{"url_path":"/sec/ibatf/10-k/2026/item-1a","section_key":"item-1a","section_title":"Item 1A Risk Factors.","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-18","source_url":"https://www.sec.gov/Archives/edgar/data/1786318/0001193125-26-274679-index.html","accession_number":"0001193125-26-274679","cik":"0001786318","ticker":"IBATF","issuer_name":"INTERNATIONAL BATTERY METALS LTD.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1786318/0001193125-26-274679-index.html","primary_entity_key":"0001786318","primary_entity_name":"INTERNATIONAL BATTERY METALS LTD."},"word_count":12866,"has_tables":true,"body_markdown":"Item 1A. Risk Factors.\n\nYou should carefully consider the information in this Annual Report, including the matters addressed under “Cautionary Statement Regarding Forward-Looking Statements” and the following risks before making an investment decision. If any of the following risks actually occur, the trading price of our Common Shares could decline, and you may lose all or part of your investment. Additional risks not presently known to us or that we currently deem immaterial could also materially affect our business.\n\nRisks Relating to Our Business\n\nWe are a pre-revenue, development-stage company with a limited operating history, an untested business model and significant commercialization risk, and we may never generate positive cash flow or achieve profitability.\n\nWe are a pre-revenue, early commercialization-stage company and have not yet generated meaningful revenue from operations. In addition, our principal asset consists of a new technology, the MDLE Plant technology, which was created by us and our Initial MDLE Plant that we are seeking to deploy. Therefore, we are, and expect for the foreseeable future to be, subject to all the risks, expenses and uncertainties frequently encountered by companies developing and commercializing new technologies. Furthermore, our business model and the MDLE Plant technology remains in the early stages of validation. Our ability to generate revenue and achieve profitability depends on a number of factors, including our ability to (1) raise sufficient capital to customize and deploy the Initial MDLE Plant once we have retained our initial customer, (2) demonstrate the commercial viability of our technology, (3) continue to develop and commercialize the next generation of MDLE Plant technology, (4) retain key management, (5) appropriately respond to lithium price volatility and competitive pressures arising from new technologies and (6) adapt to changes in demand and regulation.\n\nFurthermore, there is no generally accepted measure of the market size for lithium-based products or for the addressable market for our technology, which makes forecasting demand and financial results difficult. If our assumptions regarding market demand, commercialization timing, customer adoption or economic returns prove inaccurate, we may never generate positive cash flow or achieve profitability, and our business, financial condition and results of operations could be materially adversely affected. In addition, the commercial terms on which we may be able to deploy, license or otherwise monetize our technology remain uncertain, including expected economics, royalty structures, customer demand and timing of adoption.\n\nOur success as a company developing technology to extract and process lithium chloride depends largely on our research and development capabilities.\n\nOur success as a company developing technology to extract and process lithium chloride, which is then converted to lithium carbonate, depends on our ability to develop and implement a DLE technology that is more efficient than current lithium extraction processes and those developed by our competitors. Many DLE technologies are emerging and being tested at scale, with a handful of projects outside of the U.S. already in the commercial stage. Furthermore, the industries and market segments in which we operate are subject to rapid technological developments, evolving industry standards, changes in customer requirements, including with respect to lithium carbonate purity, and competitive new products and features. We expect to continue to make significant investment in our MDLE technology, including our proprietary columns and media, and we will need to continue to invest heavily to scale our operational capabilities to ultimately enable our customers to extract sufficient levels of lithium chloride. In addition, many of our existing or potential competitors have significantly more resources than us and may develop technologies which are similar or superior to our technology or are more competitively priced. As it is often difficult to project the time frame for developing new technologies and the duration of the market window for these products, there is a substantial risk that we may have to abandon a potential technology that is no longer commercially viable, even after we have invested significant resources in the development of such technologies. If we fail in developing competitively advantaged technology or securing adequate capital, our business, prospects, financial condition and results of operations may be materially and adversely affected.\n\nWe will need to incur significant funds in connection with the identification of a customer for, and deployment of, our Initial MDLE Plant and may be unable to secure sufficient capital to fund these costs.\n\nIn connection with the process of obtaining a customer for our Initial MDLE Plant, we have and will continue to expend sufficient funds. For example, we have and will continue to incur (i) sales and marketing costs as we seek to identify and negotiate with brine aquifer resource holders who would benefit from our Initial MDLE Plant and (ii) research and development expenses as we seek to provide potential customers with proof of concept for our MDLE Plant technology and the effectiveness of our proprietary medium. In addition, once we have entered into an agreement for deployment of our Initial MDLE Plant we will need to incur capital expenditures to customize and increase the output of the Initial MDLE Plant for our initial customer and additional deployment costs, which will vary based on the location of our initial customer. Our Initial MDLE Plant must be customized to the specific needs and resources of each customer and depending on the lithium content within a specific brine resource. Based on ongoing discussions with potential customers\n\n10\n\n[Table of Contents](#toc_page)\n\n \n\nand their requirements based on their specific brine concentrations, we anticipate that we will need to spend approximately between $2.0 to $12.0 million in capital expenditure customizations to add components such as additional heat exchangers, pumps, condensate coolers, a reverse osmosis unit, chillers, tanks and pipelines to increase the flowrate to fully utilize the twelve-column absorption capacity and expand the MDLE Plant’s capacity.\n\nWe do not currently have revenue or sufficient cash to fund these significant expenses. Historically, we have relied on equity financing transactions to fund our operations, as conventional bank financing has not been available to us, given our early commercialization stage. If we fail to achieve our business plan or are negatively impacted by risks outside of our control, there can be no assurance that such equity financing transactions will be available in the future or available on such terms as are acceptable by us. If we are unable to raise these funds, then our ability to place our Initial MDLE Plant in-service would be significantly impaired and we will not be able to fully recover the amounts capitalized as of March 31, 2026. In addition, our financial condition and our ability to continue to operate would be materially and adversely affected.\n\nFurthermore, even once we deploy our Initial MDLE Plant we expect to require significant funds for sales and marketing costs and research and development expenses. As we currently anticipate that the revenue from our deployment of our Initial MDLE Plant will be structured as some sort of recurring revenue of a significant period of time, we do not expect that such revenue will be sufficient to meet these funding requirements. If we are unable to fund these future operating costs, then our ability to develop the next generation of MDLE Plant technology would be materially and adversely affected and our financial condition and results of operations would be materially and adversely affected.\n\nWe have historically incurred losses, expect future losses, and may never achieve or maintain profitability.\n\nWe have incurred substantial losses since our inception, and we expect to incur additional operating losses. We have not generated revenue from commercial deployment of our MDLE Plant technology or established profitable operations, and although we reported net income of $0.1 million for the year ended March 31, 2026 and a net loss of $3.5 million for the year ended March 31, 2025, we may never generate positive cash flow or achieve profitability. The extent of our future losses is unpredictable, and our prospects must be weighed against the risks and uncertainties encountered by us in the continuously evolving mining and minerals industry, including the risks described throughout this annual report. If we cannot successfully address these risks, our business and financial condition may suffer.\n\nThe success of our business will depend on our ability to identity and successfully negotiate commercially reasonable agreements with potential customers to install and operate our MDLE Plants.\n\nOur success is highly dependent on our ability to effectively identify and negotiate an agreement, on commercially reasonable terms, for the placement of our Initial MDLE Plant to a new customer and to build and market additional MDLE Plants based on our proprietary technology. Furthermore, we will need to customize our Initial MDLE Plant to address the specific geography and brine quality of our initial commercial customer and depending on the lithium content within a specific brine resource. Based on ongoing discussions with potential customers and their requirements based on their specific brine concentrations, we anticipate that we will need to spend approximately between $2.0 to $12.0 million in capital expenditure customizations to add components such as additional heat exchangers, pumps, condensate coolers, a reverse osmosis unit, chillers, tanks and pipelines to increase the flowrate to fully utilize the twelve-column absorption capacity and expand the Initial MDLE Plant’s capacity. There are a limited number of customers who have resources that could utilize our MDLE technology and they may prefer other DLE technology or other DLE technology may provide a less expensive or more effective process based on the nature of their natural resources. Should future customers prefer DLE technology from our competitors, it could materially and adversely affect our business or financial condition.\n\nOur long-term success depends on our ability to provide customers the ability to extract lithium chloride from their brine and convert the resulting lithium chloride into lithium carbonate.\n\nOur MDLE Plant produces lithium chloride from brine resources that must then be converted into lithium carbonate in a separate carbonation facility before it can be used in industrial products, such as electric batteries. It may be difficult to identify customers for our MDLE Plant that already have, or have the financial resources to construct, their own carbonation facilities. Consequently, we may need to either partner with or acquire access to carbonation facilities in order to provide customers with an end-to-end process which extracts lithium and delivers battery grade lithium carbonate. While the carbonation process is an established technology, the facilities are capital intensive and we may not have the resources or be able to find a partner with the resources to fund the carbonation process. If we are unable to identify customers that can implement the carbonation process themselves and are unable to deliver customers an end-to-end process which produces lithium carbonate, we may not be able to sell our current or any future MDLE Plants which would materially and adversely affect our financial condition.\n\nWe face intense competition, and we may not be able to compete successfully.\n\nThe lithium extraction market in which we participate is highly complex, competitive and growing very rapidly. It is characterized by aggressive expansion and entry from existing and new players and emerging technologies. We compete with other companies that are developing or have developed technology designed to exploit similar markets to those in which we plan to operate. However, many of these other companies have substantially greater financial and other resources than we do. There can be no assurance\n\n11\n\n[Table of Contents](#toc_page)\n\n \n\nthat developments by other companies will not adversely affect the competitiveness of our technology. The DLE industry is characterized by extensive R&D efforts and rapid technological change. Competition can be expected to increase as technological advances are made and commercial applications for DLE technology increase. In addition, our competitors may use different technologies or approaches to develop technology like the technology we have developed or may develop new or enhanced technology or processes that may be more effective and less expensive. Furthermore, battery grade lithium does not have uniform specifications among end customers. Therefore, our MDLE Plant technology installed at a customer’s site needs to be customized and tailored to extract lithium per individual customer specifications and demands. It is critical to our success that we are able to anticipate and respond to changes in technology and industry standards and new customer challenges by consistently developing and refining our core technology to meet or exceed the changing challenges and needs of our customers.\n\nMoreover, our success is largely dependent on our ability to achieve and maintain the competitive differentiation of our MDLE Plant technology. Any failure to develop high-quality advancements to our technology could adversely affect our reputation, our ability to lease our MDLE Plants to existing and prospective customers, and our operating results. There can be no assurance that our Initial MDLE Plant or any other technology developed by us will compete successfully or that research and new industry developments will not render our technology obsolete or uneconomical.\n\nDemand and fluctuation in market prices for lithium will greatly affect the results of our operations and our ability to successfully execute on our business plan.\n\nThe prices of commodities fluctuate daily. Price volatility could have dramatic effects on the results of operations and our ability to execute our business plan. According to Benchmark Mineral Intelligence, the Global Weighted Average price of lithium carbonate prices were approximately $9,000 per metric ton in 2025 which represents more than an 80% decline from 2022. Although lithium prices have recovered during the first three months of 2026 and were at approximately $20,000 per metric ton at March 31, 2026, there can be no guarantees that the price of lithium carbonate will remain stable or increase, given the continued rise and focus by governments on transitioning away from fossil fuels to meet global clean energy goals. The price of lithium materials may also be reduced by the discovery of new lithium deposits and production methods, which could not only increase the overall supply of lithium (causing downward pressure on its price) but could draw new entrants into the lithium extraction industry that could compete with us. Even if our MDLE Plant technology is able to produce commercial quantities of lithium, there is no guarantee that a profitable market will exist for the sale of lithium-based end products.\n\nOur business will be significantly affected by changes in the market price of lithium-based end products, such as lithium carbonate and lithium hydroxide. Factors beyond our control may affect the marketability of any lithium produced. The prices of various metals have experienced significant fluctuations over short periods of time and are affected by numerous factors beyond our control, including international economic and geopolitical trends, inflation, currency exchange rates, changes in interest rates and global or regional consumption patterns, speculative activities and increased production due to improved mining and production methods. The supply of and demand for lithium is affected by various factors, including, among others, political events, economic conditions, and production costs in major producing regions. Furthermore, the price of lithium-based end products is significantly affected by their purity and performance, and by the specifications of end-user battery manufacturers. If the lithium produced from our MDLE Plant technology does not meet battery-grade quality and/or does not meet customer specifications, pricing will be reduced from that expected for battery-grade product. In turn, the availability of customers may also decrease. We may not be able to effectively mitigate against pricing risks for our products. Depressed pricing for lithium-based end products will affect the level of revenues expected to be generated by us, which in turn could affect our share price and the potential value of our MDLE Plant technology. There can be no assurance that the price of lithium will be such that our MDLE Plant technology can be deployed at a profit. In addition our ability to secure additional future financing may be adversely affected by unfavorable lithium price volatility and demand.\n\n12\n\n[Table of Contents](#toc_page)\n\n \n\nOur long-term success depends on the ability of us or our customers to enter into offtake agreements to deliver lithium chloride or lithium carbonate.\n\nEither we or our customers will need to enter into offtake agreements to deliver lithium chloride, to be converted into lithium carbonate, or lithium hydroxide, for use in the production of lithium batteries. As there are no uniform specifications among end user clients for battery grade lithium carbonate, we cannot ensure that the lithium chloride we produce, or the resulting lithium carbonate produced from our lithium chloride, will be able to meet the quantity, quality and other characteristics required by these offtake agreements. Furthermore, these agreements may be at prices, which would not allow us to recover our production costs. Failure to meet these specifications could result in price adjustments, the rejection of deliveries, or termination of the contracts. In addition, these offtake agreements may contain force majuere provisions allowing temporary suspension of performance by the customer during certain events beyond the control of the affected party. To the extent that we or our customers are unable to enter into, satisfactorily perform in accordance with and sell under offtake agreements at commercially profitable rates, the demand for our MDLE Plants will be materially and adversely affected and we may be unable to commercialize our MDLE Plant technology which would adversely affect our financial condition and future financial results.\n\nWe may not be successful in our efforts to lease our initial or future MDLE Plants or license our technology, which could adversely affect our business.\n\nThe success of our business depends on our ability to successfully identify new customers, generally through the leasing of our Initial and future MDLE Plants to customers or the licensing of our technology. Our leasing and licensing efforts focus on identifying businesses with reliable and proven access to high quality brine that have already received regulatory environmental permits and have the infrastructure that allows us to implement our MDLE Plant technology. Furthermore, our MDLE Plant produces lithium chloride which must then be converted to lithium carbonate (the input for battery production) in a separate refining unit. If there are not lithium carbonate refining units nearby a customer’s brine reservoir or if we are unable to provide another efficient and economically viable solution for converting the lithium chloride into lithium carbonate, potential customers may not be willing to utilize our MDLE Plant.\n\nWe expect that the terms of any such future leases or licenses would provide that, once defined production targets are achieved, we would be entitled to rents and royalties based on the quantities of lithium carbonate produced and the prices that are realized in the market. Since future royalty payments may be tied to the successful achievement of certain commercialization benchmarks, which may or may not be achieved, we may not be able to recover our investment into the development of the MDLE Plant technology.\n\nFurthermore, the potential lease or licensing agreements with our target customers will typically require customization to address the specific geography and brine quality of the customer or could require us to build pilot plants for testing, which may be cost and time intensive and ultimately not yield much profit. If we are unable to identify a sufficient number of potential customers for leasing or licensing our MDLE Plant technology, or if the customers that we identify do not prove to be as valuable as we anticipated, we will not be able to successfully receive rents or royalties from those customers, and our business, financial condition and results of operations may suffer materially as a result.\n\nOur ability to deploy our MDLE Plant technology depends on the availability of brine resources with sufficient concentration and purity.\n\nWe depend on the availability of brine resources from existing chemical, mineral and metal production, and brine aquifer resource holders in order to extract lithium carbonate using our MDLE Plant. In the United States, the principal potential source of high concentration lithium brine is the discovery of high lithium concentration in the Smackover Formation, a geological formation in Arkansas. However, to our knowledge, there has been no extraction of lithium from this formation to date, and therefore the scope of any such opportunity is uncertain. If for regulatory or other reasons, the resource holders are not able to exploit the lithium deposits in the brines in the Smackover Formation, there would be less demand for DLE technology, including our MDLE Plant technology.\n\nVolatility in the demand for lithium products or the development of alternative battery technologies that do not utilize lithium inputs may negatively impact overall prospects for growth of lithium marketing and pricing.\n\nThe development of our MDLE Plant is highly dependent upon the currently projected demand for and uses of lithium-based end products. This includes lithium-ion batteries for electric vehicles (EVs), power storage solutions and other large format batteries that currently have limited market share and whose projected adoption rates is uncertain. As such, our business results inherently depend on decarbonization of the global economy. To the extent that such markets do not develop in the manner contemplated by us or demand for such end products declines or do not grow as expected, then the long-term growth in the market for lithium products will be adversely affected, which would inhibit the potential for development of our MDLE Plant technology and would otherwise have a negative effect on our business and financial condition. For example, the past couple of years saw weaker than expected EV sales, which signals a decline in demand for one of the principal end products for lithium carbonate. In addition, as a commodity, lithium market demand is subject to the substitution effect in which end-users adopt an alternate commodity as a response to supply constraints or increases in market pricing. To the extent that these factors arise in the market for lithium, it could have a negative impact on overall prospects for growth of the lithium market and pricing, which in turn could have a negative effect on the Company. Further, although current batteries utilized in EV production rely on lithium compounds as a critical input, alternative materials and technologies are being researched with the goal of making batteries lighter, more efficient, faster charging and less expensive, and some of these technologies could be less\n\n13\n\n[Table of Contents](#toc_page)\n\n \n\nreliant on lithium compounds. We cannot predict which new technologies may ultimately prove to be commercially viable and when, but any future battery technologies that use less or no lithium could materially and adversely impact our business and future results of operations.\n\nChanges in government incentives for electric vehicles and other lithium-based end products could adversely affect demand for lithium and our business.\n\nDemand for lithium-based end products, including lithium-ion batteries used in electric vehicles and battery energy storage systems, may be adversely affected by changes in government regulations and economic incentives. Government programs that support the development, purchase or adoption of electric vehicles and other lithium-based technologies, including tax exemptions, tax credits, rebates and similar incentives in the United States and other jurisdictions, are subject to change, reduction or elimination, including as a result of political, fiscal or policy developments. For example, certain incentives in the United States were significantly reduced at the end of 2025, and incentives in jurisdictions including Canada, Germany, Hong Kong, Denmark and California have expired, been cancelled or become temporarily unavailable, in some cases without replacement. Any further reduction, expiration or elimination of these incentives could reduce demand for lithium-based products, adversely affect lithium prices and negatively affect our business, financial condition and results of operations.\n\nEnvironmental risks and stringent regulations related to lithium-based products may lead to additional disclosure requirements and substantial expenditures to ensure compliance.\n\nAll phases of mineral extraction and development businesses present environmental risks and hazards and are subject to extensive environmental laws and regulations. U.S. and non-U.S. environmental laws (including in Argentina and Chile, where we may operate) and regulations provide for, among other things, restrictions and prohibitions on spills, releases or emissions of various substances used and or produced in association with natural resource exploration and production operations. Under certain circumstances, we may be responsible under our future agreements with customers to operate the MDLE Plant on behalf of our customers, which may subject us to potential liability for any non-compliance under such environmental laws. These laws and regulations also require that facility sites be operated, maintained, abandoned, and reclaimed to the satisfaction of applicable regulatory authorities. Such regulations relate to many aspects of our operations. In addition, environmental regulations are evolving in a manner that is expected to require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors, and employees.\n\nWhile from a sustainability standpoint, DLE offers several advantages compared to traditional hard rock mining, there still remain challenges, including:\n\n•\nReinjection of brine could dilute the brine’s purity.\n\n•\nObtaining operational and environmental permits can take time and is complex, possibly causing project delays.\n\n•\nViolating applicable laws and regulations may result in the imposition of fines and penalties, some of which may be material, as well as reputational damage. The discharge of pollutants into the air, soil or water may give rise to liabilities to foreign governments and third parties and may require us to incur costs to remedy such discharge.\n\n•\nApplicable environmental laws and regulations require enhanced public disclosure and consultation.\n\nNo assurance can be given that the application of environmental laws to our business and operations, whether as a result of our activities or those of our customers, will not result in a curtailment of production or a material increase in the costs of production, development or exploration activities or otherwise adversely affect our financial condition, results of operations or prospects.\n\nOur business is subject to hazards common to chemical and natural resource extraction businesses, any of which could injure our employees or other persons, damage our facilities or other properties, interrupt our production and adversely affect our reputation and results of operations.\n\nOur business is subject to general hazards faced by chemical manufacturing, fabrication, storage, and extraction businesses, including explosions, fires, severe weather, natural disasters, mechanical failure, unscheduled downtime, transportation interruptions, remediation, chemical spills, discharges or releases of toxic or hazardous substances or gases and other risks. These hazards can cause personal injury and loss of life to our employees and other personnel. In addition, the occurrence of disruptions, shutdowns or other material operating problems at our MDLE Plants installed at a customer’s site, due to any of these hazards may diminish our ability to meet our contractual obligations with those customers and achieve the desired production and output. Accordingly, these hazards and their consequences could adversely affect our reputation and have a material adverse effect on our operations as a whole, including our results of operations and cash flows, both during and after the period of operational difficulties.\n\n14\n\n[Table of Contents](#toc_page)\n\n \n\nGeopolitical uncertainty may adversely affect our ability to deploy or place our MDLE Plants in foreign jurisdictions, which could materially and adversely affect our business, prospects and results of operations.\n\nOur business strategy contemplates the potential deployment of our MDLE Plants in foreign jurisdictions, including in regions where political, regulatory, trade and industrial policy conditions may be volatile or difficult to predict. We may be unable to place or operate our MDLE Plants in such jurisdictions on acceptable terms, or at all, due to tariffs, embargoes, sanctions, export controls, import restrictions, foreign investment limitations, changes in mining, environmental or land use laws, local permitting requirements, licensing delays, currency controls, geopolitical conflict or other governmental actions. In addition, foreign counterparties, regulators or commercial partners may impose requirements that increase our costs, delay deployment, restrict our contractual or operational flexibility, or otherwise make a project uneconomic. If we are unable to deploy or place our MDLE Plants in foreign countries, or if projects in those jurisdictions are delayed, suspended or terminated, our ability to execute our business strategy, expand our customer base, obtain financing and generate future revenues could be materially adversely affected.\n\nWe expect that we will be dependent on one or a small group of customers for most of our revenue, and our failure to expand our customer base would have an adverse effect on our business growth and may result in changes to our business strategy.\n\nWe have not generated any revenue to date, and the entity, US Magnesium, with which we entered into a commercial scale demonstration project of our Initial MDLE Plant terminated its operations, including its use of our Initial MDLE Plant at its site in September 2024 prior to us achieving defined production targets. As a result, our lease agreement with US Magnesium was terminated and our Initial MDLE Plant was decommissioned and relocated out of US Magnesium’s site to an offsite storage facility where we are actively marketing the Initial MDLE Plant to potential customers. There are a limited number of potential customers that own or control the natural resources that would utilize our Initial MDLE Plant. Consequently, we expect that we will be highly dependent on a limited number of customers in the future. This expected concentration of our customer base increases risks related to the financial condition of our customers, and the deterioration in financial condition of a single customer or the failure of a single customer to perform their respective contractual obligations could have a material adverse effect on our future results of operations and cash flow. In the event that any of our future customers experience a decline in usage of our MDLE Plant technology for any reason or decide to discontinue the use of our MDLE Plant technology, we may be compelled to lower our lease prices or risk losing a significant customer. Such developments could adversely affect our profit margins and financial position, leading to a negative impact on our revenue and operational results. There are inherent risks whenever a large percentage of revenues are concentrated with a limited number of customers. We are unable to predict the future level of demand for our MDLE Plant technology that will be generated by our future customers. In addition, we cannot assure that any of our future customers will not cease purchasing our proprietary technology from us. Should future customers prefer DLE technology from our competitors, significantly reduce orders, or seek price reductions in the future, any such event could have a material adverse effect on our revenue, profitability, and results of operations.\n\nOur dependence on third-party suppliers could negatively affect our operating results.\n\nWe rely on third-party suppliers to provide components and raw materials (including lithium bearing salt brines) for our MDLE Plant. While we have not recognized any trends or experienced any major disruptions or delays related to manufacturing costs or the availability of components supplied to us by our vendors, actions taken by third-party suppliers in operating their business, as well as any disruptions to their business operations (or their supplier’s business operations), could disrupt our supply chain or operations and materially negatively impact our ability to supply the market, substantially decrease sales, lead to higher costs, and damage our reputation with our future customers. Longer-term disruptions could potentially result in the permanent loss of our future customers, which could reduce our future recurring revenues and long-term profitability.\n\nIncreased cybersecurity requirements, vulnerabilities, threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, products, solutions, services and data.\n\nIncreased global cybersecurity vulnerabilities, threats, computer viruses and more sophisticated and targeted cyber-related attacks, as well as cybersecurity failures resulting from human error and technological errors, pose a risk to the security of our and our customers’, business partners’ and suppliers’ products, systems and networks and the confidentiality, availability and integrity of data on these products, systems and networks. As the perpetrators of such attacks become more capable, and as critical infrastructure is increasingly becoming digitized, the risks in this area continue to grow. While we attempt to mitigate these risks by employing a number of measures, including employee training, monitoring and testing, and maintenance of protective systems, we remain potentially vulnerable to additional known or unknown threats, and we cannot assure that the impact from such threats will not be material. In addition to existing risks, the adoption of new technologies may also increase our exposure to cybersecurity breaches and failures. Additionally, we have access to sensitive, confidential or personal data or information that is subject to privacy and security laws, regulations or customer-imposed controls. Despite our implementation of controls to protect our systems and sensitive, confidential or personal data or information, we may be vulnerable to material security breaches, theft, misplaced, lost or corrupted data, employee errors and/or malfeasance (including misappropriation by departing employees) that could potentially lead to the compromising of sensitive, confidential or personal data or information, improper use of our systems, software solutions or networks, unauthorized access, use, disclosure, modification or destruction of information, defective products, production downtimes and operational disruptions. In addition, a cyber-related attack could result in other negative consequences, including damage to our reputation or competitiveness, remediation or increased protection costs, litigation or regulatory action. Although we have experienced occasional actual or attempted\n\n15\n\n[Table of Contents](#toc_page)\n\n \n\nbreaches of our computer systems, to date we do not believe any of these breaches has had a material effect on our business, operations or reputation.\n\nThe requirements of being a reporting public company in Canada and the United States may strain our resources and divert management’s attention.\n\nWe are a reporting public company in both Canada and the United States, subject to compliance with the securities rules in both countries as well as compliance with the TSX-V stock exchange. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly and increase demand on our systems and resources. These expenses could be exacerbated once we are no longer an “emerging growth company” or a “smaller reporting company” in the United States and lose the benefit of certain accommodations and exemption granted to such registrants.\n\nChanges in laws, regulations and standards relating to corporate governance and public disclosure may increase uncertainty, legal and accounting expenses and the demands on our management and other personnel. Because many of these requirements are subject to interpretation and continue to evolve through regulatory guidance and practice, their application may remain uncertain and may require us to revise our disclosures, governance practices and compliance procedures on an ongoing basis. If our policies, procedures or disclosures are found to be inadequate or inconsistent with regulatory expectations, whether as a result of ambiguity in the applicable requirements or otherwise, we could become subject to investigations, enforcement actions, litigation or other proceedings, which could materially adversely affect our business, financial condition and results of operations.\n\nFailure to maintain effective controls over financial reporting could have a material adverse effect on our business and share price.\n\nOur consolidated financial statements are prepared in accordance with United States generally accepted accounting principles. We must periodically adjust and strengthen our operating, financial, accounting, and other systems, procedures, and controls, which could increase our costs and may adversely affect our gross profits and our ability to achieve profitability if we do not generate increased revenues to offset the costs. As a public company, our information and control systems must enable us to prepare accurate and timely financial information and other required disclosures. If we discover deficiencies in our existing information and control systems that impede our ability to satisfy our reporting requirements, we must successfully implement improvements to those systems in an efficient and timely manner. Any failure to identify and remediate such deficiencies could subject us to regulatory enforcement action, and materially adversely affect our share price and reputation.\n\nIn addition, the assets, liabilities, and expenses reported in the consolidated financial statements depend on varying degrees of estimates made by management. An estimate is considered a critical accounting estimate if it requires us to make assumptions about matters that are highly uncertain and if different estimates could have been used that would have a material impact. The significant areas requiring the use of management estimates relate to the valuation of inventory, useful lives of property and equipment and intangible assets and the valuation of share-based payments and Warrants issued in the Company exercisable for Common Shares. These estimates are based on historical experience and reflect certain assumptions about the future that we believe to be both reasonable and conservative. Actual results could differ from those estimates. We continually evaluate these estimates and assumptions.\n\nOur ability to maintain effective internal controls over financial reporting and disclosure controls may be adversely affected by the limited size of our company.\n\nAs a smaller reporting company, we have a limited number of employees that are focused on our financial reporting and, as a result, we have and may in the future identify material weaknesses in our internal control over financial reporting. For example, during the year ended March 31, 2025, we identified a material weakness related to our failure to design or maintain sufficient controls over the capitalization of capital assets or the initial determination and reassessment of their useful lives. The above material weakness resulted in a material misstatement of our unaudited consolidated financial statements as of and for the three and six months ended September 30, 2024, and as of and for the three and nine months and year ended December 31, 2025, for which we amended and restated our financial statements for the period. This material weakness was remediated as of March 31, 2026, including establishing and implementing a formal written policy governing the Company’s approach to capital asset accounting. We also implemented additional review controls and processes that require additional levels of review for material capital assets at each reporting period.\n\nWe cannot assure you that we have identified all material weaknesses. Material weaknesses may still exist when we report on the effectiveness of our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act. In the future, it is possible that additional material weaknesses or significant deficiencies may be identified. Our ability to comply with the annual internal control reporting requirements will depend on the effectiveness of our financial reporting and data systems and controls across our Company. Any weaknesses or deficiencies or any failure to implement new or improved controls, or difficulties encountered in the implementation or operation of these controls, could harm our operating results and cause us to fail to meet our financial reporting obligations, or result in material misstatements in our consolidated financial statements, which could adversely affect our business, financial condition and results of operations and reduce our share price.\n\n16\n\n[Table of Contents](#toc_page)\n\n \n\nWe may qualify as a passive foreign investment company, or “PFIC,” which could result in adverse U.S. federal income tax consequences to U.S. investors.\n\nIf we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder (as defined in the section of this annual report captioned “Material United States Federal Income Tax Considerations”) of our ordinary shares or rights, the U.S. Holder may be subject to adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. Our actual PFIC status for our current taxable year may depend on whether we qualify for the PFIC start-up exception (see the section of this annual report captioned “Material United States Federal Income Tax Considerations — U.S. Holders — Passive Foreign Investment Company Status”). Depending on particular circumstances, the application of the start-up exception may be subject to uncertainty, and there cannot be any assurance that we will qualify for the start-up exception. Accordingly, there can be no assurances with respect to our status as a PFIC for our current taxable year or any future taxable year. Our actual PFIC status for any taxable year, however, will not be determinable until after the end of such taxable year. If we determine we are a PFIC for any taxable year, we will endeavor to provide to a U.S. Holder such information as the Internal Revenue Service (“IRS”) may require, including a PFIC annual information statement, in order to enable the U.S. Holder to make and maintain a “qualified electing fund” election, but there can be no assurance that we will timely provide such required information, and such election would likely be unavailable with respect to our rights.\n\nWe urge U.S. Holders to consult their own tax advisors regarding the possible application of the PFIC rules. For a more detailed explanation of the tax consequences of PFIC classification to U.S. Holders, see the section of this annual report captioned “Material United States Federal Income Tax Considerations — U.S. Holders — Passive Foreign Investment Company Status.”\n\nWe are dependent on a small number of key personnel, and the loss of any of them could have a disproportionate effect on our business.\n\nBecause we operate with a limited number of employees, we are highly dependent on a small group of executive officers, technical personnel and other key employees. As a result, the loss of one or more of these individuals could have a disproportionate effect on our operations, development activities and strategic plans. Our ability to replace such personnel on a timely basis may be limited, particularly given the specialized knowledge required for our business.\n\nIn addition, as an early-stage company, we may face particular difficulty in competing for experienced personnel against larger and better-capitalized companies. If we are unable to retain our current personnel or attract qualified replacements or additions, our business, financial condition and results of operations could be materially adversely affected.\n\nRisks Relating to Government Regulation\n\nWe anticipate that we are and will continue to be, subject to the authority and approvals of certain regulatory agencies, both domestically and internationally, with regard to the development, testing, manufacture, and installation of the MDLE Plant, and there can be no assurance that any required regulatory approvals may be obtained or maintained.\n\nMining operations and exploration activities are subject to extensive laws and regulations. Such regulations relate to production, development, exploration, exports, imports, taxes and royalties, labor standards, occupational health, waste disposal, protection, and remediation of the environment, mine decommissioning and reclamation, mine safety, toxic and radioactive substances, transportation safety and emergency response, and other matters. Compliance with such laws and regulations increases the costs of exploring, drilling, developing, constructing and operating refining and other facilities. It is possible that in the future the costs, delays and other effects associated with such laws and regulations may impact our future customers’ decisions with respect to the exploration and development of properties and, as a consequence, our decisions with respect to the deployment of the MDLE Plant. Our customers and, to the extent we have agreed to operate the MDLE Plant on behalf of our customers, we, will be required to expend significant financial and managerial resources to comply with such laws and regulations. Since legal requirements change frequently, are subject to interpretation and may be enforced in varying degrees in practice, we are unable to predict the ultimate cost of compliance with these requirements or their effect on operations. Furthermore, future changes in governments, regulations and policies and practices, such as those affecting exploration and development of the properties in which the MDLE Plant is located, could materially and adversely affect our results of operations and financial condition in a particular year and in its long-term business prospects.\n\nWe may be subject to the authority and approvals of certain regulatory agencies both domestically and internationally. The process of obtaining such approvals can be costly and time consuming, and there can be no assurance that any required regulatory approvals may be obtained or maintained. Any failure to obtain (or significant delay in obtaining) or maintain approvals could materially adversely affect our ability to market our products successfully and could therefore have a material adverse effect on our business.\n\nEnsuring maintenance of community relations and license to operate is critical in ensuring the future success of our existing operations.\n\nOur relationship with the host communities where we operate is critical to ensure the future success of our existing operations and the construction and development of our projects. There is an increasing level of public concern relating to the perceived effect of mining activities on the environment and on communities impacted by such activities. Certain non-governmental organizations, some of which oppose globalization and resource development, are often vocal critics of the mining industry and its practices, including the\n\n17\n\n[Table of Contents](#toc_page)\n\n \n\nuse of cyanide and other hazardous substances in processing activities. Adverse publicity generated by such non-governmental organizations or others related to extractive industries generally, or our development activities specifically, could have an adverse effect on our reputation. Reputation loss may result in decreased investor confidence, increased challenges in developing and maintaining community relations and an impediment to our overall ability to advance our MDLE Plant, which could have a material adverse impact on our results of operations, financial condition, and prospects. While we are committed to operating in a socially responsible manner, there is no guarantee that our efforts in this respect will address these potential risks.\n\nWe may not have or be able to obtain adequate funding to complete any additional studies or other steps that regulatory authorities may impose in assessing our technology for regulatory approval.\n\nIf regulatory authorities require additional time or studies to assess the performance, reliability, and safety of our technology, we may not have or be able to obtain adequate funding to complete the necessary steps for approval for the technology or may be unable to technically meet their requirements. Additional delays may result if any required regulatory authority/certifications recommend non-approval or restrictions on any potential approval.\n\nDomestic and foreign government regulation and enforcement of data practices and data tracking technologies is expansive, broadly defined and rapidly evolving. Such regulation could directly restrict portions of our business.\n\nAs a Company incorporated in British Columbia, Canada, we are subject to diverse laws and regulations relating to data privacy and security, including the Personal Information Protection and Electronic Documents Act (Canada) (“PIPEDA”), the Personal Information Protection Act (British Columbia) (“PIPA”). The PIPEDA and the PIPA implement stringent operational requirements for controllers of personal data, including, for example, higher standards for obtaining consent from individuals to process their personal data (including, in certain circumstances for marketing and other follower engagement), more robust disclosures to individuals and a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on retention of information, additional obligations when we contract third-party processors in connection with the processing of personal data, and certain restrictions when transferring personal data outside of Canada.\n\nFailure to comply with Canadian privacy laws, including failure under the PIPEDA and the PIPA may result in significant fines on us, which may be onerous and adversely affect our business, financial condition, results of operations and prospects. The PIPEDA and the PIPA also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of data privacy and security.\n\nIf our treatment of data, privacy practices or data security measures fail to comply with these current or future laws and regulations in any of the jurisdictions in which we collect and/or process information, we may be subject to litigation, regulatory investigations, civil or criminal enforcement, financial penalties, audits or other liabilities in such jurisdictions, or our customers may terminate their relationships with us. In addition, data protection laws, such as the PIPEDA and the PIPA, foreign court judgments or regulatory actions could affect our ability to transfer, process and/or receive transnational data that is critical to our operations, including data relating to users, customers, or partners outside Canada.\n\nFurthermore, the uncertain and shifting regulatory environment and trust climate may cause concerns regarding data privacy and may cause our customers or our customers’ customers to resist providing the data necessary to allow our customers to use our services effectively. Even the perception that the privacy of personal information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales of our services or technology.\n\nAny failure or perceived failure by us to comply with federal, state or foreign laws or regulations, industry standards, contractual obligations or other legal obligations, or any actual or suspected security incident, whether or not resulting in unauthorized access to, or acquisition, release or transfer of personal data or other data, may result in governmental enforcement actions and prosecutions, private litigation, fines and penalties or adverse publicity and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable laws, regulations, policies, industry standards, contractual obligations or other legal obligations could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely affect our business.\n\nRisks Related to Intellectual Property\n\nPatent terms may be inadequate to protect our competitive position on our core technology for an adequate amount of time.\n\nPatents have a limited lifespan, and the protection patents afford is limited. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Even if patents covering our core technology is obtained, once the patent life has expired, we may be subject to competition from competitive products and technologies. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing DLE technology similar or identical to ours. In addition, although upon issuance in the United States a patent’s life can be increased based on certain delays caused by the USPTO, this increase can be reduced or eliminated based on certain delays caused by the patent applicant during patent prosecution. If we do not have sufficient patent life to protect our technologies, products, and product candidates, our business and results of operations will be adversely affected.\n\n18\n\n[Table of Contents](#toc_page)\n\n \n\nIntellectual property rights do not necessarily address all potential threats to our business.\n\nWhile we seek broad coverage under our patents for the core technology of our MDLE Plant, there is always a risk that an alteration to the core technology or process for lithium extraction may provide sufficient basis for a competitor to avoid infringing our patent claims. In addition, patents, if granted, expire and we cannot provide any assurance that any potentially issued patents will adequately protect our products and technology. Once granted, patents may remain open to invalidity challenges including opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against such grant. In the course of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit the scope of the allowed or granted claims thus attacked or may lose the allowed or granted claims altogether.\n\nIn addition, the degree of future protection afforded by our intellectual property rights is uncertain because even granted intellectual property rights have limitations, and may not adequately protect our business, provide a lawful barrier to entry against our competitors or potential competitors or permit us to maintain our competitive advantage. Moreover, if a third party has intellectual property rights that cover the practice of our DLE processes or technologies, we may not be able to fully exercise or extract value from our intellectual property rights. The following examples are illustrative:\n\n•\nothers may be able to develop and/or practice DLE processes or technologies that are similar to our processes or technologies or aspects of our processes or technologies, but that are not covered by the claims of the patents that we own or control, assuming such patents have issued or do issue;\n\n•\nwe or our licensees or any future strategic partners might not have been the first to conceive or reduce to practice the core technologies covered by the issued patents that we own or have exclusively licensed;\n\n•\nwe or our licensees or any future strategic partners might not have been the first to file patent applications covering our core technologies;\n\n•\nothers may independently develop similar or alternative processes or technologies to extract lithium or duplicate any of our processes or technologies without infringing our intellectual property rights;\n\n•\nit is possible that our pending patent applications will not lead to issued patents;\n\n•\nissued patents that we own or have exclusively licensed may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;\n\n•\nour competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive lithium extraction processes or technologies to service our potential customers;\n\n•\nparties may assert an ownership interest in our intellectual property and, if successful, such disputes may preclude us from exercising exclusive rights over that intellectual property;\n\n•\nwe may not develop or in-license additional proprietary technologies that are patentable;\n\n•\nwe may not be able to obtain and maintain necessary licenses on commercially reasonable terms, or at all; and\n\n•\nthe patents of others may have an adverse effect on our business.\n\nShould any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and prospects.\n\nIf we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed.\n\nWhile we have patent protection for our core technologies, such as our various types of extraction apparatuses, mobile extraction arrays, ion extraction columns, silica fouling prevention technologies, sorbents for lithium extraction, and other related technologies, we also rely in part on trade secret protection in order to protect our proprietary trade secrets and unpatented know-how, such as the chemical structure of the selective absorption media used in our extraction columns, the exact design and interaction of the extraction columns, as well as various manufacturing and extraction processes, formulas, compositions. However, trade secrets are difficult to protect, and we cannot be certain that others will not develop the same or similar technologies and processes on their own. We have taken steps, including entering into confidentiality agreements with our employees, consultants, outside collaborators, researchers and other advisors, to protect our trade secrets and unpatented know-how. These agreements generally require that the other party keep confidential and not disclose to third parties all confidential information developed by us, the party or made known to the party by us during the course of the party’s relationship with us. We also typically obtain agreements from these parties which provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property. However, these agreements may not be honored and may not effectively assign intellectual property rights to us. Our security measures may not prevent an employee or consultant from misappropriating our trade secrets and providing them to a competitor, and recourse we take against such misconduct\n\n19\n\n[Table of Contents](#toc_page)\n\n \n\nmay not provide an adequate remedy to protect our interests fully. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our product that we consider proprietary. Enforcing a claim that a party illegally obtained and is using our trade secrets or know-how is difficult, expensive and time consuming, and the outcome is unpredictable. Even though we use commonly accepted security measures, trade secret violations are often a matter of state law, and the criteria for protection of trade secrets can vary among different jurisdictions. In addition, courts outside the United States may be less willing to protect trade secrets or know-how. Further, trade secrets may be independently developed by others in a manner that could prevent legal recourse by us. If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our business and competitive position could be harmed.\n\nWe may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of their former employers or other third parties.\n\nWe do and may employ individuals who were previously employed at other material science companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants, and independent contractors do not use the proprietary information or know-how of others in their work for us, and we are not currently subject to any claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties, we may in the future be subject to such claims.\n\nLitigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our DLE process and MDLE Plant technology. Such a license may not be available on commercially reasonable terms or at all. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees and could result in customers seeking other sources for the DLE technology or processes or ceasing from doing business with us.\n\nOur ability to obtain intellectual property protection for our technology is limited. If we cannot obtain intellectual property protection for our technology our business may be negatively impacted.\n\nOur success depends, in part, on our ability to maintain or obtain and enforce patent and other intellectual property protections for our processes and technologies and to operate without infringing upon the proprietary rights of outside parties or having outside parties circumvent the rights we own or license. We have applications and registrations in the United States and other jurisdictions, and we expect to seek additional patents and registrations in the future.\n\nPatents provide some degree of protection for intellectual property. However, patent protection involves complex legal and factual determinations and is therefore uncertain. We cannot be assured that our patents or patent applications will be valid or will issue over prior art. Additionally, we cannot be assured that the scope of any claims granted in any patent will be commercially useful or will provide adequate protection for the technology used currently or in the future. Moreover, we cannot be certain that the creators/conceptualizers of the core technology incorporated into our MDLE Plan were the first inventors of the DLE processes covered by our patents and patent applications or that they were the first to file. Accordingly, it cannot be assured that our patents will be valid or will afford protection against competitors with similar technology or processes. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our proprietary information. Monitoring unauthorized use of confidential information is difficult and we cannot be certain the steps taken to prevent unauthorized use of confidential information will be effective. In addition, the laws governing patent protection continue to evolve and are different from one country to another, all of which causes further uncertainty in the usefulness of a patent. In addition, issued patents or patents licensed to us may be successfully challenged, invalidated, circumvented or may be unenforceable so that our patent rights would not create an effective competitive barrier. We also rely upon unpatented proprietary manufacturing expertise, innovation and other trade secrets and know-how to develop and maintain our competitive position. In addition, our trade secrets and know-how may be improperly obtained by other means, such as a breach of our information technologies security systems or other theft.\n\nMoreover, the laws of some countries may not protect our proprietary rights to the same extent, as do the laws of the United States. There are also countries in which we intend to sell or lease our technology, but have no patents or pending patent applications, or trademark registrations. Our ability to prevent others from making or selling duplicate or similar technologies will be impaired in those countries in which there is no intellectual property protection. If we are not able to adequately protect our intellectual property and proprietary technology, our competitive position, future business prospects and financial performance may be adversely affected. Unpatented trade secrets, technological innovation and confidential know-how are important to our success. Although protection is sought for proprietary information through confidentiality agreements and other appropriate means, these measures may not effectively prevent disclosure of proprietary information, may not provide meaningful protection for our trade secrets and proprietary manufacturing expertise, may not provide us with adequate remedies in the event of an unauthorized use or disclosure of our trade secrets or manufacturing expertise, and it cannot be assured that others will not independently develop the same or similar information or gain access to the same or similar information. In view of these factors, our intellectual property positions have a degree of uncertainty. Setbacks in these areas could negatively affect our ability to compete and materially and adversely affect our business, financial condition, and results of operations.\n\n20\n\n[Table of Contents](#toc_page)\n\n \n\nIf we infringe the intellectual property rights of others, we may be required to cease operations related to infringement in some markets and our business may be negatively affected.\n\nOur commercial success depends, in part, upon not infringing or violating intellectual property rights owned by others. The markets in which we intend to compete has participants that own, or claim to own, intellectual property. We cannot determine with certainty whether any existing outside-party patents, or the issuance of any new outside-party patents, would require us to alter our technologies, obtain licenses or cease certain activities.\n\nWe may in the future receive claims from outside parties asserting infringement and other related claims. Litigation may be necessary to determine the scope, enforceability, and validity of outside-party intellectual property rights or to protect, maintain and enforce our intellectual property rights. Some of our competitors have, or are affiliated with companies having, substantially greater resources, and these competitors may be able to sustain the costs of complex intellectual litigation to a greater degree and for longer periods than we can. Regardless of whether claims that it is infringing or violating patents or other intellectual property rights have any merit, those claims could:\n\n•\nadversely affect our relationships with future customers who utilize our technology;\n\n•\nadversely affect our reputation with potential customers;\n\n•\nbe time-consuming and expensive to evaluate and defend;\n\n•\ndivert management’s attention and resources;\n\n•\nsubject us to significant liabilities and damages;\n\n•\nrequire us to enter into royalty or licensing agreements; or\n\n•\nrequire us to cease certain activities, including the sale or lease of our technology.\n\nIf it is determined that we have infringed, violated or is infringing or violating a patent or the intellectual property right of any other person or if we are found liable in respect of any other related claim, then, in addition to being liable for potentially substantial damages, we may be prohibited from developing, using, distributing, selling or commercializing certain technologies unless it obtains a license from the holder of the patent or other intellectual property right. We cannot assure that we will be able to obtain any such license on a timely basis or on commercially favorable terms, or that any such licenses will be available, or that workarounds will be feasible and cost-efficient. If we do not obtain such a license or find a cost-efficient workaround, our business, operating results and financial condition may be materially affected, and we may be required to cease related business operations in some markets and restructure our business to focus on our continuing operations in other markets.\n\nRisks Relating to Our Common Shares\n\nOur Common Shares is currently thinly traded on the TSX Venture Exchange and on OTCQB and the public price for our Common Shares is volatile. We can offer no assurance that an active trading market for our Common Shares will develop or that the public price of our Common Shares will become less volatile.\n\nAn active market for our shares of Common Shares may never develop. In the absence of an active public trading market, investors may not be able to liquidate their investments in our shares of Common Shares. An inactive market may also impair our ability to raise capital by selling our shares of Common Shares, our ability to motivate our employees through future equity incentive awards and our ability to acquire other companies, products or technologies by using our shares of Common Shares as consideration. We can offer no assurance that the public price of our Common Shares will cease to be volatile, as there are many factors which affect the public price which are beyond our control. These factors include, without limitation:\n\n•\nthe number of shares of our Common Shares publicly owned and available for trading;\n\n•\noverall performance of the equity markets and/or publicly-listed companies that offer DLE;\n\n•\nchanges in the financial projections we provide to the public or our failure to meet these projections;\n\n•\nfailure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet the estimates or the expectations of investors;\n\n•\nany major change in our Board, management, or key personnel;\n\n•\nthe economy as a whole and market conditions in our industry;\n\n•\nrumors and market speculation involving us or other companies in our industry;\n\n•\nnew laws or regulations or new interpretations of existing laws or regulations applicable to our business, in the U.S. or globally;\n\n21\n\n[Table of Contents](#toc_page)\n\n \n\n•\nother events or factors, including those resulting from war, incidents of terrorism, or responses to these events and\n\n•\nsales or expected sales of our Common Shares by us and our officers, directors, and principal shareholders.\n\nThe market price of the Common Shares is volatile and may not accurately reflect the long-term value of the Company.\n\nSecurities markets have a high level of price and volume volatility, and the market price of securities of many companies have experienced substantial volatility in the past, often based on factors unrelated to the financial performance or prospects of the companies involved. These factors included macroeconomic developments in North America and globally, and market perceptions of the attractiveness of particular industries. The price of the Common Shares is also likely to be significantly affected by changes in the financial condition or results of operations as reflected in our financial reports. If an active market for the Common Shares does not continue, the liquidity of an investor’s investment may be limited and the price of the Common Shares may decline below the price at which such Common Shares were purchased. If an active market does not continue, investors may lose their entire investment in the Common Shares. As a result of any of these factors, the market price of the Common Shares at any given point in time may not accurately reflect the long-term value of the Company.\n\nWe are an “emerging growth company” and a “smaller reporting company” and we cannot be certain if the reduced disclosure requirements applicable to us will make our Common Shares less attractive to investors.\n\nWe are a “smaller reporting company,” as defined in Rule 12b-2 under the U.S. Exchange Act, as well as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or “JOBS Act”. Accordingly, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, such as, but not limited to, not exemption from the requirement of auditor attestation in the assessment of our internal control over financial reporting, exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about our audit and the financial statements (auditor discussion and analysis) (for so long as we are an emerging growth company), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.\n\nAs a result of the foregoing, the information that we provide shareholders may be different than what is available with respect to other public companies (other than, in some cases, smaller reporting companies).\n\nIn addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the U.S. Securities Act for complying with new or revised accounting standards. We plan to elect to use the extended period for compliance and, as a result, our financial statements may not be comparable to companies that comply with public company effective dates.\n\nFor example, if we do not adopt a new or revised accounting standard, our future financial results may not be as comparable to the financial results of certain other companies in our industry that adopted such standards. If some investors find our Common Shares less attractive as a result, there may be a less active trading market for our Common Shares and our stock price may be more volatile.\n\nAs a pre-revenue company, we expect to fund our operations with equity offerings, including common shares and warrants, until we can generate sufficient cash from operations to support the business. In connection with these equity offerings, shareholders may experience immediate dilution and, as a result, our share price may decline.\n\nThe current financing environment in the United States, particularly for early-stage development companies and for DLE companies like us, is exceptionally challenging. Consequently, we expect to fund our operations with equity offerings, including common shares and warrants, until we can generate sufficient cash from operations to support the business. As a result, we expect that, from time-to-time, we will sell additional Common Shares at a discount from the existing trading price of our Common Shares. Consequently, our shareholders would experience immediate dilution upon the sale of any of our Common Shares at such discount. In addition, as opportunities present themselves, we may enter into financing or similar arrangements in the future, including the issuance of Common Shares, warrants and/or debt securities. If we issue Common Shares or securities convertible into Common Shares, our shareholders would experience additional dilution and, as a result, our share price may decline and we can provide no assurances as to when such an environment may improvement.\n\nWe have outstanding warrants and options. Conversions of these securities could result in substantial dilution of our Common Shares and may cause a decline in our market price. Our Board of Directors may seek to change the number of authorized shares in the future, may seek to adjust the number of shares issued or issuable upon the exercise of warrants, may choose to reduce the exercise price of any outstanding warrants and may choose to issue shares to acquire businesses or to provide additional financing in the future. The issuance of any such shares may result in a reduction of market price of the outstanding Common Shares. If we issue any such additional shares, such issuance will cause a reduction in the proportionate ownership of current shareholders.\n\nOur Warrants are not currently traded and our Common Shares may become thinly traded and investors may be unable to sell at or near ask prices, or at all, and may lose some or all of their investment.\n\n22\n\n[Table of Contents](#toc_page)\n\n \n\nWe cannot predict the extent to which an active public market for trading our Common Shares will be sustained or if an active trading market for our Warrants will be developed. The trading volume of our Common Shares may be sporadically or “thinly-traded,” meaning that the number of persons interested in purchasing our Common Shares at or near bid prices at certain given times may be relatively small or non-existent. Furthermore, our Warrants are not currently traded and given there is no active trading for the Warrants, that may make it more difficult to sell the Warrants resulting in lack of liquidity. All of this, could consequently result in our Common Shares and Warrants being less attractive, causing our overall stock price to be more volatile.\n\nThis situation is attributable to a number of factors, including the fact that we are a small company, which is relatively unknown to stock analysts, stockbrokers, institutional investors and others in the investment community who generate or influence sales volumes. Even if we came to the attention of such persons, those persons may be reluctant to follow, purchase, or recommend the purchase of shares of an unproven company such as ours until such time as we become more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give any assurance that a broader or more active public trading market for our Common Shares will develop or be sustained.\n\nAdditionally, there is no guarantee that an investment in our Common Shares will earn any positive return in the short or long term. A purchase of our Common Shares involves a high degree of risk and should be undertaken only by investors whose financial resources are sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment. An investment in our Common Shares is appropriate only for investors who have the capacity to absorb a loss of some or all of their investment.\n\nOur Common Shares are considered a “penny stock,” and is thereby subject to additional sale and trading regulations that may make it more difficult to sell. Further, the market for penny stocks has suffered in recent years from patterns of fraud and abuse.\n\nOur Common Shares are considered a “penny stock” as defined in Rule 3a51-1 promulgated by the SEC under the U.S. Exchange Act. The penny stock rules require a broker-dealer, prior to a transaction in penny stock not otherwise exempt from the rules, to deliver a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form, sets forth (x) the basis on which the broker or dealer made the suitability determination and (y) the fact that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.\n\nThese disclosure rules have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. So long as our Common Shares are subject to the penny stock rules, it may be more difficult to sell the Common Shares. Further, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include but are not limited to: (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price."}