{"url_path":"/sec/wast/10-k/2026/item-1a","section_key":"item-1a","section_title":"Item 1A RISK FACTORS**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-07-14","source_url":"https://www.sec.gov/Archives/edgar/data/1515139/0001493152-26-033196-index.html","accession_number":"0001493152-26-033196","cik":"0001515139","ticker":"WAST","issuer_name":"WASTE ENERGY CORP.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1515139/0001493152-26-033196-index.html","primary_entity_key":"0001515139","primary_entity_name":"WASTE ENERGY CORP."},"word_count":3768,"has_tables":true,"body_markdown":"**ITEM\n1A. RISK FACTORS**\n\n \n\nAn\ninvestment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below,\ntogether with all of the other information in this Annual Report, before making an investment decision with respect to our common stock.\nOur business, financial condition, results of operations, and prospects could be materially and adversely affected by any of these risks,\nand the trading price of our common stock could decline, resulting in a loss of all or part of your investment. The risks described below\nare not the only risks we face; additional risks and uncertainties that we do not currently know about, or that we currently consider\nimmaterial, may also adversely affect our business.\n\n \n\n**Risks\nRelated to Our Financial Condition and Capital Needs**\n\n \n\n**We\nare an early-stage company with a limited operating history in the waste-to-energy sector, and we may never achieve or sustain profitability.**\n\n** **\n\nWe\nare an early-stage company and have a limited operating history in the waste-to-energy sector. We have not yet commenced commercial\noperations at our planned Midland, Texas facility, and we generated only $424,167 in revenue during the year ended December 31,\n2025, and $nil during the year ended December 31, 2024, substantially all of which was derived from a single consulting customer. We\nhave incurred significant operating losses since inception and expect to continue to incur losses as we complete the commissioning\nof our Midland facility and expand our operations. There can be no assurance that we will generate meaningful revenue, achieve\nprofitability, or sustain profitability if achieved.\n\n \n\n**Our\nfinancial statements have been prepared assuming we will continue as a going concern, and there is substantial doubt about our ability\nto do so.**\n\n** **\n\nFor the years ended December 31, 2025 and 2024, we incurred net losses\nof approximately $1.0 million and $2.9 million, respectively. As of December 31, 2025, we had an accumulated deficit of approximately\n$51.0 million, negative working capital of approximately $4.7 million, and cash and cash equivalents of approximately $68,000. Our independent\nregistered public accounting firm has included an explanatory paragraph in its report on our consolidated financial statements expressing\nsubstantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern depends on our ability\nto generate revenue from our waste conversion operations, raise additional capital on acceptable terms, and manage our operating expenses.\nThe inclusion of a going-concern explanatory paragraph may make it more difficult for us to obtain additional financing on acceptable\nterms, may cause counterparties to hesitate to enter into commercial arrangements with us, and may adversely affect the market price of\nour common stock. If we are unable to continue as a going concern, we may be required to curtail or cease operations, and stockholders\ncould lose all or a substantial portion of their investment.\n\n \n\n**We\nwill require substantial additional capital to execute our business plan, and financing may not be available on acceptable terms, or\nat all.**\n\n** **\n\nDeveloping,\ncommissioning, and operating waste conversion facilities is capital-intensive. We estimate we will require approximately $900,000 to\nfund our general and administrative operating expenses over the next twelve months, in addition to capital required to complete commissioning\nof our Midland facility, expand to additional processing capacity, and pursue future deployments. We do not have committed sources of\nfinancing sufficient to meet these needs, and we expect to seek additional financing through the sale of equity or debt securities or\ncredit facilities. Financing may not be available on acceptable terms, or at all. Our status as an early-stage company, our going-concern\nqualification, our penny stock classification, the limited trading market for our common stock, and general credit and capital market\nconditions may limit our access to capital and increase our cost of financing. Any equity financing will dilute existing stockholders,\nand any debt financing may impose operating restrictions or require the issuance of securities with dilutive or other adverse terms.\nIf we are unable to obtain required capital, we may be unable to execute our business plan, and our business, financial condition, and\nprospects could be materially and adversely affected.\n\n \n\n**Risks\nRelated to Our Operations and Business Strategy**\n\n \n\n**Our\nbusiness is dependent on the successful delivery, installation, commissioning, and operation of our initial 15-TPD waste conversion system\nat our Midland, Texas facility.**\n\n** **\n\nWe\nhave not yet commenced commercial operations at our Midland, Texas facility, and our near-term business plan is substantially dependent\non the successful delivery, installation, commissioning, and operation of our initial 15 tons-per-day waste conversion system and related\ndistillation equipment. As of December 31, 2025, the equipment had arrived at a U.S. port but had not yet cleared customs or been delivered\nto the Midland site, and approximately $653,000 in related payments were classified as a capital advance on our balance sheet pending\ntransfer of control. Any delays in customs clearance, transportation, site preparation, installation, or commissioning, or any performance\nshortfalls relative to specifications, could delay our ability to begin generating operating revenue, increase our capital requirements,\nand have a material adverse effect on our business and financial condition.\n\n \n\n**Our\nbusiness plan depends on a single planned facility, and any disruption at that facility could materially harm our business.**\n\n** **\n\nOur\nnear-term operations are concentrated at our Midland, Texas site. Until we develop additional facilities, any event affecting our Midland\nsite — including equipment failures, construction or commissioning delays, permitting delays, adverse weather, labor disputes,\nfires, or casualty losses — could disrupt our entire operating plan. We do not yet have the operational diversity to mitigate single-site\nrisk.\n\n \n\n9\n\n \n\n \n\n**Our\nwaste conversion technology has not been demonstrated at commercial scale within our operations, and performance at scale may differ\nfrom expectations.**\n\n** **\n\nWhile\nthe thermal conversion technology we are deploying has been used in similar applications, our specific configuration at Midland has not\nyet been operated at commercial scale by us. Actual performance — including feedstock throughput, product yields, product quality,\nenergy efficiency, emissions levels, and maintenance requirements — may differ materially from our expectations. Any significant\nshortfall in operational performance could delay revenue generation, increase operating costs, require capital modifications, or adversely\naffect our ability to secure offtake agreements and regulatory approvals.\n\n \n\n**We\ndepend on a consistent and economical supply of waste tire and plastic feedstock.**\n\n** **\n\nOur\nrevenue and operating model depend on securing a reliable supply of waste tires and plastics at economical cost. As of the date of this\nAnnual Report, we have not entered into binding long-term feedstock supply agreements. Our ability to source feedstock is subject to\nrisks including fluctuations in the volume, composition, and quality of available waste; competition from recycling programs, landfill\noperators, and other waste conversion companies; changes in municipal waste management contracts or tipping fee structures; and transportation\nand logistics costs. A failure to secure adequate feedstock, or feedstock that meets our technical specifications, could materially reduce\nour operating capacity, product yields, and revenues.\n\n \n\n**Our\nfinancial results will be affected by commodity price fluctuations for our products.**\n\n** **\n\nOur\nrevenues will depend in part on prices we receive for tire-derived oil, refined fuel products, recovered carbon black, and recovered\nsteel, each of which is subject to commodity price volatility driven by global energy markets, industrial demand, and competition from\nalternative products. A material decline in prices for any of these products, or unfavorable terms on offtake or supply arrangements,\ncould adversely affect our revenues and profitability.\n\n \n\n**We\nhave not finalized material offtake agreements for our products.**\n\n** **\n\nAs\nof the date of this Annual Report, we have not finalized any material offtake agreements for tire-derived oil, recovered carbon black,\nrecovered steel, or related products, although we have entered into preliminary arrangements subject to output laboratory results. If\nwe are unable to secure offtake agreements on commercially reasonable terms, we may be unable to monetize our products as planned, which\ncould have a material adverse effect on our business and financial condition.\n\n \n\n**Our\nrevenues from environmental credit monetization are speculative and subject to significant uncertainty.**\n\n** **\n\nA\nportion of our planned revenue is expected to come from the monetization of carbon credits, plastic credits, and other environmental\nincentives. The markets for these credits are evolving, fragmented, and subject to significant regulatory, market, and certification\nrisks. We may be unable to qualify for, generate, or monetize environmental credits on the terms or in the amounts we anticipate, which\ncould adversely affect our business model and projected returns.\n\n \n\n**Risks\nRelated to Regulation and Compliance**\n\n \n\n**Our\noperations are subject to extensive environmental, health, safety, and permitting requirements, and failure to comply could materially\nadversely affect our business.**\n\n** **\n\nOur\nplanned operations are subject to extensive federal, state, and local laws and regulations governing air emissions, waste handling, scrap\ntire storage, worker safety, transportation, and facility operations, including the Clean Air Act, the Resource Conservation and Recovery\nAct, OSHA requirements, and state and local regulations administered in Texas by the Texas Commission on Environmental Quality (“TCEQ”).\nRegulatory requirements applicable to waste conversion are complex and evolving. Changes in environmental laws or regulations —\nparticularly those related to greenhouse gas emissions, waste classification, or the regulatory treatment of waste-to-energy —\ncould require significant capital expenditures or operational modifications. Failure to obtain, maintain, or renew required operating\npermits could result in fines, penalties, facility shutdowns, or inability to expand, any of which could have a material adverse effect\non our business.\n\n \n\n**We\nhave not yet obtained all permits and approvals required to commence commercial operations at Midland.**\n\n** **\n\nAs\nof the date of this Annual Report, we have not obtained all permits and approvals required to commence commercial operations at the Midland\nfacility. Permitting processes can be time-consuming, costly, and subject to objection or denial. Any delay or inability to obtain required\npermits would delay our ability to begin generating revenue and could materially adversely affect our business.\n\n \n\n10\n\n \n\n \n\n**Risks\nRelated to Our Common Stock and Capital Structure**\n\n \n\n**The\nconversion features of our outstanding convertible notes, including variable conversion prices tied to our trading price, could result\nin substantial dilution to our stockholders and depress the market price of our common stock.**\n\n** **\n\nAs\nof December 31, 2025, we had outstanding convertible notes payable with an aggregate principal balance of approximately $970,000,\nas well as other obligations that may be settled in shares of our common stock. A significant portion of these convertible notes contain\nvariable conversion features that allow the holder, beginning six months after issuance, to convert all or a portion of the outstanding\nprincipal and accrued interest into shares of our common stock at a conversion price equal to 60% of the lowest trading price of our\ncommon stock during the twenty trading days preceding conversion. Other outstanding notes are convertible at fixed prices as low as $0.025\nto $0.20 per share.\n\n \n\nBecause\nthe number of shares issuable upon conversion of notes with variable conversion features is determined by reference to our trading price\nat the time of conversion, the lower our stock price at the time of conversion, the more shares we will be required to issue. As a result:\n\n \n\n●Conversions\nof these notes will be significantly dilutive to existing stockholders, and the extent of\ndilution is not presently determinable.\n\n●Declines\nin our stock price will increase the number of shares issuable upon conversion, which could\nresult in the issuance of shares substantially in excess of what a fixed conversion price\nwould produce.\n\n●The\nsale of shares acquired upon conversion, or the anticipation of such sales, could place additional\ndownward pressure on the market price of our common stock, which in turn could further increase\nthe number of shares issuable upon subsequent conversions, creating a cycle of declining\nstock price and increasing dilution sometimes referred to as a “death spiral.”\n\n●The\nexistence of these conversion features may make it more difficult for us to raise additional\ncapital on favorable terms, as potential investors may be deterred by the prospect of significant\nfuture dilution.\n\n \n\nOur\noutstanding convertible notes also include original issue discounts and default provisions that could materially increase the obligations\npayable by us, including in shares of our common stock. We are party to a convertible loan agreement under which an event of default\nwould result in a 30% increase in the outstanding balance and a conversion price of $0.025 per share. Other notes carry default interest\nrates as high as 22%. Events of default could accelerate repayment obligations or significantly increase share issuances.\n\n \n\nOur\nauthorized capital consists of 400,000,000 shares of common stock, of which 149,220,840 were issued and outstanding as of the date of\nthis Annual Report. If our stock price declines materially, the number of shares issuable upon conversion of our outstanding convertible\nnotes, together with shares issuable under outstanding stock options, warrants, and stock subscription obligations, could approach or\nexceed our authorized share capital. Any required increase in authorized capital would require stockholder approval, which we may not\nbe able to obtain on a timely basis, or at all. Our inability to issue shares upon conversion when required could result in events of\ndefault under the applicable notes, with the consequences described above.\n\n \n\nAs of December 31, 2025, we had approximately $1.8 million recorded\nas a derivative liability on our consolidated balance sheet, reflecting the fair value of the embedded conversion features of certain\nof these notes. For the year ended December 31, 2025, we recorded a gain of $385,493 related to the change in fair value\nof derivative liabilities. Changes in the fair value of this derivative liability will continue to affect our reported results of operations.\nFor additional information, see Notes 8 and 9 to our consolidated financial statements included in this Annual Report.\n\n \n\n**In\naddition to dilution from our convertible notes, we may issue additional shares of common stock at any time, which would dilute existing\nstockholders.**\n\n** **\n\nWe\nare authorized to issue up to 400,000,000 shares of common stock, of which 149,220,840 were issued and outstanding as of the date of\nthis Annual Report. Our Board of Directors has the authority to issue additional shares of common stock without the consent of our stockholders.\nConsequently, stockholders may experience further dilution as we raise capital, compensate service providers, or otherwise issue equity.\nIf outstanding stock options, warrants, or convertible notes are exercised or converted, we will be required to issue additional shares,\nwhich will result in further dilution. See also the risk factor titled “The conversion features of our outstanding convertible\nnotes, including variable conversion prices tied to our trading price, could result in substantial dilution…” above.\n\n \n\n**We\ndo not intend to pay cash dividends on our common stock.**\n\n** **\n\nWe\ndo not anticipate paying any cash dividends on our common stock in the foreseeable future. The declaration, payment, and amount of any\nfuture dividends will be made at the discretion of our Board of Directors and will depend on our results of operations, cash flows, financial\ncondition, operating and capital requirements, and other factors the Board considers relevant. Stockholders will not receive a return\non their shares unless they are sold.\n\n \n\n**Our\ncommon stock is considered a “penny stock,” which limits its marketability.**\n\n** **\n\nOur\ncommon stock is considered a “penny stock” under SEC Rule 15g-9, which generally defines “penny stock” as any\nequity security with a market or exercise price of less than $5.00 per share, subject to certain exceptions. The penny stock rules impose\nadditional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited\ninvestors, including the delivery of a standardized risk disclosure document, disclosure of current bid and offer quotations, disclosure\nof broker-dealer compensation, monthly account statements, and a suitability determination with written customer agreement. These requirements\nmay reduce trading activity in our common stock, limit the ability of broker-dealers to trade our securities, discourage investor interest,\nand adversely affect the liquidity and market price of our common stock.\n\n \n\n**FINRA\nsales practice requirements may further limit a stockholder’s ability to buy and sell our common stock.**\n\n** **\n\nIn\naddition to the SEC’s penny stock rules, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules requiring\nthat, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing the investment is suitable\nfor that customer. FINRA’s guidance suggests that speculative low-priced securities may not be suitable for at least some customers.\nThese requirements may make it more difficult for broker-dealers to recommend our common stock to their customers and may limit the liquidity\nof our common stock.\n\n \n\n**There\nis a limited trading market for our common stock, and trading is subject to significant volatility.**\n\n** **\n\nOur\ncommon stock is quoted on the OTCQB tier of the OTC Markets Group under the symbol “WAST.” Trading in stocks quoted on the\nOTCQB is often thin and is characterized by wide fluctuations in trading prices, many of which are unrelated to the underlying business\nperformance of the issuer. We cannot assure you that an active trading market for our common stock will develop or be sustained, or that\nthe trading price of our common stock will not experience significant volatility. On May 7, 2025 the Company received a cease trade order in Canada due to the non-filing of our December 31,\n2024 financial statements. We anticipate having the order removed by September 30, 2026.\n\n \n\n11\n\n \n\n \n\n**Risks\nRelated to Legal Proceedings and Related-Party Matters**\n\n \n\n**We\nare subject to pending legal proceedings whose outcome is uncertain and could materially and adversely affect us.**\n\n** **\n\nAs\ndescribed in Item 3, “Legal Proceedings,” and Note 11 to our consolidated financial statements, LarCo Holdings, LLC filed\na complaint in July 2024 in the Superior Court of the State of Arizona, Maricopa County, against Business Instincts Group, Inc. (“BIG”)\nand the Company. LarCo is seeking damages of $1,321,382 in the aggregate, of which $752,500 is claimed against us in connection with\nan uncollected invoice the Company pledged as collateral in support of a BIG loan. We intend to defend against the claim; however, the\noutcome cannot be predicted and any adverse ruling could result in a material monetary judgment, legal costs, and diversion of management\nattention.\n\n \n\nOn June 13, 2025, judgment on the loan was entered\nin LarCo’s favor against the Vendor and a former executive of the Company’s predecessor, and on September 17, 2025, an amended\njudgment was entered against those parties in the approximate amount of $1.57 million. The Company was not a party to, and has no liability\nunder, that judgment.\n\n \n\nOn January 15, 2026, LarCo filed a First Verified\nAmended Complaint (the “Amended Complaint”) asserting claims against the Company for breach of contract, breach of the implied\ncovenant of good faith and fair dealing, negligent misrepresentation, fraud-based claims, conversion, unjust enrichment, and aiding and\nabetting. As against the Company, the Amended Complaint seeks, among other things, $752,500 in respect of the pledged invoice; joint and\nseveral liability for the approximately $1.57 million judgment previously entered against the co-defendants described above; $1,875,000\nasserted against all defendants in respect of certain pledged shares; punitive damages; and attorneys’ fees and costs.\n\n \n\n**Certain\nrelated-party obligations recorded on our balance sheet are disputed and subject to ongoing review.**\n\n** **\n\nAs\ndescribed in Note 13 to our consolidated financial statements, as of December 31, 2025, we had recorded accounts payable and accrued\nexpense balances in the aggregate amount of $672,524 in connection with BIG and Cameron Chell, our former Executive Chairman. The entire\naggregate balance is currently disputed, and we are unable to confirm that the underlying obligations were properly authorized, appropriately\nvalued, or legitimately incurred in accordance with our related-party transaction policies. In addition, we have received notice that\na third party has purported to assert rights against amounts allegedly owed by us to BIG and/or Mr. Chell pursuant to a judgment against\nthem. We dispute the validity and enforceability of any such third-party claim. The outcome of these matters is uncertain, and an adverse\nresolution could result in a material cash payment, share issuance, or legal costs.\n\n \n\n**Risks\nRelated to Internal Controls and Governance**\n\n \n\n**We\nhave identified material weaknesses in our internal control over financial reporting, and failure to remediate them could result in misstatements\nin our financial statements.**\n\n** **\n\nAs\ndescribed in Item 9A, “Controls and Procedures,” management has identified material weaknesses in our internal control over\nfinancial reporting, including the lack of a fully integrated financial reporting system and insufficient segregation of duties and technical\naccounting resources. As a result of these material weaknesses, our principal executive officer and principal financial officer have\nconcluded that our disclosure controls and procedures were not effective as of December 31, 2025. Material weaknesses could result in\nmaterial misstatements in our financial statements that may not be detected on a timely basis, could cause us to fail to meet our reporting\nobligations, and could cause investors to lose confidence in our reported financial information, any of which could adversely affect\nthe market price of our common stock. Remediation will require significant time, effort, and financial resources, and we cannot be certain\nthat our remediation efforts will be successful.\n\n \n\n**Our\nsuccess depends on the continued service of key personnel.**\n\n** **\n\nOur\nsuccess depends on the continued service of our executive officers, directors, and key consultants, including Scott Gallagher, Braden\nGlasbergen, and Scott McBride, each of whom possesses expertise material to our business. We do not maintain key-person life insurance\non any of our executives. Competition for qualified personnel in the waste-to-energy and clean-energy industries is significant. The\nloss of any key personnel, or our inability to attract and retain qualified replacements, could have a material adverse effect on our\nbusiness.\n\n \n\n**General\nRisk Factors**\n\n \n\n**Supply\nchain disruptions and third-party dependencies could adversely affect our operations.**\n\n** **\n\nWe\ndepend on third parties for the design, manufacture, importation, delivery, and maintenance of our waste conversion equipment and related\ncomponents, as well as for construction services, engineering, and other inputs. Supply chain disruptions, transportation delays, customs\nissues, tariff changes, vendor performance failures, or geopolitical events could delay our commissioning timeline, increase costs, or\nadversely affect our operations.\n\n \n\n**We\nmay be subject to additional litigation and legal proceedings in the ordinary course of our business.**\n\n** **\n\nWe\nmay from time to time be subject to legal claims arising from our operations, including environmental liability claims, regulatory enforcement\nactions, contractual disputes, and other litigation. Any material legal proceeding, whether or not ultimately decided in our favor, could\ndivert management attention and result in substantial legal costs and potential damages.\n\n \n\n**Adverse\neconomic and market conditions could adversely affect our business.**\n\n** **\n\nBroader\neconomic conditions, including inflation, rising interest rates, capital market disruptions, recession, and changes in governmental policy,\ncould adversely affect customer demand, investor confidence, the availability and cost of financing, and our ability to execute our business\nstrategy.\n\n \n\n12"}