its ability to develop and commercialize its products
without infringing, misappropriating or otherwise violating the intellectual property rights of third parties. However, RWT may not be
aware that its products are infringing, misappropriating or otherwise violating third-party intellectual property rights and such third
parties may bring claims alleging such infringement, misappropriation or violation. For example, there may be issued patents of which
RWT is unaware, held by third parties that, if found to be valid and enforceable, could be alleged to be infringed by RWT’s offerings.
There also may be pending patent applications of which RWT is not aware that may result in issued patents, which could be alleged to be
infringed by RWT’s offerings. Because patent applications can take years to issue and are often afforded confidentiality for some
period of time there may currently be pending applications, unknown to RWT, that later result in issued patents that could cover RWT’s
future technologies. Lawsuits can be time-consuming and expensive to resolve, and they divert management’s time and attention. RWT’s
platform may not be able to withstand any third-party claims against its use. In addition, many companies have the capability to dedicate
substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. In
a patent infringement claim against RWT, RWT may assert, as a defense, that we do not infringe the relevant patent claims, that the patent
is invalid or both. RWT does not have a large patent portfolio which it could use in counter-claims as part of a defense against infringement.
The strength of RWT’s defenses will depend on the patents asserted, the interpretation of these patents, and its ability to invalidate
the asserted patents. However, RWT could be unsuccessful in advancing non-infringement and/or invalidity arguments in its defense. In
the United States, issued patents enjoy a presumption of validity, and the party challenging the validity of a patent claim must present
clear and convincing evidence of invalidity, which is a high burden of proof. Conversely, the patent owner need only prove infringement
by a preponderance of the evidence, which is a lower burden of proof. If a third party is able to obtain an injunction preventing us from
accessing such third-party intellectual property rights, or if RWT cannot modify its technology to make it non-infringing, or license
or develop alternative technology for any infringing aspect of our business, it may be forced to limit or stop sales of its products or
cease business activities related to such intellectual property. RWT cannot predict the outcome of lawsuits and cannot ensure that the
results of any such actions will not have an adverse effect on its business, financial condition or results of operations. Any intellectual
property litigation to which RWT might become a party, or for which it is required to provide indemnification, regardless of the merit
of the claim or its defenses, may require RWT to do one or more of the following:
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● rebrand RWT or pursue a different trademark; or
● indemnify organizations using RWT’s platform or third-party service providers.
Even if the claims do not result in litigation or are resolved in RWT’s
favor, these claims, and the time and resources necessary to resolve them, could divert the resources of its management and harm its business