The information in this proxy statement/prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

TABLE OF CONTENTS

FREQUENTLY USED TERMS

Unless otherwise stated in this proxy statement, the terms, “we,” “us,” “our” “CleanTech” or “CLAQ” refer to CleanTech Acquisition Corp., a Delaware corporation. Further, in this document:

•        “Amended Charter” means the Second Amended and Restated Certificate of Incorporation of CLAQ.

•        “Board” means the board of directors of CLAQ.

•        “Business Combination” means the merger contemplated by the Merger Agreement.

•        “CLAQ Rights” or “Rights” means the rights as part of the Units sold by CLAQ in its IPO.

•        “CLAQ Warrants” or “Warrants” means the redeemable warrants that entitle the holder thereof to purchase one share of common stock at a price of $11.50 per share.

•        “Certificate of Incorporation” or “Current Charter” means CLAQ’s current Amended and Restated Certificate of Incorporation.

•        “Chardan” or “Chardan Capital Markets, LLC” means Chardan Capital Markets, LLC, the representative of the underwriters in CLAQ’s initial public offering.

•        “CleanTech Investments” means CleanTech Investments, LLC, an entity affiliated with certain of CLAQ’s investors and Chardan.

•        “CleanTech Sponsor” means CleanTech Sponsor I LLC, an entity affiliated with certain of CLAQ’s directors and officers.

•        “Closing” means the consummation of the Business Combination.

•        “Closing Date” means date of the consummation of the Business Combination.

•        “Co-sponsors” means CleanTech Sponsor and CleanTech Investments.

•        “Code” means the Internal Revenue Code of 1986, as amended.

•        “Closing Share Price” means $10.00 per share.

•        “Combined Company” means CLAQ after the Business Combination, renamed “Nauticus Robotics, Inc.”

•        “Combination Period” means the period of time from the closing of the IPO to consummate the initial Business Combination pursuant to CLAQ’s Current Charter.

•        “common stock” means the shares of common stock, par value $0.0001 per share, of CLAQ prior to the Closing, and the Common Stock of the Combined Company following the Closing.

•        “Continental” means Continental Stock Transfer & Trust Company, CLAQ’s transfer agent.

•        “Duff & Phelps” means Kroll LLC operating through its Duff & Phelps Opinions Practice.

•        “Effective Time” means the time at which the Business Combination becomes effective.

•        “Equity Value” means the sum of (i) Three Hundred Million ($300,000,000) plus (ii) the amount by which (x) the outstanding liabilities and obligations of CLAQ with respect to the Transactions (including with respect to Indebtedness of CLAQ and Outstanding CLAQ Expenses) at the Closing (but prior to repayment thereof at the Closing) exceeds (y) $35,000,000. For the avoidance of doubt, the amount described in sub-clause (ii) of this definition of Equity Value shall not be less than zero (0) and the Equity Value shall not be less than Three Hundred Million ($300,000,000).

•        “Exchange Act” means the Securities Exchange Act of 1934, as amended.

•        “Exchange Ratio” means the ratio determined by dividing (a) the Per Share Merger Consideration Value, by (b) the Closing Share Price.

•        “founder shares” means an aggregate of 4,312,500 shares of common stock held by our co-sponsors, directors and officers, consisting of (i) 2,595,000 shares of common stock held by CleanTech Investments; (ii) 1,437,500 shares of common stock held by CleanTech Sponsor; and (iii) an aggregate of 280,000 shares of common stock held by CLAQ officers, directors and certain advisors.

•        “GAAP” means accounting principles generally accepted in the United States of America.

•        “Incentive Award Plan” means the Nauticus Robotics, Inc. 2022 Incentive Award Plan.

•        “Initial Stockholders” means the Co-sponsors and any other initial holders of CLAQ common stock and Private Warrants.

•        “IPO” means the initial public offering of 15,000,000 Units of CLAQ consummated on July 19, 2021, including the additional 2,250,000 Units sold to cover the over-allotment option on July 28, 2021.

•        “IRS” means the United States Internal Revenue Service.

•        “Meeting” means the special meeting of the stockholders of CLAQ, which will be held at            a.m./p.m.., Eastern time, on            , 2022.

•        “Merger Agreement” means that certain Merger Agreement, dated as of December 16, 2021, as amended on January 30 and June 6, 2022, by and among CLAQ, Merger Sub and Nauticus.

•        “Merger Sub” means CleanTech Merger Sub, Inc., a Texas corporation and wholly-owned subsidiary of CLAQ.

•        “Minimum Cash Condition” means the aggregate cash available to CLAQ at Closing from the Trust Account and the PIPE Investment (after giving effect to the redemption and the payment of all expenses) shall equal or exceed $50,000,000.

•        “Nauticus” or “Nauticus Robotics” means Nauticus Robotics, Inc., a Texas corporation, formerly known as Houston Mechatronics, Inc.

•        “Nauticus Convertible Notes” means (i) that certain Unsecured Convertible Promissory Note, dated June 19, 2021, by and between Goradia Capital, LLC and Nauticus, as amended on December 16, 2021, (ii) that certain Unsecured Convertible Promissory Note, August 3, 2021, by and between Material Impact Fund II, L.P. and Nauticus, as amended on December 16, 2021, (iii) that certain Unsecured Convertible Promissory Note, dated October 22, 2021, by and between In-Q-Tel, Inc. and Nauticus, as amended on December 16, 2021, (iv) that certain Unsecured Convertible Promissory Note, dated July 28, 2020, by and between Schlumberger Technology Corporation and Nauticus, as amended on December 16, 2021, and (v) that certain Unsecured Convertible Promissory Note, dated December 7, 2020, by and between Transocean Inc. and Nauticus, as amended on December 16, 2021 (each, a “Nauticus Convertible Note” and collectively, the “Nauticus Convertible Notes”).

•        “Per Share Merger Consideration” means with respect to any share of Nauticus Common Stock, issued and outstanding immediately prior to the Effective Time, including those issued in connection with the Nauticus Preferred Stock Conversion and the Nauticus Convertible Note Conversion, a number of shares of the Combined Company’s Common Stock equal to (i) the Per Share Merger Consideration Value divided by (ii) the Closing Share Price.

•        “Per Share Merger Consideration Value” means $142.069.

•        “PIPE Investment” means the sale and issuance of (i) 3,530,000 shares of common stock to certain investors for an aggregate purchase price of $35.3 million in a private placement immediately prior to the closing of the Business Combination (the “Equity Financing”); and (ii) up to an aggregate of $40.0 million in principal amount of secured debentures (the “Debentures”) (of which we have entered into agreements for $37,959,184 of Debentures) and warrants to certain investors named in the Securities Purchase Agreement dated December 16, 2021, substantially concurrently with the closing of the Business Combination (the “Debt Financing”).

•        “public stockholders” means holders of Public Common Stock.

•        “Public Common Stock” means Common Stock sold in the IPO as part of the Units, whether they were purchased in the IPO or thereafter in the open market.

•        “Public Warrants” means warrants sold in the IPO as part of the Units, whether they were purchased in the IPO or thereafter in the open market.

•        “Private Warrants” mean the 7,175,000 Warrants issued to the Co-Sponsors, consisting of (i) 4,783,333 Private Warrants issued to CleanTech Sponsor; and (ii) 2,391,667 Private Warrants issued to CleanTech Investments, in a private placement in connection with the consummation of the IPO.

•        “RaaS” means Robotics as a Service.

•        “SEC” means the U.S. Securities and Exchange Commission.

•        “Securities Act” means the Securities Act of 1933, as amended.

•        “Trust Account” means CLAQ’s trust account maintained by Continental.

•        “Units” means the units of CLAQ, each consisting of one share of common stock, one right and one-half of one redeemable warrant.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus contains forward-looking statements, including statements about the parties’ ability to close the Business Combination, the anticipated benefits of the Business Combination, and the financial condition, results of operations, earnings outlook and prospects of CLAQ and/or Nauticus and may include statements for the period following the consummation of the Business Combination. Forward-looking statements appear in a number of places in this proxy statement/prospectus including, without limitation, in the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Nauticus” and “Business of Nauticus.” In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements are based on the current expectations of the management of CLAQ and Nauticus as applicable and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in “Risk Factors,” those discussed and identified in public filings made with the SEC by CLAQ and the following:

•        the inability of the parties to successfully or timely consummate the Business Combination, including the risk that any required regulatory approvals are not obtained, are delayed or are subject to unanticipated conditions that could adversely affect Nauticus or the expected benefits of the Business Combination, if not obtained;

•        the failure to realize the anticipated benefits of the Business Combination;

•        matters discovered by the parties as they complete their respective due diligence investigation of the other parties;

•        the ability of CLAQ prior to the Business Combination, and the Combined Company following the Business Combination, to maintain the listing of CLAQ’s securities on Nasdaq;

•        costs related to the Business Combination;

•        the failure to satisfy the conditions to the consummation of the Business Combination, including the approval of the definitive merger agreement by the stockholders of CLAQ, the satisfaction of the minimum cash requirements of the definitive merger agreement following any redemptions by CLAQ’s public stockholders;

•        the risk that the Business Combination may not be completed by the stated deadline and the potential failure to obtain an extension of the stated deadline; the inability to complete a PIPE Investment;

•        the outcome of any legal proceedings that may be instituted against CLAQ or Nauticus related to the Business Combination;

•        the attraction and retention of qualified directors, officers, employees and key personnel of CLAQ and Nauticus prior to the Business Combination, and the Combined Company following the Business Combination;

•        the ability of Nauticus to compete effectively in a highly competitive market;

•        the ability to protect and enhance Nauticus’ corporate reputation and brand;

•        the impact from future regulatory, judicial, and legislative changes in Nauticus’ industry;

•        the uncertain effects of the COVID-19 pandemic;

•        competition from larger technology companies that have greater resources, technology, relationships and/or expertise;

•        future financial performance of the Combined Company following the Business Combination including the ability of future revenues to meet projected annual bookings;

•        the ability of Nauticus to forecast and maintain an adequate rate of revenue growth and appropriately plan its expenses;

•        the ability of Nauticus to generate sufficient revenue from each of our revenue streams;

•        the ability of Nauticus’ patents and patent applications to protect Nauticus’ core technologies from competitors;

•        Nauticus’ ability to manage a complex set of marketing relationships and realize projected revenues from subscriptions, advertisements;

•        product sales and/or services;

•        Nauticus’ ability to execute its business plans and strategy; and

•        those factors set forth in documents of CLAQ filed, or to be filed, with SEC.

Should one or more of these risks or uncertainties materialize or should any of the assumptions made by the management of CLAQ and Nauticus prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

All subsequent written and oral forward-looking statements concerning the Business Combination or other matters addressed in this proxy statement/prospectus and attributable to CLAQ, Nauticus or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this proxy statement/prospectus. Except to the extent required by applicable law or regulation, CLAQ and Nauticus undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events.

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS

The following are answers to some questions that you, as a stockholder of CLAQ, may have regarding the Proposals being considered at the Meeting. We urge you to read carefully the remainder of this proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the Proposals and the other matters being considered at the Meeting. Additional important information is also contained in the annexes to and the documents incorporated by reference into this proxy statement/prospectus.

Q:     What is the purpose of this document?

A:     CLAQ, Merger Sub, and Nauticus, have agreed to the Business Combination under the terms of the Merger Agreement, which is attached to this proxy statement/prospectus as Annex A, and is incorporated into this proxy statement/prospectus by reference. The Board is soliciting your proxy to vote for the Business Combination and other Proposals at the Meeting because you owned common stock at the close of business on            , 2022, the “Record Date” for the Meeting, and are therefore entitled to vote at the Meeting. This proxy statement/prospectus summarizes the information that you need to know in order to cast your vote.

Q:     What is being voted on?

A:     Below are the Proposals that the CLAQ stockholders are being asked to vote on:

•        Proposal 1 — The Business Combination Proposal to approve the Merger Agreement and the Business Combination.

•        Proposal 2 — The Charter Approval Proposal to approve the Second Amended and Restated Certificate of Incorporation attached to this proxy statement/prospectus as Annex B.

•        Proposal 3 — The Bylaws Proposal to approve the Amended and Restated Bylaws attached to this proxy statement/prospectus as Annex C.

•        Proposals 4A-4E — The Governance Proposals to approve and adopt, on a non-binding advisory basis, certain differences, in the governance provisions set forth in the Amended Charter, as compared to our Current Charter.

•        Proposal 5 — The Directors Proposal to elect, effective as of the consummation of the Business Combination, Nicolaus Radford, Eli Spiro, Mark Mey, Lisa Porter, Jim Bellingham, Adam Sharkawy, Joseph W. Dyer, and John W. Gibson, Jr. to serve on the Board until their respective successors are duly elected and qualified.

•        Proposal 6 — The Stock Plan Proposal to approve the Incentive Award Plan.

•        Proposal 7 — The Nasdaq Merger Proposal to approve the issuance of more than 20% of the issued and outstanding shares of common stock in connection with the terms of the Merger Agreement, which will result in a change of control, as required by Nasdaq Listing Rule 5635(a)and (b).

•        Proposal 8 — The Nasdaq PIPE Proposal to approve the issuance or potential issuance of more than 20% of the issued and outstanding shares of common stock in connection with the PIPE Investment, as required by Nasdaq Listing Rule 5635(d).

•        Proposal 9 — The Adjournment Proposal to approve the adjournment of the Meeting.

Q:     What vote is required to approve the Proposals?

A:     Proposal 1 — The Business Combination Proposal requires the affirmative vote of the majority of the issued and outstanding shares of common stock present by virtual attendance or represented by proxy and entitled to vote at the Meeting. An abstention will have the effect of a vote “AGAINST” Proposal 1. Broker non-votes will have no effect on the vote for Proposal 1.

Proposal 2 — The Charter Approval Proposal requires the affirmative vote of the majority of the issued and outstanding shares of common stock. Abstentions and broker non-votes will have the effect of a vote “AGAINST” Proposal 2.

Proposal 3 — The Bylaws Proposal requires the affirmative vote of the majority of the issued and outstanding shares of common stock present in person by virtual attendance or represented by proxy and entitled to vote. An abstention will have the effect of a vote “AGAINST” Proposal 3. Broker non-votes will have no effect on the vote for Proposal 3.

Proposals 4A-4E — The Governance Proposals require the affirmative vote of the majority of the issued and outstanding shares of common stock present in person by virtual attendance or represented by proxy and entitled to vote. Abstentions will have the effect of a vote “AGAINST” Proposals 4A-4E. Broker non-votes will have no effect on the vote for Proposals 4A-4E.

Proposal 5 — The Directors Proposal requires a plurality of the votes cast. Withhold votes and broker non-votes will have no effect on the vote for Proposal 5.

Proposal 6 — The Stock Plan Proposal requires the affirmative vote of the majority of the issued and outstanding shares of common stock present in person by virtual attendance or represented by proxy and entitled to vote. Abstentions will have the effect of a vote “AGAINST” Proposal 6. Broker non-votes will have no effect on the vote for Proposal 6.

Proposal 7 — The Nasdaq Merger Proposal requires the affirmative vote of the majority of the issued and outstanding shares of common stock present by virtual attendance or represented by proxy and entitled to vote at the Meeting. Abstentions will have the effect of a vote “AGAINST” Proposal 7. Broker non-votes will have no effect on the vote for Proposal 7.

Proposal 8 — The Nasdaq PIPE Proposal requires the affirmative vote of the majority of the issued and outstanding shares of common stock present by virtual attendance or represented by proxy and entitled to vote at the Meeting. Abstentions will have the effect of a vote “AGAINST” Proposal 8. Broker non-votes will have no effect on the vote for Proposal 8.

Proposal 9 — The Adjournment Proposal requires the affirmative vote of the majority of the issued and outstanding shares of common stock present in person by virtual attendance or represented by proxy and entitled to vote at the Meeting. Abstentions will have the effect of a vote “AGAINST” Proposal 9. Broker-non votes have no effect on the vote for Proposal 9.

Q:     Are any of the Proposals conditioned on one another?

A:     The Business Combination Proposal is conditioned upon the approval of Proposals 2, 3, 5, 6, 7 and 8. Proposals 2, 3, 4, 5, 6, 7 and 8 are dependent upon approval of the Business Combination Proposal. It is important for you to note that in the event that the Business Combination Proposal is not approved, CLAQ will not consummate the Business Combination. If CLAQ does not consummate the Business Combination and fails to complete an initial business combination by July 19, 2022, CLAQ will be required to dissolve and liquidate, unless we seek stockholder approval to amend our Certificate of Incorporation to extend the date by which the Business Combination may be consummated.

Q:     What will happen in the Business Combination?

A:     At the closing of the Business Combination, Merger Sub will merge with and into Nauticus, with Nauticus surviving such merger as the surviving entity. Upon consummation of the Business Combination, Nauticus will become a wholly-owned subsidiary of CLAQ. In connection with the Business Combination, the cash held in the Trust Account after giving effect to any redemption of shares by CLAQ’s public stockholders and the proceeds from the PIPE Investment will be used to pay certain fees and expenses in connection with the Business Combination, and for working capital and general corporate purposes. A copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A.

Q:     How will the Initial Stockholders vote?

A:     In connection with the execution of the Merger Agreement, the Co-Sponsors entered into the Sponsor Support Agreement with Nauticus pursuant to which they agreed to vote all shares of common stock beneficially owned by them in favor of the Business Combination Proposal (“Sponsor Support Agreement”).

As of             , 2022, a total of 4,032,500 shares of common stock or approximately 18.7% of the outstanding shares were subject to the Sponsor Support Agreement. In addition, pursuant to a letter agreement dated July 14, 2021, the Initial Stockholders agreed to vote their respective shares of common stock acquired by them prior to the IPO and any shares of common stock purchased by them in the open market after the IPO in favor of the Business Combination

Proposal (“Letter Agreement”). As of            , 2022, a total of 4,312,500 shares of common stock held by CLAQ officers (2,595,000 shares, or 12.0%), directors (4,252,500 shares, or 19.7%) and CLAQ Co-Sponsors (4,032,500 shares or 18.7% in the aggregate), or approximately 20.0% of the outstanding shares were subject to the Letter Agreement. As a result, only 1,078,126 shares of common stock held by the public stockholders will need to be present in person by virtual attendance or by proxy to satisfy the quorum requirement for the meeting. In addition, as the vote to approve the Business Combination Proposal is a majority of the then outstanding shares of common stock present and entitled to vote at the Meeting, assuming only the minimum number of shares of common stock to constitute a quorum is present, only 539,063 shares of common stock or approximately 3.1% of the outstanding shares of the common stock held by the public stockholders must vote in favor of the Business Combination Proposal for it to be approved.

Pursuant to the Nauticus Support Agreement (defined below), Nauticus’ directors, executive officers and their affiliates have agreed to vote in favor of the Business Combination at Nauticus’ special meeting to approve the Business Combination. These directors, executive officers and their affiliates represent the holders of approximately 88.8% of the voting power of Nauticus. As such, they do not require additional votes from other stockholders to vote in favor of the Business Combination.

Q:     How many votes do I and others have?

A:     You are entitled to one vote for each share of common stock that you held as of the Record Date. As of the close of business on the Record Date, there were            outstanding shares of common stock.

Q:     Will the transaction qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended?

A:     While the parties intend for the transaction to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code, there is no assurance that will indeed be the case. In the event that the transaction fails to qualify as such, there would be no adverse tax consequences to CLAQ or Merger Sub.

Q:     Did the CLAQ Board obtain a fairness opinion in determining whether or not to proceed with the Business Combination?

A:     After careful consideration of the terms and conditions of the Merger Agreement, the CLAQ Board determined in December 2021 that Business Combination and the transactions contemplated thereby are fair to, and in the best interests of, CLAQ and its stockholders. In reaching its decision with respect to the Business Combination and the transactions contemplated thereby, the CLAQ Board reviewed various industry and financial data and the evaluation of materials provided by Nauticus. Although the CLAQ Board did not obtain a third-party valuation or fairness opinion in connection with its resolution to approve the Merger but determined that CLAQ’s management, CleanTech Sponsor and the members of the Board had substantial experience in evaluating the operating, financial and business merits of companies similar to Nauticus, sufficient to make its own determination of the merits of a business combination with Nauticus.

On January 28, 2022, in order to provide added transparency to the transactions contemplated by the Merger Agreement and greater certainty to close the Business Transaction in the current turbulent market, CLAQ retained Duff & Phelps to serve as an independent financial advisor to the Board of CLAQ, specifically to provide to the Board a fairness opinion in connection with the Business Combination. On March 24, 2022, the CLAQ Board (solely in their capacity as members of the CLAQ Board) obtained an opinion from Duff & Phelps that the consideration to be paid by CLAQ to the Nauticus securityholders in the Business Combination pursuant to the Merger Agreement is fair to CLAQ, from a financial point of view. There was no separate opinion rendered on the fairness of the Business Combination to the public shareholders or shareholders unaffiliated with the Co-Sponsors or their affiliates. See “Proposal 1 — The Business Combination Proposal — Opinion of CLAQ’s Financial Advisor” and the opinion (as described below) attached to the proxy statement/prospectus as Exhibit F.

Q:     What is the consideration being paid to Nauticus security holders?

Preferred Stock.    Immediately prior to the Effective Time, each share of Nauticus Preferred Stock that is issued and outstanding immediately prior to such time shall automatically convert into shares of Nauticus Common stock, par value $0.01 per share (the “Nauticus Common Stock”), in accordance with its Certificate of Incorporation (collectively, the “Nauticus Preferred Stock Conversion”). As a result of the Merger, an aggregate of 15,062,524 shares of CLAQ Common Stock will be issued to the holders of Nauticus Preferred Stock.

Convertible Notes.    Immediately prior to the Effective Time, each of (i) that certain Unsecured Convertible Promissory Note, dated June 19, 2021, by and between Goradia Capital, LLC and Nauticus, as amended on December 16, 2021, (ii) that certain Unsecured Convertible Promissory Note, August 3, 2021, by and between Material Impact Fund II, L.P. and Nauticus, as amended on December 16, 2021, (iii) that certain Unsecured Convertible Promissory Note, dated October 22, 2021, by and between In-Q-Tel, Inc. and Nauticus, as amended on December 16, 2021, (iv) that certain Unsecured Convertible Promissory Note, dated July 28, 2020, by and between Schlumberger Technology Corporation and Nauticus, as amended on December 16, 2021, and (v) that certain Unsecured Convertible Promissory Note, dated December 7, 2020, by and between Transocean Inc. and Nauticus, as amended on December 16, 2021 (each, a “Nauticus Convertible Note” and collectively, the “Nauticus Convertible Notes”) shall automatically convert into shares of Nauticus Common Stock in accordance with the terms of each such Nauticus Convertible Note (collectively, the “Nauticus Convertible Notes Conversion”). As a result of the Merger, an aggregate of 5,299,543 shares of CLAQ Common Stock will be issued to the holders of Nauticus Convertible Notes.

Common Stock.    At the Effective Time, following the Nauticus Preferred Stock Conversion and Nauticus Convertible Notes Conversion, each share of Nauticus Common Stock (including shares of Nauticus Common Stock outstanding as a result of the Nauticus Preferred Stock Conversion and Nauticus Convertible Notes Conversion, but excluding shares of the holders of which perfect rights of appraisal under Delaware law) will be converted into the right to receive the Per Share Merger Consideration of 14.2069 (as defined below) shares of CLAQ Common Stock and the Earnout Shares (as defined below). As a result of the Merger, an aggregate of 9,669,216 shares of CLAQ Common Stock will be issued to the holders of Nauticus Common Stock (not including the Earnout Shares).

Stock Options.    At the Effective Time, each outstanding option to purchase shares of Nauticus Common Stock (a “Nauticus Option”), whether or not then vested and exercisable, will be assumed by CLAQ and converted automatically (and without any required action on the part of such holder of outstanding option) into an option to purchase shares of the CLAQ’s Common Stock equal to the number of shares determined by multiplying the number of shares of the Nauticus Common Stock subject to such Nauticus Option immediately prior to the Effective Time by the Exchange Ratio of 14.2069 (as defined below), which product shall be rounded down to the nearest whole number of shares, at a per share exercise price determined by dividing the per share exercise price of such Nauticus Option immediately prior to the Effective Time by the Exchange Ratio. As a result of the Merger, an aggregate of 3,977,368 shares of CLAQ Common Stock will be issuable upon exercise of these options.

Earnout Shares.    Following the closing of the merger, former holders of shares of Nauticus Common Stock (including shares received as a result of the Nauticus Preferred Stock conversion and the Nauticus Convertible Notes conversion, the “Stockholder Earnout Group”) shall be entitled to receive their pro rata share of up to 7,500,000 additional shares of Combined Company Common Stock (the “Earnout Shares”). The Earnout Shares will be released and delivered to the Stockholder Earnout Group upon occurrence of the following (each, a “Triggering Event”):

(i)     one-half of the Escrow Shares will be released if, within a 5-year period following the signing date of the Merger Agreement, the volume-weighted average price of the Combined Company Common Stock equals or exceeds $15.00 per share, over any 20 trading days within a 30-day trading period.

(ii)    one-quarter of the Escrow Shares will be released if, within a 5-year period following the signing date of the Merger Agreement, the volume-weighted average price of the Combined Company Common Stock equals or exceeds $17.50 per share over any 20 trading days within a 30-day trading period; and

(iii)   one-quarter of the Escrow Shares will be released if, within a 5-year period following the signing date of the Merger Agreement, the volume-weighted average price of the Combined Company Common Stock equals or exceeds $20.00 per share over any 20 trading days within a 30-day trading period.

Q:     What equity stake will current stockholders of CLAQ and Nauticus stockholders hold in the Combined Company after the closing?

A.     It is anticipated that upon completion of the Business Combination and assuming no redemptions by CLAQ public stockholders, CLAQ’s public stockholders (other than the PIPE Investors) will retain an ownership interest of approximately 28.5% in the Combined Company the PIPE Investors will own approximately 5.6% of the Combined Company, the Co-Sponsors, officers, directors and other holders of founder shares will retain an ownership interest of approximately 6.8% of the Combined Company, and the Nauticus stockholders will own approximately 59.1% (including the 7,500,000 Earnout Shares) of the Combined Company.

The ownership percentage with respect to the Combined Company does not take into account (i) the redemption of any Public Common Stock by the CLAQ public stockholders, (ii) the issuance of any additional shares upon the closing of the Business Combination under the Incentive Award Plan, and (iii) the issuance of the Debentures and associated warrants in connection with the Debt Financing. If the actual facts are different from these assumptions (which they are likely to be), the percentage ownership retained by the CLAQ stockholders will be different. See “Unaudited Pro Forma Condensed Combined and Consolidated Financial Information.”

The following table illustrates varying ownership levels in the Combined Company, assuming consummation of the Business Combination and no redemptions by CLAQ public stockholders, 10% redemption by CLAQ public stockholders, 50% redemption by CLAQ public stockholders, 75% redemption by Public Shareholders and the maximum redemptions by CLAQ public stockholders:

____________

(1)      Assumes that no CLAQ public stockholders are redeemed.

(2)      Assumes that 1,725,000 Public Common Stock is redeemed for aggregate redemption payments of approximately $17,424,797, assuming a $10.10 per share redemption price and based on funds in the Trust Account as of March 31, 2022. The Merger Agreement includes a condition to the closing that at the closing having an amount of available cash from the Trust Account and the PIPE Investment (after giving effect to the redemption of any Public Common Stock in connection with the IPO and the payment of the transaction expenses), of no less than $50,000,000.

(3)      Assumes that 8,625,000 Public Common Stock is redeemed for aggregate redemption payments of approximately $87,123,987, assuming a $10.10 per share redemption price and based on funds in the Trust Account as of March 31, 2022. The Merger Agreement includes a condition to the closing that at the closing having an amount of available cash from the Trust Account and the Equity Financing (as defined in the Merger Agreement) (after giving effect to the redemption of any Public Common Stock in connection with the IPO and the payment of the transaction expenses), of no less than $50,000,000.

(4)      Assumes that 12,937,500 Public Common Stock is redeemed for aggregate redemption payments of approximately $130,685,980, assuming a $10.10 per share redemption price and based on funds in the Trust Account as of March 31, 2022. The Merger Agreement includes a condition to the closing that at the closing having an amount of available cash from the Trust Account and the Equity Financing (as defined in the Merger Agreement) (after giving effect to the redemption of any Public Common Stock in connection with the IPO and the payment of the transaction expenses), of no less than $50,000,000.

(5)      Assumes that 17,250,000 Public Common Stock is redeemed for aggregate redemption payments of approximately $174,247,973, assuming a $10.10 per share redemption price and based on funds in the Trust Account as of March 31, 2022. The Merger Agreement includes a condition to the closing that at the closing having an amount of available cash from the Trust Account and the PIPE Investment (after giving effect to the redemption of any Public Common Stock in connection with the IPO and the payment of the transaction expenses), of no less than $50,000,000.

(6)      Includes 7,500,000 shares of Common Stock subject to the Earnout Terms and the exercise of 3,977,368 Nauticus Options. The Earnout Shares subject to the Triggering Events will be deposited into escrow in accordance with the terms of the Merger Agreement and will be subject to reduction or forfeiture in accordance with the terms of the Merger Agreement. However, registered holders will maintain voting rights related to such shares unless forfeited.

(7)      Includes 8,625,000 Public Warrants and the issuance of 862,500 shares of Common Stock pursuant to the Rights. Non-redeeming public stockholders could suffer additional dilution in their ownership and voting interest of the combined company upon exercise of the Public Warrants held by redeeming CLAQ public stockholder who continue to hold these warrants, which could have an aggregate value of $3,967,500, based on the closing trading price per Public Warrant as of May 16, 2022.

(8)      Includes 4,312,500 outstanding founder shares and 7,175,000 Private Warrants.

(9)      Total of 4,312,500 outstanding founder shares includes 1,437,500 founder shares held by the Sponsor, 2,595,000 founder shares held by CleanTech Investments, and 280,000 founder shares held by the officers and directors of CleanTech. Please see the section titled “Beneficial Ownership of Securities.”

(10)    Assumes the sale of an aggregate of 3,530,000 shares of CleanTech Common Stock, for a purchase price of $10.00 per share and an aggregate purchase price of $35,300,000, conversion of the Debentures at a conversion price of $15.00 and exercise and conversion of the Warrants income Common Stock.

The following table illustrates estimated ownership levels in the Combined Company, immediately following the consummation of the Business Combination, based on the varying levels of redemptions by the CLAQ public stockholders and the following additional assumptions and the potential impact of redemptions on the value, on a per-share basis, of the shares owned by non-redeeming CLAQ public stockholders across varying levels of redemptions:

____________

(1)      Assumes that no Public Common Stock is redeemed.

(2)      Assumes that 1,725,000 Public Common Stock is redeemed for aggregate redemption payments of approximately $17,424,797, assuming a $10.10 per share redemption price and based on funds in the Trust Account as of March 31, 2022. The Merger Agreement includes a condition to the closing that at the closing having an amount of available cash from the Trust Account and the PIPE Investment (after giving effect to the redemption of any Public Common Stock in connection with the IPO and the payment of the transaction expenses), of no less than $50,000,000.

(3)      Assumes that 8,625,000 Public Common Stock is redeemed for aggregate redemption payments of approximately $87,123,987, assuming a $10.10 per share redemption price and based on funds in the Trust Account as of March 31, 2022. The Merger Agreement includes a condition to the closing that at the closing having an amount of available cash from the Trust Account and the Equity Financing (as defined in the Merger Agreement) (after giving effect to the redemption of any Public Common Stock in connection with the IPO and the payment of the transaction expenses), of no less than $50,000,000.

(4)      Assumes that 12,937,500 Public Common Stock is redeemed for aggregate redemption payments of approximately $130,685,980, assuming a $10.10 per share redemption price and based on funds in the Trust Account as of March 31, 2022. The Merger Agreement includes a condition to the closing that at the closing having an amount of available cash from the Trust Account and the Equity Financing (as defined in the Merger Agreement) (after giving effect to the redemption of any Public Common Stock in connection with the IPO and the payment of the transaction expenses), of no less than $50,000,000.

(5)      Assumes that 17,250,000 Public Common Stock is redeemed for aggregate redemption payments of approximately $174,247,973, assuming a $10.10 per share redemption price and based on funds in the Trust Account as of March 31, 2022. The Merger Agreement includes a condition to the closing that at the closing having an amount of available cash from the Trust Account and the PIPE Investment (after giving effect to the redemption of any Public Common Stock in connection with the IPO and the payment of the transaction expenses), of no less than $50,000,000.

(6)      Based on a post-transaction equity value of approximately $634.9 million, $617.6 million, $548.6 million, $505.5 million, and $462.4 million under the No Redemptions, 10% Redemption, 50% Redemption, 75% Redemption, and Maximum Redemption scenarios, respectively.

(7)      Represents the post-Closing share ownership assuming various levels of redemption by CLAQ Public Stockholders.

(8)      Represents the Base Scenario plus the full exercise of the 8,625,000 Public Warrants.

(9)      Represents the Base Scenario plus the full exercise of the 7,175,000 Private Warrants.

(10)    Represents the Base Scenario plus the full exercise of the 8,625,000 Public Warrants and the 7,175,000 Private Warrants.

(11)    Represents the Base Scenario plus the full exercise of the 8,625,000 Public Warrants, 7,175,000 Private Warrants, 3,977,368 Nauticus Options, 3,036,735 shares of Common Stock pursuant to the conversion of the Debentures and 3,036,735 shares of Common Stock pursuant to the full exercise of the Warrants.

(12)    Analysis does not account for exercise prices to be paid in connection with the exercise of warrants.

Q:     Do any of CLAQ’s directors or officers have interests that may conflict with my interests with respect to the Business Combination?

A:     In considering the recommendation of the Board to approve the Merger Agreement, CLAQ stockholders should be aware that certain CLAQ executive officers and directors have interests in the Business Combination that are different from, or in addition to, those of CLAQ stockholders generally. When you consider the recommendation of the Board in favor of adoption of the Business Combination Proposal and other Proposals, you should keep in mind that CLAQ’s directors and officers and their affiliates have interests in the Business Combination that are different from, or in addition to, your interests as a shareholder, including:

•        CLAQ’s Co-sponsors have a fiduciary obligation to each of their respective members and Eli Spiro, (CLAQ’s Chief Executive Officer and Director) and Jonas Grossman (a CLAQ Director) are the controlling members of our Co-sponsors. Because each of Mr. Spiro and Mr. Grossman have a fiduciary obligation to both CLAQ and the Co-sponsors, they had a conflict of interest when voting on the Business Combination.

•        CLAQ currently plans to hold a special meeting this month seeking shareholders’ approval to amend its Current Charter (the “Charter Amendment Proposal”) and Investment Management Trust Agreement with Continental Stock Transfer & Trust Company, dated July 14, 2021 (the “Trust Agreement Proposal”) so that it will have the right to extend the Combination Period six (6) times for an additional one (1) month each time by depositing into the Trust Account $100,000 for each one-month extension. If the Charter Amendment Proposal and the Trust Amendment Proposal are approved, public stockholders will forfeit their right to receive up to $1,725,000 and up to an aggregate of $3,450,000 under the current Trust Agreement if CLAQ seeks to extend the Combination Period for three or six months, respectively, but does not consummate a business combination;

•        If the Charter Amendment Proposal and the Trust Amendment Proposal are approved, CLAQ’s Co-Sponsors will no longer be required to deposit into the Trust Account $1,725,000 prior to each three-month extension (up to $3,450,000 in the aggregate) and these amounts may not be repaid if a business not consummated to the extent funds are not available outside of the Trust Account;

•        If the Charter Amendment Proposal and the Trust Amendment Proposal are approved and the Company extends the Combination Period to January 19, 2023, with one (1) month extension each time after July 19, 2022, the additional redemption amount added to the trust account will be reduced from the current $0.10 per share (or a per share redemption amount of approximately $10.21 as of June 21, 2022, assuming payment of the extension amount) to approximately $0.006 per share, assuming no redemptions (or a redemption amount of approximately $10.11 as of June 21, 2022).

•        If the Charter Amendment Proposal and the Trust Amendment Proposal are approved, the Co-Sponsors are expected to contribute to CLAQ up to $600,000 (if the full 6-month extension is sought) in an interest-free loan for the full extension of the Combination Period on an as-needed basis. If the Charter Amendment Proposal and the Trust Amendment Proposal are not adopted, the Co-Sponsors are expected to deposit into the Trust Account an aggregate of $3,450,000 (if the full 6-month extension is sought) in an interest-free loan. Since both loans will become payable only after Closing of the Business Combination, CLAQ’s Co-Sponsors will lose repayment of either $600,000 loan (if the Charter Amendment Proposal and Trust Amendment Proposal is approved) or $3,450,000 (under the Current Charter) if the Business Combination is not completed after the full 6-month extension.

•        If an initial business combination, such as the Business Combination, is not completed, CLAQ will be required to dissolve and liquidate. In such event, the 4,312,500 founder shares currently held by the Initial Stockholders, which were acquired prior to the IPO will be worthless because such holders have agreed to waive their rights to any liquidation distributions. The founder shares were purchased for an aggregate purchase price of $25,000, and had an aggregate market value of approximately $43.4 million based on the closing price of $10.07 per share of CLAQ common stock on the Nasdaq Stock Market as of June 29, 2022.

•        If an initial business combination, such as the Business Combination, is not completed, an aggregate of 7,175,000 Private Warrants purchased by CLAQ’s Co-sponsors for a total purchase price of $7,175,000, will be worthless. The Private Warrants had an aggregate market value of approximately $2.3 million based on the closing price of $0.32 per Public Warrant on the Nasdaq Stock Market as of June 29, 2022.

•        Because of these interests, CLAQ’s Initial Stockholders could benefit from the completion of a business combination that is not favorable to its public shareholders and may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to public shareholders rather than liquidate. For example, if the share price of the CLAQ common stock declined to $5.00 per share after the close of the business combination, CLAQ’s public shareholder that purchased shares in the initial public offering, would have a loss of $5.00 per share, while CLAQ’s Sponsor would have a gain of $4.99 per share because it acquired the founder shares for a nominal amount. In other words, CLAQ’s Initial Stockholders can earn a positive rate of return on their investment even if public shareholders experience a negative rate of return in the post-combination company.

•        One of CLAQ’s Co-sponsors is CleanTech Sponsor, and the managing member of CleanTech Sponsor is Eli Spiro, CLAQ’s Chief Executive Officer and Director. If an initial business combination, such as the Business Combination, is not completed, CleanTech Sponsor will lose an aggregate of approximately $27.9 million (not including any extension loan which must be paid before July 19, 2022), comprised of the following:

•        approximately $26.1 million (based on the closing price of $10.07 per share of CLAQ common stock on the Nasdaq Stock Market as of June 29, 2022) of the 2,595,000 founder shares CleanTech Sponsor holds;

•        approximately $1.5 million (based on the closing price of $0.32 per Public Warrant on the Nasdaq Stock Market as of May 20, 2022) of the 4,783,333 Private Warrants CleanTech Sponsor holds; and

•        repayment of an interest-free loan of $267,000 (as of June 30, 2022) by CleanTech Sponsor since the loan will become payable only after Closing of the Business Combination, or the date on which CLAQ determines that it is unable to effect a business combination.

•        CLAQ’s other Co-sponsor, CleanTech Investments, is an affiliate of Chardan, and CLAQ’s director, Mr. Jonas Grossman, is the Managing Partner and President of Chardan. If an initial business combination, such as the Business Combination, is not completed, Chardan will lose an aggregate of approximately $23.6 million (not including any extension loan which must be paid before July 19, 2022), comprised of the following:

•        approximately $14.5 million (based on the closing price of $10.07 per share of CLAQ common stock on the Nasdaq Stock Market as of June 29, 2022) of the 1,437,500 founder shares CleanTech Investment holds;

•        approximately $0.8 million (based on the closing price of $0.32 per Public Warrant on the Nasdaq Stock Market as of June 29, 2022) of the 2,391,667 Private Warrants CleanTech Investment holds;

•        a marketing fee of $6,037,500 for certain services pursuant to a Business Combination Marketing Agreement;

•        a placement fee of $2,118,000 (i.e., 6.0% of the PIPE Investment that is not sold to an affiliate of Chardan) for certain services pursuant to the Financial Advisory Agreement (pursuant to the Financial Advisory Agreement, Chardan also has a right of first refusal to act as a book-running manager with minimum economics of 15% for the first two public or private equity offerings by CLAQ or any successor or subsidiary of CLAQ);

•        repayment of an interest-free loan of $133,000 (as of June 30, 2022) by CleanTech Investments since the loan will become payable only after Closing of the Business Combination, or the date on which CLAQ determines that it is unable to effect a business combination; and

•        the $10,000 monthly administrative fee under the Administrative Support Agreement pursuant to which CLAQ may delay payment of the same until the consummation of a business combination. As of June 30, 2022, there is an accrued and unpaid balance of $113,333 owed to Chardan under the Administrative Support Agreement.

•        If an initial business combination, such as the Business Combination, is not completed, the Initial Stockholders will lose a combined aggregate amount of approximately $46.1 million (including the Co-sponsors’ loans and securities held based on the closing price of $10.07 per share of CLAQ common

stock and $0.32 per Public Warrant on June 29, 2022), and the Initial Stockholders together with their affiliates (including Chardan) will lose a combined aggregate amount of approximately $54.4 million (including Chardan’s fees contingent upon the Closing of the Business Combination.)

•        If the proposed Business Combination is not completed, CLAQ’s Initial Stockholders will not have the potential ownership interest of approximately 6.8% (assuming no redemption) or 8.6% (assuming maximum redemption) in the combined company, assuming exercise and conversion of all securities.

•        As of the date of this proxy statement/prospectus, ATW is the only purchaser for the Debentures and associated Warrants in the Debt Financing. ATW is managed by ATW Partners Opportunities Management, LLC, which is an affiliate of Chardan, and our director, Mr. Jonas Grossman, is the Managing Partner and President of Chardan.

•        The exercise of CLAQ’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the transaction may result in a conflict of interest when determining whether such changes or waivers are appropriate and in our stockholders’ best interest.

•        If the Business Combination is completed, Nauticus will designate all members of the Combined Company’s Board of Directors, except for the Transocean Designee).

See “Proposal 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination” beginning on page 127.

Q:     Are there any arrangements to help ensure that CLAQ will have sufficient funds, together with the proceeds in its Trust Account, to fund the consideration?

A:      Yes. CLAQ entered into subscription agreements, dated as of December 14, 2021, with certain investors pursuant to which, among other things, CLAQ agreed to issue and sell, in a private placement to close immediately prior to the closing of the Business Combination, an aggregate of 3,530,000 shares of our common stock for $10.00 per share for a total of $35.3 million (the “Equity Financing”). To the extent not utilized to consummate the Business Combination, the proceeds from the Trust Account will be used for general corporate purposes, including, but not limited to, working capital for operations, capital expenditures and future acquisitions. CLAQ will agree that it (or its successor) will file with the SEC a registration statement registering the resale of the shares purchased in the Equity Financing and use its commercially reasonable efforts to have the registration statement declared effective as soon as practicable.

In addition, CLAQ entered into a Securities Purchase Agreement with certain investors purchasing up to an aggregate of $40.0 million in principal amount of secured debentures (the “Debentures”) and warrants. The number of shares of common stock into which the Debentures are convertible is equal to 120% of the outstanding principal amount of the Debentures divided by the conversion price of $15.00, and the number of shares of common stock into which the associated warrants are exercisable is equal to 120% of the outstanding principal amount of the Debentures divided by the conversion price, with an exercise price equal to $20, subject to adjustment (the “Debt Financing,” and together with the Equity Financing, the “PIPE Investment”). The exercise price of the associated warrant will be subject to (i) customary anti-dilution adjustments; and (ii) in the case of a subsequent equity sale at a per share price below the exercise price, the exercise price of the associated warrant will be adjusted to such lower price, and the number of shares underlying the warrant will increase proportionately. In the event of a rights offering or dividend, the warrant holder will be treated as though the shares underlying the warrant he/she holds were outstanding. These warrants can be exercised on a cashless basis. There will be an original issue discount of 2% from the issued amount of the Debentures. Interest will accrue on all outstanding principal amount of the Debentures at 5% per annum, payable quarterly. The Debentures will be secured by first priority interests, and liens on, all present and after-acquired assets of the Combined Company, and will mature on the fourth anniversary of the date of issuance. As of the date of this proxy statement/prospectus, ATW Special Situations I LLC (“ATW”) is the only purchaser and has subscribed for Debentures in the an aggregate principal amount of $37,959,184 (out of the aggregate $40.0 million) which is convertible into 3,036,735 shares of the Combined Company’s common stock and associated warrants for an additional 3,036,735 shares of the Combined Company’s common stock. ATW is managed by ATW Partners Opportunities Management, LLC, which is an affiliate of Chardan Capital Markets, LLC (“Chardan”), and our director, Mr. Jonas Grossman, is the Managing Partner and President of Chardan. Chardan will not receive any fees or compensation for ATW’s participation in the Debt Financing. The obligations to consummate the transactions contemplated by the Securities Purchase Agreement are conditioned upon, among other things, (i) raising $25,000,000 in equity financing from strategic investors, (ii) hiring a chief financial officer with public company experience, and (iii) all conditions precedent to the Merger set forth in the Merger Agreement having been satisfied or waived. The Equity Financing will satisfy the closing condition related

Q:     What is the quorum requirement for the Meeting?

A:     Stockholders representing a majority of the shares of common stock issued and outstanding as of the Record Date and entitled to vote at the Meeting must be present in person by virtual attendance or represented by proxy in order to hold the Meeting and conduct business. This is called a quorum. Shares of our common stock will be counted for purposes of determining if there is a quorum if the stockholder (i) is present and entitled to vote at the meeting, or (ii) has properly submitted a proxy card or voting instructions through a broker, bank or custodian. In the absence of a quorum, stockholders representing a majority of the votes present in person or represented by proxy at such meeting may adjourn the meeting until a quorum is present.

Q:     Am I required to vote against the Business Combination Proposal in order to have my Public Common Stock redeemed?

A:     No. You are not required to vote against the Business Combination Proposal in order to have the right to demand that CLAQ redeem your Public Common Stock for cash equal to your pro rata share of the aggregate amount then on deposit in the Trust Account (before payment of deferred underwriting commissions and including interest earned on their pro rata portion of the Trust Account, net of taxes payable). These rights to demand redemption of Public Common Stock for cash are sometimes referred to herein as “redemption rights”. If the Business Combination is not completed, holders of Public Common Stock electing to exercise their redemption rights will not be entitled to receive such payments and their shares of common stock will be returned to them.

Q:     How do I exercise my redemption rights?

A:     If you are a public stockholder and you seek to have your Public Common Stock redeemed, you must (i) demand, no later than 5:00 p.m., Eastern Time on            , 2022 (at least two business days before the Meeting), that CLAQ redeem your shares into cash; and (ii) submit your request in writing to Continental, at the address listed at the end of this answer and deliver your shares to Continental physically or electronically using The Depository Trust Company’s (“DTC”) DWAC (Deposit/Withdrawal at Custodian) System at least two business days before the Meeting.

Any corrected or changed written demand of redemption rights must be received by Continental two business days before the Meeting. No demand for redemption will be honored unless the holder’s shares have been delivered (either physically or electronically) to Continental at least two business days before the Meeting.

You may seek to have your Public Common Stock redeemed regardless of whether you vote for or against the Business Combination and whether or not you are holders of common stock as of the Record Date. Any public stockholder who holds shares of common stock on or before            , 2022 (two business days before the Meeting) will have the right to demand that his, her or its shares be redeemed for a pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid, at the consummation of the Business Combination.

The actual per share redemption price will be equal to the aggregate amount then on deposit in the Trust Account (before payment of deferred underwriting commissions and including interest earned on their pro rata portion of the Trust Account, net of taxes payable), divided by the number of shares of common stock underlying the CLAQ Units sold in the IPO. Please see the section titled “The Meeting — Redemption Rights” for the procedures to be followed if you wish to redeem your shares of common stock for cash.

Exercise of your redemption rights will not result in either the exercise or loss of any of the warrants you may hold. Your warrants will continue to be outstanding following a redemption of your Public Common Stock and will become exercisable in connection with the completion of the Business Combination.

If you intend to seek redemption of your Public Common Stock, you will need to deliver your shares (either physically or electronically) to Continental, our Transfer Agent, prior to the Meeting, as described in this Proxy Statement/Prospectus. If you have questions regarding the certification of your position or delivery of your shares, please contact:

Continental Stock Transfer & Trust Company
One State Street, 30th Floor
New York, New York 10004
Attention: Mark Zimkind
E-mail: mzimkind@continentalstock.com

Q:     What are the U.S. federal income tax consequences of exercising my redemption rights?

A:     In the event that a U.S. Holder elects to redeem its common stock for cash, the treatment of the transaction for U.S. federal income tax purposes will depend on whether the redemption qualifies as a sale or exchange of common stock under Section 302 of the Code or is treated as a distribution under Section 301 of the Code. Whether the redemption qualifies as a sale or exchange or is treated as a distribution will depend on the facts and circumstances of each particular U.S. Holder at the time such U.S. Holder exercises his, her, or its redemption rights. If the redemption qualifies as a sale or exchange of the common stock, the U.S. Holder will be treated as recognizing capital gain or loss equal to the difference between the amount realized on the redemption and such U.S. Holder’s adjusted tax basis in the common stock surrendered in such redemption transaction. Any such capital gain or loss generally will be long-term capital gain or loss if the U.S. Holder’s holding period for the common stock redeemed exceeds one year. The deductibility of capital losses is subject to limitations. See “Material U.S. Federal Income Tax Consequences — Certain Material U.S. Federal Income Tax Consequences of Exercising Redemption Rights” for a more detailed discussion of the U.S. federal income tax consequences of a U.S. Holder electing to redeem its common stock for cash.

Q:     What are the material U.S. federal income tax consequences of the Merger to holders of Nauticus Common Stock?

A:     CLAQ and Nauticus intend for the Merger to qualify as a tax-deferred “reorganization” within the meaning of Section 368(a) of the Code. In connection with the filing of this registration statement, Nauticus is receiving an opinion of legal counsel, based on certain factual representations from CLAQ, Merger Sub and Nauticus and certain customary factual assumptions, to the effect that the Merger will qualify as a tax-deferred “reorganization.” Certain material U.S. federal income tax considerations that may be relevant to holders of Nauticus Common Stock in respect of the Merger are discussed in more detail in the section entitled “Material U.S. Federal Income Tax Consequences — U.S. Federal Income Tax Considerations for Holders of Nauticus Common Stock.” The discussion of the U.S. federal income tax consequences contained in this proxy statement/prospectus is intended to provide only a general discussion and is not a complete analysis or description of all of the U.S. federal income tax considerations that are applicable to holders of Nauticus common stock in respect of the Merger, nor does it address any tax considerations arising under U.S. state or local or non-U.S. tax laws.

TAX MATTERS ARE COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER WILL DEPEND ON THE FACTS APPLICABLE TO EACH HOLDER OF NAUTICUS COMMON STOCK. EACH HOLDER OF NAUTICUS COMMON STOCK SHOULD CONSULT THEIR OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER BASED ON SUCH HOLDER’S PARTICULAR CIRCUMSTANCES.

Q:     What do I need to do now?

A:     You are urged to read carefully and consider the information contained in this proxy statement/prospectus, including the annexes, and to consider how the Business Combination will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.

Q:     How can I vote?

A:     If you are a stockholder of record, you may vote online at the virtual Meeting or vote by proxy using the enclosed proxy card, the Internet or telephone. Whether or not you plan to participate in the Meeting, we urge you to vote by proxy to ensure your vote is counted. Even if you have already voted by proxy, you may still attend the virtual Meeting and vote online, if you choose.

To vote online at the virtual Meeting, follow the instructions below under “How may I participate in the virtual Meeting?”

To vote using the proxy card, please complete, sign and date the proxy card and return it in the prepaid envelope. If you return your signed proxy card before the Meeting, we will vote your shares as you direct.

The Notice of Special Meeting, proxy statement/prospectus and form of Proxy Card are available at:            .

Q:     If my shares are held in “street name” by my bank, brokerage firm or nominee, will they automatically vote my shares for me?

A:     No. If you are a beneficial owner and you do not provide voting instructions to your broker, bank or other holder of record holding shares for you, your shares will not be voted with respect to any Proposal for which your broker does not have discretionary authority to vote. If a Proposal is determined to be discretionary, your broker, bank or other holder of record is permitted to vote on the Proposal without receiving voting instructions from you. If a Proposal is determined to be non-discretionary, your broker, bank or other holder of record is not permitted to vote on the Proposal without receiving voting instructions from you. A “broker non-vote” occurs when a bank, broker or other holder of record holding shares for a beneficial owner does not vote on a non-discretionary proposal because the holder of record has not received voting instructions from the beneficial owner.

Each of the Proposals to be presented at the Meeting is a non-discretionary proposal. Accordingly, if you are a beneficial owner and you do not provide voting instructions to your broker, bank or other holder of record holding shares for you, your shares will not be voted with respect to any of the Proposals. A broker non-vote would have the same effect as a vote against the Business Combination Proposal, and the Adjournment Proposal.

Q:     What if I abstain from voting or fail to instruct my bank, brokerage firm or nominee?

A:     CLAQ will count a properly executed proxy marked “ABSTAIN” with respect to a particular Proposal as present for the purposes of determining whether a quorum is present at the Meeting. For purposes of approval, an abstention on any Proposals will have the same effect as a vote “AGAINST” such Proposal.

Q:     If I am not going to attend the Meeting, should I return my proxy card instead?

A.     Yes. Whether you plan to attend the Meeting virtually or not, please read the enclosed proxy statement/prospectus carefully, and vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

Q:     How can I submit a proxy?

A.     You may submit a proxy by (a) visiting            and following the on screen instructions (have your proxy card available when you access the webpage), or (b) calling toll-free            in the U.S. or            from foreign countries from any touch-tone phone and follow the instructions (have your proxy card available when you call), or (c) submitting your proxy card by mail by using the previously provided self-addressed, stamped envelope.

Q:     Can I change my vote after I have mailed my proxy card?

A:     Yes. You may change your vote at any time before your proxy is voted at the Meeting. You may revoke your proxy by executing and returning a proxy card dated later than the previous one, or by attending the virtual Meeting in person and casting your vote or by voting again by the telephone or Internet voting options described below, or by submitting a written revocation stating that you would like to revoke your proxy that our proxy solicitor receives prior to the Meeting. If you hold your shares of common stock through a bank, brokerage firm or nominee, you should follow the instructions of your bank, brokerage firm or nominee regarding the revocation of proxies. If you are a record holder, you should send any notice of revocation or your completed new proxy card, as the case may be, to:

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Unless revoked, a proxy will be voted at the virtual Meeting in accordance with the stockholder’s indicated instructions. In the absence of instructions, proxies will be voted FOR each of the Proposals.

RISK FACTORS

You should consider carefully the following risk factors, as well as the other information set forth in this proxy statement/prospectus, before making a decision on the Business Combination. Risks related to Nauticus, including risks related to Nauticus’ business, financial position and capital requirements, development, regulatory approval and commercialization, dependence on third parties, intellectual property and taxation, will continue to be applicable to the Combined Company after the closing of the Business Combination.

Risks Related to Nauticus’ Business and Industry

Nauticus is an early-stage company with a history of losses, and it expects to incur significant expenses for the foreseeable future.

Nauticus incurred a net loss of $3.5 million for the three months ended March 31, 2022 and $15.1 million and $7.2 million for the years ended December 31, 2021 and 2020, respectively. Nauticus believes that it will continue to incur operating and net losses each quarter until at least the fourth quarter of 2022. Even though Nauticus has commercial traction for platform sales, it may not attract customers for its RaaS offering, Nauticus’ potential profitability is dependent upon the successful adoption on a larger scale of its robotics systems, which may not occur. There can be no assurance that Nauticus will be financially successful.

Nauticus expects the rate at which it will incur losses will be significantly higher in future periods as Nauticus:

•        continues to design, develop, manufacture and commercialize its ocean robotic systems;

•        continues to utilize and develop potential new relationships with third-party partners for supply, design to manufacturing and manufacturing;

•        expands its production capabilities, including costs associated with potential outsourcing the manufacturing of its ocean robotic systems;

•        builds up inventories of parts and components for its ocean robotic systems;

•        matures its maintenance and servicing capacity, capabilities, and replacement parts inventory;

•        manufactures an inventory of its ocean robotic systems;

•        increases its sales and marketing activities and enhances its sales and distribution infrastructure;

•        further develop its remote monitoring, updating, and other cloud-based services;

•        refines its safety measures for the ocean robotic systems;

•        expands its technology infrastructure and cybersecurity measures, policies, and controls; and

•        increases its general and administrative functions to support its growing operations and to operate as a public company.

Because Nauticus will incur costs and expenses from these efforts before it receives any incremental revenues with respect thereto, Nauticus’ losses in future periods will be significant. In addition, Nauticus may find that these efforts are more expensive than it currently anticipates or that these efforts may not result in revenues, which would further increase Nauticus’ losses.

Nauticus has identified a material weakness in its internal control over financial reporting. This material weakness could continue to adversely affect Nauticus’ ability to report its results of operations and financial condition accurately and in a timely manner.

Nauticus management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP. Nauticus’ management is likewise required, on a quarterly basis, to evaluate the effectiveness of its internal controls. Nauticus has identified a material weakness in its internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of Nauticus’ annual or interim financial statements will not be prevented or detected on a timely basis.

Nauticus identified certain accounting errors related to the financial statements. As a result, Nauticus management concluded that a material weakness existed in its internal control over financial reporting related to the identification and review of technical issues associated with certain unique, unusual and nonstandard transactions within Nauticus’ equity process. As a result of this material weakness, Nauticus’ management concluded that its internal control over financial reporting was not effective as of December 31, 2021.

To address this material weakness, Nauticus has engaged a technical accounting and financial reporting consulting firm to assist the company with (i) its financial accounting close, (ii) the application of technical accounting literature, (iii) the preparation of its financial statements, and (iv) the independent audit of its financial statements. Nauticus' plan is to employ additional financial and accounting personnel in key finance and accounting positions. The company has identified some new personnel and expects to secure their full-time employment by the end of third quarter 2022. As of March 31, 2022, Nauticus has filled positions of Senior Accountant and Accounts Receivable to remediate this weakness in its internal controls. In addition, Nauticus has recently added a Chief Financial Officer to strengthen its internal controls and financial reporting. Nauticus plans to transition two current contracted personnel to accounting leadership and controller positions. Nauticus is also strengthening internal controls over financial reporting by implementing an Enterprise Resource Planning system (“ERP”), a software used to automate business processes, containing workflows and business rules that ensure process is followed by approved policies, roles, and procedures. The Company expects to complete the ERP implementation within 6 months.

The resulting fully integrated system will enhance financial reporting and transactional interfaces. Nauticus will also add RaaS operations personnel as required when the production Aquanauts are completed, commissioned, and put into service. Nauticus’ management will make an assessment of these remediation steps and add additional staff, if necessary to remediate the weakness.

Nauticus expects to incur on-going significant costs to meet the corporate governance provisions of the Sarbanes-Oxley Act of 2002, related regulations of the SEC, and the requirements of NASDAQ, with which Nauticus is not required to comply presently as a private company. Complying with these statutes, regulations, and requirements will occupy a significant amount of the Nauticus board of director's and management's time and will significantly increase its costs and expenses.

While Nauticus believes these actions will address the reported material weakness, Nauticus can give no assurances that these actions will remediate the deficiency in internal control or that additional material weaknesses or significant deficiencies in its internal control over financial reporting will not be identified in the future. Nauticus' failure to implement and maintain effective internal control over financial reporting could result in errors in its financial statements that could result in a restatement of its financial statements and cause it to fail to meet its reporting obligations.

In addition to the steps already taken, Nauticus plans to continue to devote, significant effort and resources to the remediation and improvement of its internal control over financial reporting. While Nauticus has processes to identify and appropriately apply applicable accounting requirements, Nauticus plans to enhance these processes to better evaluate its research and understanding of the nuances of the complex accounting standards that apply to its consolidated financial statements. These include providing enhanced access to accounting literature, research materials and documents, increased communication among its personnel, hiring additional technical accounting resources, and third-party professionals with whom Nauticus consults regarding complex accounting applications. The elements of its continued remediation plan can only be accomplished over time, and Nauticus can offer no assurances that these initiatives will ultimately have all or some of the intended effects.

Any failure to maintain such internal control could adversely impact Nauticus’ ability to report its financial position and results of operations on a timely and accurate basis. If Nauticus’ financial statements are not accurate, investors may not have a complete understanding of its operations. Likewise, if after the Business Combination, Nauticus’ financial statements are not filed on a timely basis, Nauticus could be subject to sanctions or investigations by the stock exchange on which its common stock is listed, the SEC or other regulatory authorities. In either case, that could result in a material adverse effect on Nauticus’ business. Ineffective internal controls could also cause investors to lose confidence in Nauticus’ reported financial information which could have a negative effect on the trading of Nauticus stock.

Nauticus can give no assurances that going forwards the measures it plans to take in the future will remediate any additional material weaknesses or restatements of financial results will not arise in the future due to failure to implement and maintain adequate control over financial reporting or circumvention of these controls. In addition, even if Nauticus is successful in strengthening its controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair preparation and presentation of our consolidated financial statements.

For more information please see the Risk Factor “If Nauticus fails to maintain an effective system of internal controls, its ability to produce timely and accurate financial statements or comply with applicable regulations could be adversely affected.”

Almost all of Nauticus’ revenues in 2020, 2021, and the first quarter of 2022 were derived from three customers. A substantial portion of Nauticus’ current revenue is generated by sales to government entities, which are subject to a number of uncertainties, challenges, and risks.

Nauticus currently has a limited number of customers. For the three months ended March 31, 2022, sales to one customer accounted for 95% of total revenue, sales to another customer accounted for 4% of total revenue, and sales to another customer accounted for 1% of total revenue. For the year ended December 31, 2021, sales to one customer accounted for 89% of total revenue and the total balance due from this customer as of December 31, 2021 made up 82% of accounts receivable. For the year ended December 31, 2020, sales to one customer accounted for 61% of total revenue, sales to another customer accounted for 20% of total revenue, and sales to another customer accounted for 17% of total revenue. The total balances due from these customers as of December 31, 2020 made up 100% of accounts receivable. Sales to government entities are subject to a number of risks. Selling to government entities can be highly competitive, expensive, and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale. In the event that Nauticus is successful in being awarded further government contracts, such awards may be subject to appeals, disputes, or litigation, including, but not limited to, bid protests by unsuccessful bidders. Government demand and payment for Nauticus’ solutions may be impacted by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for Nauticus’ solutions. Government entities may have statutory, contractual, or other legal rights to terminate Nauticus’ contracts for convenience or default. For purchases by the U.S. federal government, the government may require certain products to be manufactured in the United States and other high cost manufacturing locations, and Nauticus or any third-party manufacturers may not manufacture all products in locations that meet government requirements, and as a result, Nauticus’ business and results of operations may suffer.

As a government contractor or subcontractor, Nauticus must comply with laws, regulations, and contractual provisions relating to the formation, administration, and performance of government contracts and inclusion on government contract vehicles, which affect how Nauticus and its partners do business with government agencies. As a result of actual or perceived noncompliance with government contracting laws, regulations, or contractual provisions, Nauticus may be subject to non-ordinary course audits and internal investigations which may prove costly to its business financially, divert management time, or limit Nauticus’ ability to continue selling its products to its government customers. These laws and regulations may impose other added costs on Nauticus’ business, and failure to comply with these or other applicable regulations and requirements, including non-compliance in the past, could lead to claims for damages, downward contract price adjustments or refund obligations, civil or criminal penalties, and termination of contracts and suspension or debarment from government contracting for a period of time with government agencies. Any such damages, penalties, disruption, or limitation in Nauticus’ ability to do business with a government would adversely impact, and could have a material adverse effect on, Nauticus’ business, prospects, financial condition and operating results.

If Nauticus fails to effectively manage its growth, Nauticus may not be able to design, develop, manufacture, market, and launch new generations of its robotic systems successfully.

Nauticus intends to invest significantly in order to expand its business. Any failure to manage Nauticus’ growth effectively could materially and adversely affect Nauticus’ business, prospects, financial condition, and operating results. Nauticus intends to expand its operations significantly. Nauticus expects its expansion to include:

•        expanding the management, engineering, and product teams;

•        identifying and recruiting individuals with the appropriate relevant experience;

•        hiring and training new personnel;

•        launching commercialization of new products and services;

•        forecasting production and revenue and implementing enterprise resource planning (ERP) systems;

•        entering into relationships with one or more third-party design for manufacturing partners and third-party manufacturers and/or expanding its internal manufacturing capabilities;

•        controlling expenses and investments in anticipation of expanded operations;

•        carrying out acquisitions and entering into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships;

•        expanding and enhancing internal information technology, safety, and security systems;

•        establishing or expanding sales, customer service and maintenance and servicing facilities and organization;

•        conducting demonstrations of ocean robotic systems;

•        entering into agreements with suppliers and service providers; and

•        implementing and enhancing administrative infrastructure, systems, and processes.

Nauticus intends to continue to hire a significant number of additional personnel, including engineers, design and production personnel and service technicians for its ocean robotic systems and services. Because of the innovative nature of Nauticus’ technology, individuals with the necessary experience may not be available to hire, and as a result, Nauticus will need to expend significant time and expense to recruit and retain experienced employees and appropriately train any newly hired employees. Competition for individuals with experience designing, producing, and servicing dexterous ocean robots and their software is intense, and Nauticus may not be able to attract, integrate, train, motivate or retain additional highly qualified personnel. The failure to attract, integrate, train, motivate and retain these additional employees could seriously harm Nauticus’ business, prospects, financial condition and operating results.

Nauticus’ operating and financial projections rely on management assumptions and analyses. If these assumptions or analyses prove to be incorrect, Nauticus’ actual operating results may be materially different from its forecasted results.

Nauticus is an ocean robotics and services company, with limited experience commercializing its products and services. The projected financial and operating information appearing elsewhere in this proxy statement/prospectus reflect estimates of future performance and is based on multiple financial, technical, and operational assumptions, including hiring of additional skilled personnel in a timely way to support continued development and commercialization of the core products, timing of commercial launch of the ocean robotic systems, the level of demand for Nauticus’ ocean robotic systems, the performance of Nauticus’ ocean robotic systems, the utilization of the ocean robot fleet, commercial interest in the RaaS subscription model, the useable life of the ocean robotic systems, cost of manufacturing, cost of components and availability of adequate supply, the nature and length of the sales cycle, maintenance and servicing costs and the costs of refurbishing the ocean robotic systems. However, given Nauticus’ limited commercial experience, it is likely that many of these assumptions will prove incorrect. The projections are forward-looking statements that are inherently subject to significant uncertainties and contingencies, many of which are beyond Nauticus’ control. See “Risk Factors,” “Nauticus’ Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Cautionary Note Regarding Forward-Looking Statements.” Whether actual operating and financial results and business developments will be consistent with Nauticus’ expectations and assumptions as reflected in its forecast depends on a number of other factors, many of which are outside Nauticus’ control, including, but not limited to:

•        whether Nauticus can obtain sufficient capital to sustain and grow its business;

•        Nauticus’ ability to manage its growth;

•        the contractual terms of one or more agreements with third-party manufacturers;

•        whether Nauticus can manage relationships with key suppliers and partners;

•        the timing and costs of the required marketing and promotional efforts;

•        the timing and cost of each sale or RaaS subscription;

•        whether customers and their employees will adopt the ocean robotic systems offered by Nauticus;

•        the timing required and success of customer testing of Nauticus’ technology;

•        competition, including from established and future competitors;

•        Nauticus’ ability to retain existing key management, to attract additional leaders, to integrate recent hires and to attract, retain and motivate qualified personnel, including engineers, design and production personnel, and service technicians;

•        the overall strength and stability of domestic and international economies;

•        demand for currently available and future ocean robots;

•        regulatory, legislative, and political changes; and

•        customer requirements and preferences.

Unfavorable changes in any of these or other factors, most of which are beyond Nauticus’ control, could cause Nauticus to fail to meet its operating and financial projections and could materially and adversely affect its business, prospects, financial condition and operating results. For more information regarding Nauticus’ projections, please see the section entitled “Proposal 1 — The Business Combination Proposal — Certain Nauticus’ Projected Financial Information.”

We rely on third party manufacturers/suppliers and expect to continue to do so for the foreseeable future. This reliance on third parties increases the risk that we will not have sufficient quantities of our products or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

We rely, and expect to continue to rely, on third party manufacturers/suppliers. This reliance on third party manufacturers/suppliers increases the risk that we will not have sufficient quantities of our products or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts. Additionally, we may be unable to establish or continue any agreements with third-party manufacturers/suppliers or to do so on acceptable terms. Even if we are able to establish agreements with third-party manufacturers/suppliers, reliance on third-party manufacturers/suppliers entails additional risks, including:

•        failure of third-party manufacturers/suppliers to comply with regulatory requirements and maintain quality assurance;

•        breach of the manufacturing/supply agreement by the third party;

•        failure to manufacture/supply our product according to our specifications;

•        failure to manufacture/supply our product according to our schedule or at all;

•        misappropriation of our proprietary information, including our trade secrets and know-how; and

•        termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.

If our current or future third-party manufacturers/suppliers cannot perform as agreed, we may be required to replace such manufacturers/suppliers and we may be unable to replace them on a timely basis or at all. Our current and anticipated future dependence upon third party manufacturers/suppliers may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.

The commercial RaaS launch of Nauticus’ core product, Aquanaut, may be delayed beyond the end of 2022.

Nauticus expects to commercially launch its RaaS business model to the public at large by the end of 2022. A delay in the delivery and readiness of its core product, Aquanaut, due to the factors mentioned below would also delay the generation of revenue through the RaaS business model. Both Aquanaut and the subsequent RaaS revenue stream may be delayed if the risks mentioned herein are not mitigated. Among the significant current challenges that could delay the commercial launch are:

•        The COVID-19 pandemic and general labor shortages of qualified applicants has affected and may continue to affect Nauticus’ ability to recruit skilled employees to join its team, negatively affecting the timeline.

•        Nauticus and its suppliers are currently experiencing increases in cost of and an interruption in the supply and shortage of materials. Due to the nature of Nauticus’ products, each unit contains several major subsystem components. Difficulty securing any components and materials could result in delays in the production of these platforms, which delays could be compounded if components or units require redesign.

•        Delays in the production of Aquanaut due to these challenges also affect negotiations with third party contract manufacturers, as such negotiations are more complicated if the units and/or components are undergoing improvements. If Nauticus is unable to enter into definitive agreements or is only able to do so on terms that are less commercially favorable to Nauticus, it may need to enhance its own manufacturing and production capabilities, which may impact Nauticus’ operating expenditures and profitability.

Nauticus’ financial projections, particularly its projected increases in revenue starting in 2023, were premised on a commercial launch of the RaaS business model by the 4th quarter, 2022. Delays in this launch will result in a commensurate delay in revenues and profitability.

Nauticus has limited experience commercializing its products at a large scale and may not be able to do so efficiently or effectively.

Although Nauticus has sold products to a limited number of individual customers in the past, it has limited experience commercializing ocean robotic systems at a large scale and may not be able to do so efficiently or effectively. A key element of Nauticus’ long-term business strategy is the continued growth in sales, marketing, training, customer service and maintenance and servicing operations, including hiring personnel with the necessary experience. Managing and maintaining these operations is expensive and time consuming, and an inability to leverage such an organization effectively or at all could inhibit potential sales or subscriptions and the penetration and adoption of Nauticus’ products into new markets. In addition, certain decisions Nauticus makes regarding staffing in these areas in its efforts to maintain an adequate spending level could have unintended negative effects on its revenues, such as by weakening the sales, marketing and maintenance and servicing infrastructures or lowering the quality of customer service.

Nauticus’ business plans require a significant amount of capital. Nauticus’ future capital needs may require Nauticus to sell additional equity or debt securities that may dilute its stockholders or introduce covenants that may restrict its operations or its ability to pay dividends.

Nauticus will require significant capital to operate its business and fund its capital expenditures for the next several years. While Nauticus expects that following the Business Combination, Nauticus will have sufficient capital to fund its currently planned operations for the foreseeable future, it is possible that Nauticus will need to raise additional capital to fund its business, including to finance ongoing research and development costs, manufacturing, any significant unplanned or accelerated expenses, and new strategic alliances or acquisitions. The fact that Nauticus has limited experience commercializing its ocean robotic systems on a large scale, coupled with the fact that Nauticus’ products represent a new product category in the commercial and industrial ocean robotic market, means Nauticus has limited historical data on the demand for its robotic systems. In addition, Nauticus expects its capital expenditures to continue to be significant in the foreseeable future as it continues generational improvements for its commercial products, and that its level of capital expenditures will be significantly affected by customer demand for its ocean robotic systems. As a result, Nauticus’ future capital requirements may be uncertain and actual capital requirements may be different from those it currently anticipates. Nauticus may need to seek equity or debt financing to finance a portion of its capital expenditures. Such financing might not be available to Nauticus in a timely manner or on terms that are acceptable, or at all.

Nauticus’ ability to obtain the necessary financing to carry out its business plan is subject to a number of factors, including general market conditions and investor acceptance of Nauticus’ business model. These factors may make the timing, amount, terms, and conditions of such financing unattractive or unavailable to Nauticus. If Nauticus is unable to raise sufficient funds, it will have to significantly reduce its spending, delay or cancel its planned activities or substantially change its corporate structure. Nauticus might not be able to obtain any funding, and it might not have sufficient resources to conduct its business as projected, both of which could mean that Nauticus would be forced to curtail or discontinue its operations.

In addition, Nauticus’ future capital needs and other business reasons could require it to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could dilute its stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict Nauticus’ operations.

If Nauticus cannot raise additional funds when it needs or want them, its operations and prospects could be negatively affected.

To date, Nauticus’ cash needs have been met with debt and equity funding from its principal stockholders. If the Business Combination is not consummated and Nauticus is not able to obtain sufficient funding, its business, prospects, financial condition and operating results will be harmed and Nauticus may be unable to continue as a going concern.

Nauticus’ products and services are disruptive to the ocean services industries, and important assumptions about the market demand, pricing, adoption rates and sales cycle, for its current and future products and services may be inaccurate.

Nauticus’ core offering, its tetherless surface and subsea robot pair, are a new service paradigm in the ocean services markets and which are currently dominated by conventional, tethered devices with large surface vessels. The market demand for and adoption of Nauticus’ offering is unproven, and important assumptions about the characteristics of targeted markets, pricing, and sales cycles may be inaccurate. Although Nauticus has engaged in ongoing dialogue with potential customers, it has few binding commitments to purchase its products and services and no hard commitments to enter into RaaS subscriptions. Existing or new regulatory or safety standards, or resistance by customer employees and labor unions, all of which are outside of Nauticus’ control, could cause delays or otherwise impair adoption of these new technologies, which will adversely affect Nauticus’ growth, financial position, and prospects. Given the evolving nature of the markets in which Nauticus operates, it is difficult to predict customer demand or adoption rates for its products or the future growth of the markets Nauticus expects to target. If one or more of the targeted markets experience a shift in customer or prospective customer demand, Nauticus’ products may not compete as effectively, if at all, and they may not be fully developed into commercial products. As a result, the financial projections in this proxy statement/prospectus necessarily reflect various estimates and assumptions that may not prove accurate and these projections could differ materially from actual results because of the risks included in this “Risk Factors” section, among others. If demand does not develop as expected or if Nauticus cannot accurately forecast pricing, adoption rates and sales cycle for its products, its business, results of operations and financial condition will be adversely affected.

With Nauticus’ service offering still being commercialized at a large scale, Nauticus has limited current customers and no hard contracts for the RaaS offering, and there is no assurance that expected customer demand will result in binding orders or subscriptions.

Nauticus expects to launch its core RaaS offering by the end of 2022. This evaluation is based on the time to complete production of the initial RaaS fleet. With initial fleet still under production, Nauticus has no binding commitments for its RaaS offering. At present, Nauticus has contracts for delivery of pre-production units with U.S. government customers and it also has had and currently has revenue generating contracts with both commercial and U.S. Government customers. Pre-production means that the unit that has not gone through a subsequent design evolution for mass production (defined as tens of units per year). Although Nauticus has engaged in dialogue (i.e. MOUs) with potential customers about their interest in Nauticus’ offering, there is no assurance that expected customer trials and discussions will result in binding commitments. There may be variability in the customer testing time that will be required to adopt its RaaS offering. As such, customer testing may be longer than anticipated by Nauticus, and Nauticus may not be able to provide such testing to the satisfaction of prospective customers, which could result in longer sales cycles and lower subscriptions revenue than anticipated. In addition, in order to build and maintain its business, Nauticus must maintain confidence among customers, suppliers, analysts, ratings agencies and other parties in its ocean robotic systems, long-term financial viability and business prospects. Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of Nauticus’ control, such as its limited commercial experience, customer unfamiliarity with its products, any delays in scaling production, inability of delivery and service operations to meet demand, competition and uncertainty regarding the future of ocean robotics. If Nauticus does not receive a sufficient number of binding orders for its products or RaaS subscriptions, its business, prospects, financial condition and operating results could be materially and adversely affected.

The benefits of Nauticus’ products to customers and projected return on investment have not been substantiated through long-term trials or use.

Nauticus’ core products’ benefits to customers and projected return on investment have not been substantiated through long-term trials or use. Nauticus currently has a limited frame of reference by which to evaluate the performance of its ocean robotic systems upon which its business prospects depend. There can be no assurance that such units will provide the expected benefit to customers. Nauticus’ ocean robotic systems may not perform consistently with customers’ expectations or consistently with other robotics products which may become available. Any failure of Nauticus’ robotic systems and software to perform as expected could harm Nauticus’ reputation and result in adverse publicity, lost revenue, delivery delays, product recalls, product liability claims and significant warranty and other expenses and could have a material adverse impact on Nauticus’ business, prospects, financial condition and operating results. Additionally, problems and defects experienced by competitors or others in the ocean robotics market could, by association, have a negative impact on perception and customer demand for Nauticus’ ocean robotic systems.

Nauticus may fail to attract or retain customers for RaaS business model at sufficient rates or at all.

Nauticus has limited experience commercializing its RaaS business model and may not be able to do so efficiently or effectively. Although Nauticus has engaged in ongoing dialogue with potential future customers, there are currently no binding commitments with commercial customers to enter into RaaS agreements with respect to its ocean services. To grow its customer base, Nauticus must achieve binding commitments from expected customers and add new customers, which Nauticus may not be able to do in sufficient numbers or at all. Even if Nauticus is able to attract customers, these customers may not maintain a high level of commitment to Nauticus’ products and services. In addition, Nauticus will incur marketing, sales or other expenses, including referral fees, to attract new customers, which will offset revenues from such customers. For these and other reasons, Nauticus could fail to achieve revenue growth, which could adversely affect its results of operations, prospects and financial condition.

If customers or their employees do not perceive Nauticus’ product and service offerings to be of value, Nauticus may not be able to attract and retain customers and customers may fail to purchase additional units or renew their RaaS subscriptions. If Nauticus’ efforts to satisfy and retain its existing customers are not successful, it may not be able to attract customers, and as a result, its ability to maintain and/or grow its business will be adversely affected. Customers may fail to purchase additional units or cancel Nauticus’ subscription/contracts for many reasons including inadequate customer service or maintenance and servicing issues that are not satisfactorily resolved. Customer retention will also be largely dependent on the quality and effectiveness of Nauticus’ customer service and maintenance and servicing operations, which may be handled internally by Nauticus’ personnel and also by third-party service providers. Outsourcing of certain customer service and claims administration or maintenance and servicing functions may reduce Nauticus’ ability to ensure consistency in its overall customer service processes. If Nauticus is unable to successfully retain existing customers and attract new customers, Nauticus’ business, prospects, financial condition and operating results will be adversely affected.

Even if Nauticus successfully markets its products and services, the purchase or subscription, adoption and use of the products and services may be materially and negatively impacted if Nauticus’ customers resist the use and adoption of the products and services.

Nauticus has designed and developed its robotic systems with the goal of reducing operating costs and greenhouse gases through the use of smaller surface vessels (Hydronaut) and all electric robot subsystems. Even if Nauticus successfully markets its products and services to customers, the purchase or subscription, adoption and the use of the products and services may be materially and negatively impacted if Nauticus’ customers resist or delay the use and adoption of these new technology products and services. Customers may resist or delay the adoption of Nauticus’ products and services for several reasons, including lack of confidence in autonomous and semi-autonomous ocean vehicles. Nauticus will spend significant time and resources on beta units of its Aquanaut for customer testing. If Nauticus’ customers resist or delay adoption of Nauticus’ ocean robotic platforms, Nauticus’ business, prospects, financial condition and operating results will be materially and adversely affected.

Nauticus’ RaaS subscription model (planned for future commercial services but yet to be implemented) has yet to be tested and may fail to gain commercial acceptance.

Nauticus’ ability to derive revenue from its products depends on its ability to successfully market its products and develop a network of ongoing customers for its new RaaS revenue model. Investors should be aware of the difficulties normally encountered by a new business model, many of which are beyond Nauticus’ control, including substantial risks and expenses while establishing or entering new markets, setting up operations and undertaking marketing activities. There can be no assurance that customers will perceive benefits to the RaaS subscription model.

Because Nauticus will continue to own units while they are used by the customers, Nauticus will be subject to risks associated with ongoing ownership of the units, including the risks of deterioration, damage or theft and higher maintenance and servicing costs. All of these could result in higher costs to Nauticus, and could lead to customer dissatisfaction. The likelihood of Nauticus’ success must be considered in light of these risks, expenses, complications, delays, and the competitive environment in which Nauticus operates. There is, therefore, nothing at this time upon which to base an assumption that Nauticus’ RaaS business model will prove successful.

If Nauticus is successful in commercializing its products and services, Nauticus’ revenue will be concentrated in a limited number of models for the foreseeable future.

If Nauticus is successful in commercializing its products and services, its revenue will be concentrated in a limited number of models for the foreseeable future. Nauticus launched the Aquanaut platform in 2021 and expects to launch the commercial production versions of the Aquanaut robotic system under the RaaS business model by the end of 2022. Such timeline may be delayed, including due to challenges in recruiting skilled employees, difficulties in securing components and materials, development delays, difficulties relating to manufacturing of the units and other factors. Such challenges may result in delay of the anticipated commercial launch of one or more of the products and services, which would adversely affect Nauticus’ financial and operating results. To the extent Nauticus’ products and services do not meet customer expectations, or cannot be completed or manufactured or delivered on their projected timelines and in line with cost and volume targets, Nauticus’ future sales and operating results may be adversely affected. Given that for the foreseeable future Nauticus’ business will depend on a limited number of product models, to the extent a particular product model is not well-received by the market, Nauticus’ revenue could be materially and adversely affected. This could have a material adverse effect on Nauticus’ business, prospects, financial condition and operating results.

Nauticus may not be able to complete or enhance its product and service offerings through its research and development efforts.

To commercially launch the RaaS business model, Nauticus will need to continue to advance and evolve its products in response to the evolving demands of its customers in the various industries it expects to serve. Nauticus expects to launch newer versions of two (2) subsea vehicle products by the end of 2022: the Aquanaut, a mobile subsea robotic system, and the Argonaut, a defense-oriented subsea vehicle. Each of these products and setup of associated services will require significant additional expenses, and Nauticus may not be successful in commercializing or marketing such products and services at all or within the currently expected timeline.

In addition, notwithstanding Nauticus’ market research efforts, its future products and services may not be accepted by customers or their employees. The success of any proposed product and service offerings will depend on numerous factors, including Nauticus’ ability to:

•        attract, recruit and retain qualified personnel, including engineers, design and production personnel and service technicians;

•        identify the preferred product and service features in multiple industries, such as offshore wind energy, defense, and subsea oil and gas and successfully incorporate those features into its products;

•        develop and introduce proposed products and services in sufficient quality and quantities and in a timely manner;

•        adequately protect its intellectual property and avoid infringing upon the intellectual property rights of third parties; and

•        demonstrate the cost savings and efficacy of the proposed products and services.

Nauticus has managed and expects to continue to manage its product development efforts through the development of alpha units, beta units and commercial units. If Nauticus fails to adequately communicate to customers the improvements that are expected from one development stage to the next, or if customer feedback from one development stage is not adequately reflected in the next, customers may not be persuaded of the value of Nauticus’ products and services. If Nauticus fails to generate demand by developing products that incorporate features desired by customers, Nauticus may fail to generate RaaS subscriptions sufficient to achieve or maintain profitability. Nauticus has in the past experienced, and may in the future experience, delays in various phases of product development, including during research and development, manufacturing, limited release testing, marketing and customer education efforts. Further, delays in product development would postpone demonstrations and customer testing, important opportunities for customer engagement, and cause Nauticus to miss expected timelines. Such delays could cause customers to delay or forgo purchases of or subscriptions to Nauticus’ products and services, or to purchase or subscribe for competitors’ products and services. Even if Nauticus is able to successfully develop proposed products when anticipated, these products and their related services may not produce revenue in excess of the costs of development and service, and they may be quickly rendered obsolete by changing customer preferences or the introduction by competitors of products and services embodying new technologies or features. If Nauticus is unable to successfully manage its product development and communications with customers, customers may choose to not adopt, to cancel or to not renew RaaS subscriptions, which would adversely affect Nauticus’ business, prospects, financial condition, and operating results.

Defects, glitches, or malfunctions in Nauticus’ products or the software that operates them, failure of its products to perform as expected, connectivity issues or operator errors, result in product recalls, lower than expected return on investment for customers, cause harm to operators and significant safety concerns, each of which could adversely affect Nauticus’ results of operations, financial condition and its reputation.

The design, manufacture, and marketing of Nauticus’ products involve certain inherent risks. Manufacturing or design defects, glitches, malfunctions, connectivity issues between the central processing unit and peripheral vehicle subsystems, unanticipated use of Nauticus’ robotic systems, operator errors or inadequate disclosure of risks relating to the use of ocean robotic systems, among others, can lead to injury, property damage or other adverse events. Nauticus conducts extensive testing of its units, in some instances in collaboration with its customers, to ensure that any such issues can be identified and addressed in advance of commercial launch of the products. However, there can be no assurance that Nauticus will be able to identify all such issues or that, if identified, efforts to address them will be effective in all cases.

In addition, if the manufacturing of Nauticus’ products is outsourced, Nauticus may not be aware of manufacturing defects that could occur. Such adverse events could lead to unexpected failures in Nauticus’ products and could result, in certain cases, in the removal of its products from the market. A product recall could result in significant costs. To the extent any manufacturing defect occurs, Nauticus’ agreement with the third-party manufacturer may contain a limitation on the third-party manufacturer’s liability, and therefore Nauticus could be required to incur the majority of related costs. Product defects or recalls could also result in negative publicity, damage to Nauticus’ reputation or, in the event of regulatory developments, delays in new product acceptance.

Nauticus’ products incorporate sophisticated computer software. Complex software frequently contains errors, especially when first introduced. Nauticus’ software may experience errors or performance problems in the future. If any part of Nauticus’ products’ hardware or software were to fail, the service mission could be compromised. Additionally, users may not use Nauticus’ products in accordance with safety protocols and training, which could amplify the risk of failure. Customers and users also may fail to install updates and fixes to the software for several reasons including poor connectivity or inattention. Any such occurrence could cause delay in market acceptance of Nauticus’ products, damage to its reputation, product recalls, increased service and warranty costs, product liability claims and loss of revenue relating to such hardware or software defects.

Nauticus anticipates that as part of its ordinary course of business it may be subject to product liability claims alleging defects in the design or manufacture of its products. A product liability claim, regardless of its merit or eventual outcome, could result in significant legal defense costs and high punitive damage payments. Although Nauticus maintains product liability insurance, the coverage is subject to deductibles and limitations, and may not be adequate to cover future claims. Additionally, Nauticus may be unable to maintain its existing product liability insurance in the future at satisfactory rates or adequate amounts.

Even if Nauticus’ products perform properly and are used as intended, if operators sustain any injuries while using Nauticus’ products, Nauticus could be exposed to liability and its results of operations, financial condition, and its reputation may be adversely affected.

Nauticus’ products contain complex technology and must be used as designed and intended in order to operate safely and effectively. While Nauticus expects to develop a training, customer service and maintenance and servicing infrastructure to ensure users are equipped to operate its products in a safe manner, it cannot be sure that the products will ultimately be used as designed and intended. In addition, Nauticus cannot be sure that it will be able to predict all the ways in which use or misuse of the products can lead to injury or damage to property, and its training resources may not be successful at preventing all incidents. If operators were to sustain any injuries or cause any damage to property while using Nauticus’ products, in a manner consistent with Nauticus’ training and instructions or otherwise, Nauticus could be exposed to liability and its results of operations, financial condition and its reputation may be adversely affected.

Nauticus has no experience maintaining or servicing its products at a large scale.

Under the RaaS subscription (planned for future commercial services but yet to be implemented) or conventional service contract model, Nauticus will be responsible for maintenance and servicing of the units. However, Nauticus has no experience providing maintenance and servicing on a global scale. Nauticus may elect to partner with one or more third parties to perform some or all of the servicing and maintenance on its products, but there can be no assurance that Nauticus will be able to enter into an acceptable arrangement with any such third-party provider. Although such servicing partners may have experience in servicing complex machinery, they will initially have limited experience in servicing Nauticus’ ocean vehicles. If Nauticus is unable or elects not to enter into a partnership with third parties to perform maintenance and servicing, it would be required to provide such services directly, which would significantly increase Nauticus’ capital expenditures and personnel costs. Nauticus would also be required to recruit and train employees to provide these services and it may not be able to attract persons with the necessary knowledge or experience to provide these services. Delays in implementing a maintenance and servicing infrastructure may significantly delay new RaaS subscriptions due to smaller than expected maintenance and servicing capacity.

In addition, there can be no assurance that Nauticus’ service and maintenance arrangements will adequately address the service and maintenance requirements of its customers to their satisfaction, or that Nauticus and its servicing partners will have sufficient resources, experience or inventory to meet these service requirements in a timely manner as the volume of robotic systems Nauticus delivers increases. Even if Nauticus and its servicing partners have the sufficient resources and experience needed, they still may not adequately service or maintain the units. If Nauticus is unable to, directly or through third party partners, roll out and establish a widespread service network, including on-site services, customer satisfaction could be adversely affected, which in turn could materially and adversely affect Nauticus’ reputation and thus its sales, results of operations and prospects.

Nauticus’ customers will also depend on Nauticus’ customer support team to resolve technical and operational issues relating to the integrated software underlying Nauticus’ ocean robotic systems. In addition, the RaaS subscription model will require Nauticus to cover costs relating to servicing and maintenance of the robotic systems. Customer behavior and usage may result in higher than expected maintenance and repair costs. Moreover, if RaaS customers do not pay the subscription fee while the units are out of service, there could be an adverse impact on Nauticus’ financial condition and operating results.

As Nauticus continues to grow, additional pressure may be placed on Nauticus’ customer support team or partners, and Nauticus may be unable to respond quickly enough to accommodate short-term increases in customer demand for technical support. Nauticus also may be unable to modify the future scope and delivery of its technical support to compete with changes in the technical support provided by its competitors. Increased customer demand for support, without corresponding revenue, could increase costs and negatively affect Nauticus’ operating results. If Nauticus is unable to successfully address the service requirements of its customers or establish a market perception that Nauticus does not maintain high-quality support, Nauticus may be subject to claims from its customers, including loss of revenue or damages, and Nauticus’ business, prospects, financial condition and operating results may be materially and adversely affected.

Nauticus’ ability to manufacture products of sufficient quality on schedule is unproven, and delays in the design, production and launch of its products could harm its business, prospects, financial condition and operating results.

Nauticus’ future business depends in large part on its ability to execute its plans to design, develop, manufacture, market, deploy and service its products. Nauticus intends to outsource the manufacturing of its ocean robotic systems to a third-party manufacturing partner. While this arrangement may lower operating costs, it also reduces Nauticus’ direct control over production and manufacturing. Such diminished control may have an adverse effect on the quality or quantity of Nauticus’ units, or Nauticus’ flexibility to respond to changing conditions.

Nauticus also plans to retain third-party vendors and service providers to engineer, design and test some of the critical systems and components of Nauticus’ units. While this allows Nauticus to draw from such third parties’ industry knowledge and expertise, there can be no assurance such systems and components will be successfully developed to Nauticus’ specifications or delivered in a timely manner to meet Nauticus’ program timing requirements.

Nauticus’ continued development and manufacturing of its commercially available robotic system, Aquanaut, and its future models, including Argonaut, are and will be subject to risks, including with respect to:

•        costs to be incurred by Nauticus and/or any third-party manufacturing partner or partners in meeting Nauticus specifications and design tolerances;

•        the ongoing effects of the COVID-19 pandemic or other pandemics, epidemics or outbreaks;

•        hiring and retaining a sufficient number of qualified employees. Nauticus has historically been understaffed due to these challenges;

•        long- and short-term durability of Nauticus’ ocean robotic systems to withstand day-to-day wear and tear;

•        delays in delivery of final systems and components by Nauticus’ suppliers;

•        manufacturing of robotic systems units in excess of demand due to contractual requirements or unexpected changes in demand;

•        shifts in demand for future models;

•        quality controls, particularly as Nauticus’ plans to expand its production capabilities;

•        delays or disruptions in Nauticus’ supply chain, or the need to order supplies in excess of demand due to batch number requirements or price thresholds;

•        work stoppages, labor strikes and other labor disputes affecting Nauticus or its suppliers, third-party manufacturers and other partners; and

•        other delays and cost overruns.

Nauticus is or may be subject to risks associated with strategic alliances or acquisitions and may not be able to identify adequate strategic relationship opportunities, or form strategic relationships, in the future.

Nauticus may seek to enter into strategic alliances, joint ventures, minority equity investments, acquisitions, collaborations and in-license arrangements. There is no guarantee that any of these partnerships or acquisitions would lead to any binding agreements or lasting or successful business relationships with third parties. If any of these relationships are established, they may subject Nauticus to a number of risks, including risks associated with sharing proprietary information, non-performance by the third-party and increased expenses in establishing new relationships, any of which may materially and adversely affect Nauticus’ business. Nauticus may have limited ability to monitor or control the actions of these third parties and, to the extent any of these strategic third parties suffers negative publicity or harm to their reputation from events relating to their business, Nauticus may also suffer negative publicity or harm to its reputation by virtue of its association with any such third-party.

Strategic business relationships will be an important factor in the growth and success of Nauticus’ business. However, there are no assurances that Nauticus will be able to identify or secure suitable business relationship opportunities in the future or Nauticus’ competitors may capitalize on such opportunities before Nauticus does. Moreover, identifying such opportunities could require substantial management time and resources, and negotiating

and financing relationships involves significant costs and uncertainties. If Nauticus is unable to successfully source and execute on strategic relationship opportunities in the future, its overall growth could be impaired, and its business, prospects, financial condition and operating results could be materially adversely affected.

When appropriate opportunities arise, Nauticus has in the past, and may in the future acquire additional assets, products, technologies or businesses that are complementary to its existing business. From time to time, the sellers of these assets, products and technologies or business may retain limited rights to the technology that they sell to us, which in some circumstances could allow the sellers to compete with us in a limited fashion. In addition to possible stockholder approval, Nauticus may need approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable laws and regulations, which could result in increased delay and costs, and may disrupt Nauticus’ business strategy if it fails to do so. Furthermore, acquisitions and the subsequent integration of new assets and businesses into Nauticus’ own require significant attention from Nauticus’ management and could result in a diversion of resources from Nauticus’ existing business, which in turn could have an adverse effect on Nauticus’ operations and financial results. Acquired assets or businesses may not generate the financial results Nauticus expects. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant.

Nauticus is highly dependent on the services of its senior management and other key employees and, if Nauticus is unable to attract and retain a sufficient number of qualified employees, its ability to design, manufacture and launch its products, operate its business and compete could be harmed.

Nauticus’ success depends, in part, on its ability to retain its key personnel. Nauticus expects that it will be required to increase compensation levels of senior management and key employees to remain competitive with its peers. The unexpected loss of or failure to retain one or more of Nauticus’ senior managers or other key employees could delay product development and require outsourcing to third parties, each of which in turn could adversely affect Nauticus’ business. Nauticus’ success also depends, in part, on its continuing ability to identify, hire, attract, train and develop other highly qualified personnel. Experienced and highly skilled employees are in high demand and competition for these employees can be intense, and Nauticus’ ability to hire, attract and retain them depends on its ability to provide competitive compensation. Nauticus may not be able to attract, assimilate, develop or retain qualified personnel in the future, and its failure to do so could adversely affect Nauticus’ business, including the execution of its strategy. Any failure by Nauticus’ management team and Nauticus’ employees to perform as expected may have a material adverse effect on Nauticus’ business, prospects, financial condition and operating results.

Nauticus’ management as a group has limited experience in operating a public company.

Nauticus’ management team may not successfully or effectively manage its transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. Nauticus’ executive officers as a group have limited experience in the management of a publicly traded company. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of the post-combination company. Nauticus will need to recruit additional persons to join its management team in order to handle the increased demands of running a public company, but its efforts may not be successful. Nauticus may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting required of public companies. Any failure by Nauticus’ management team to perform as expected may have a material adverse effect on Nauticus’ business, prospects, financial condition, and operating results.

Nauticus will incur significant increased expenses and administrative burdens as a public company, which could have a material adverse effect on its business, prospects, financial condition and operating results.

If Nauticus completes the Business Combination and becomes a public company, it will incur significant legal, accounting and other expenses that it did not incur as a private company, and these expenses may increase even more after Nauticus’ is no longer an emerging growth company, as defined in Section 2(a) of the Securities Act. As a public company, Nauticus will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted, and to be adopted, by the

SEC and Nasdaq. Nauticus’ management and other personnel will need to devote a substantial amount of time to these compliance initiatives. It is possible that Nauticus will be required to expand its employee base and hire additional employees to support its operations as a public company which will increase its operating costs in future periods. Moreover, Nauticus expects these rules and regulations to substantially increase its legal and financial compliance costs and to make some activities more time-consuming and costly. The increased costs will increase Nauticus’ net loss. For example, Nauticus expects it to become more difficult and more expensive for it to obtain director and officer liability insurance and it may be forced to incur substantially higher costs to obtain appropriate coverage. Nauticus cannot accurately predict or estimate the amount or timing of additional costs it may incur. The impact of being a public company could also make it more difficult for Nauticus to attract and retain qualified persons to serve on its board of directors, its board committees or as executive officers. Such increased expenses and administrative burdens involved in operating as a public company could have a material adverse effect on Nauticus’ business, prospects, financial condition, and operating results.

Ongoing impacts from COVID-19 or another pandemic, epidemic or outbreak of an infectious disease may materially and adversely impact Nauticus’ business, prospects, financial condition and operating results.

The ongoing COVID-19 pandemic as well as other possible health pandemics, epidemics or outbreaks may materially and adversely impact Nauticus’ business, prospects, financial condition, and operating results. Nauticus’ engineering and product development operations, among others, cannot all be conducted in a remote working structure and often require on-site access to materials and equipment. Nauticus has customers with international operations in varying industries. It also depends on suppliers and manufacturers worldwide.

Depending upon the duration of the ongoing COVID-19 pandemic and the associated business interruptions, its customers, suppliers, manufacturers and partners may suspend or delay their engagement with Nauticus, which could result in a material adverse effect on its financial condition and ability to meet current timelines. The COVID-19 pandemic has affected and may continue to affect Nauticus’ ability to recruit skilled employees to join its team. Nauticus’ response to the ongoing COVID-19 pandemic may prove to be inadequate and it may be unable to continue its operations in the manner it had prior to the outbreak, and may endure interruptions, reputational harm, delays in its product development and shipments, all of which could have an adverse effect on its business, prospects, financial condition and operating results. In addition, when the pandemic subsides, Nauticus cannot assure you as to the timing of any economic recovery, which could continue to have a material adverse effect on its target markets and its business.

The ongoing military action between Russia and Ukraine could adversely affect our business, financial condition and operating results.

On February 24, 2022, Russian military forces launched a military action in Ukraine, and sustained conflict and disruption in the region is likely. Although the length, impact and outcome of the ongoing military conflict in Ukraine is highly unpredictable, this conflict could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences as well as increase in cyberattacks and espionage.

Russia’s recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military action against Ukraine have led to an unprecedented expansion of sanction programs imposed by the United States, the European Union, the United Kingdom, Canada, Switzerland, Japan and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic and the so-called Luhansk People’s Republic, including, among others:

•        blocking sanctions against some of the largest state-owned and private Russian financial institutions (and their subsequent removal from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system) and certain Russian businesses, some of which have significant financial and trade ties to the European Union;

•        blocking sanctions against Russian and Belarusian individuals, including the Russian President, other politicians and those with government connections or involved in Russian military activities; and

•        blocking of Russia’s foreign currency reserves as well as expansion of sectoral sanctions and export and trade restrictions, limitations on investments and access to capital markets and bans on various Russian imports.

While we do not currently have operations in Ukraine, Russia or Belarus, we are nevertheless actively monitoring the situation in Ukraine and assessing its impact on our business, including our business partners and customers. To date we have not experienced any material interruptions in our infrastructure, supplies, technology systems or networks needed to support our operations. We have no way to predict the progress or outcome of the conflict in Ukraine or its impacts in Ukraine, Russia or Belarus as the conflict, and any resulting government reactions, are rapidly developing and beyond our control. The extent and duration of the military action, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time. Any of the abovementioned factors could affect our business, financial condition and operating results. Any such disruptions may also magnify the impact of other risks described herein.

Nauticus may become subject to new or changing governmental regulations relating to the design, manufacturing, marketing, distribution, servicing, or use of its products, and a failure to comply with such regulations could lead to withdrawal or recall of Nauticus’ products from the market, delay Nauticus’ projected revenues, increase cost, or make Nauticus’ business unviable if it is unable to modify its products to comply.

Nauticus may become subject to new or changing international, federal, state and local regulations, including laws relating to the design, manufacturing, marketing, distribution, servicing or use of its products. Such laws and regulations may require Nauticus to pause sales and modify its products, which could result in a material adverse effect on its revenues and financial condition. Such laws and regulations can also give rise to liability such as fines and penalties, property damage, bodily injury and cleanup costs. Capital and operating expenses needed to comply with laws and regulations can be significant, and violations may result in substantial fines and penalties, third-party damages, suspension of production or a cessation of Nauticus’ operations. Any failure to comply with such laws or regulations could lead to withdrawal or recall of Nauticus’ products from the market.

Nauticus may experience significant delays in the design, development, production and launch of its ocean robotic systems, which could harm its business, prospects, financial condition and operating results.

Nauticus’ core products, including the Argonaut, Aquanaut, Olympic Arm and ToolKITT, are currently offered through direct sales and will be offered for lease through RaaS when available, Nauticus expects that the nature of these products will require continuous improvements and further testing throughout their product and generational lifecycle in order to innovate and develop these products fully. Manufacturing and deliveries of the Aquanaut, to public commercial clients, are not expected to begin until the end of 2022, and may occur later or not at all. Such timeline may be delayed, including due to challenges in recruiting skilled employees, difficulties in securing components and materials, development delays, difficulties relating to manufacturing of the units and other factors. Any delay in the design, development, production and release of Nauticus’ products could materially damage Nauticus’ brand, business, prospects, financial condition and operating results. Nauticus may experience delays in the design, development, production and release of new products, including due to integration, safety and performance issues. To the extent Nauticus delays the commercial launch of its ocean robotic systems, its growth prospects and operating results will likely be adversely affected.

Nauticus has no experience to date in high volume manufacture of its products, nor does it have the facility, employees or equipment needed to manufacture its products in high volume.

Nauticus intends to enter into contracts with one or more third-party manufacturers to produce Nauticus’ ocean vehicles. Nauticus does not know whether its future third-party manufacturers will be able to develop efficient, automated, low-cost production capabilities and processes and reliable sources of component supply, that will enable Nauticus to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully market Nauticus’ robotic systems. Even if Nauticus and its third-party manufacturers are successful in developing its production capability and processes and reliably source its components, Nauticus does not know whether it will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of factors beyond its control such as problems with suppliers and vendors, or force majeure events, or in time to meet Nauticus’ unit commercialization schedules or to satisfy the requirements of customers and potential customers.

If Nauticus is unable to enter into agreements with third-party manufacturers on acceptable terms, it will need to develop its own manufacturing and production capabilities, significantly increasing Nauticus’ capital expenditures and delaying production of Nauticus’ ocean robotic systems. If this were to occur, Nauticus would need raise or borrow additional money, which may not be successful, and possibly change the anticipated pricing of its RaaS subscription model, which would adversely affect Nauticus’ margins and cash flows.

Any failure to develop production processes and capabilities within Nauticus’ projected costs and timelines could have a material adverse effect on Nauticus’ business, prospects, financial condition and operating results.

The period of time from initial design of Nauticus’ products to obtaining binding purchase commitments from customers is long and Nauticus is subject to the risk that customers who initially expressed an interest in its products during the design phase will not enter into binding commitments.

Nauticus’ products contain complex technology that requires multiple years of engineering and design. Therefore, the period of time from initial design of Nauticus’ products to obtaining binding purchase commitments from customers is long and Nauticus is subject to the risk that customers who initially expressed an interest in its products during the design phase will not enter into binding commitments. Nauticus’ design of its products is significantly influenced by feedback from potential customers and reflect the needs they expressed. As a result, adapting Nauticus’ products to other industries or customers may require additional design, development, testing, work and expenses. Nauticus cannot be sure that it will be able to adapt its products to reflect such feedback successfully or at all. If customers who initially express an interest in Nauticus’ proposed products and influenced their design ultimately decide to not enter into binding commitments or to adopt a competitors’ technology, Nauticus’ business, prospects, financial condition and operating results would be adversely affected.

Nauticus’ ability to control costs and liability is dependent on developing sufficient screening criteria for its RaaS customers.

Nauticus’ ability to realize revenue and reduce liability related to its RaaS subscription model (planned for future commercial services but yet to be implemented) is heavily dependent on its ability to effectively screen customers for high risk activities or environments that could result in higher costs for Nauticus. Nauticus has limited experience with its RaaS subscription model, a service planned for future commercial use but yet to be implemented, and may not be able to effectively develop effective customer screening criteria. Nauticus may need to rely on third-party service providers to develop effective screening criteria, which will result in additional cost to Nauticus. Nauticus’ screening criteria may also need to be adjusted over time to satisfy requirements under applicable law, from its insurers, lenders or from other third-party service providers. Nauticus must balance the need to develop effective screening criteria with its need to attract new customers or market to different industry segments.

Nauticus’ business and prospects depend significantly on its ability to build the Nauticus brand. Nauticus may not succeed in continuing to establish, maintain and strengthen the Nauticus brand, and its brand and reputation could be harmed by negative publicity regarding Nauticus or its products.

Nauticus’ business and prospects are heavily dependent on its ability to develop, maintain and strengthen the Nauticus brand. If Nauticus does not continue to establish, maintain and strengthen its brand, it may lose the opportunity to build a critical mass of customers. Promoting and positioning its brand will likely depend significantly on Nauticus’ ability to provide high quality products and engage with its customers as intended. In addition, Nauticus’ ability to develop, maintain and strengthen the Nauticus brand may depend on the acceptance of its products by employees of its customers. To promote its brand, Nauticus may be required to change its customer development and branding practices, which could result in substantially increased expenses, including the need to use traditional media including print media. If Nauticus does not develop and maintain a strong brand, its business, prospects, financial condition and operating results will be materially and adversely impacted.

In addition, if incidents occur or are perceived to have occurred, whether or not such incidents are Nauticus’ fault, Nauticus could be subject to adverse publicity. In particular, given the popularity of social media, any negative publicity, whether true or not, could quickly proliferate and harm perceptions and confidence in the Nauticus brand. Furthermore, there is the risk of potential adverse publicity related to Nauticus’ manufacturing or other partners whether or not such publicity is related to their collaboration with Nauticus. Nauticus’ ability to successfully position its brand could also be adversely affected by perceptions about the quality of its competitors’ products.

Nauticus is dependent on its suppliers, some of which are currently single or limited source suppliers, and the inability of these suppliers to deliver necessary components of Nauticus’ products at prices and volumes, performance and specifications acceptable to Nauticus, could have a material adverse effect on Nauticus’ business, prospects, financial condition and operating results. Nauticus has not yet identified all of the suppliers that it is likely to rely on to support any future commercialization of its core products.

Nauticus relies on third-party suppliers for the provision and development of many of the key components and materials used in its products. Nauticus has not yet identified all of the suppliers, contractors and other third parties that it is likely to rely on to support any future commercialization of its core products. While Nauticus plans to obtain components from multiple sources whenever possible, some of the components used in its products may have to be purchased by Nauticus from a single source. If Nauticus’ third-party suppliers are unable to supply key components and materials at the required volume, Nauticus’ sales, revenues and profitability will likely be adversely affected. Nauticus’ third-party suppliers may also not be able to meet the specifications and performance characteristics required by Nauticus, which would impact Nauticus’ ability to achieve its product specifications and performance characteristics as well. Additionally, Nauticus’ third-party suppliers may be unable to obtain required certifications for their products for which Nauticus plans to use or provide warranties that are necessary for Nauticus’ solutions. If Nauticus is unable to obtain components and materials used in its products from its suppliers, Nauticus’ business would be adversely affected.

Nauticus has less negotiating leverage with suppliers than larger and more established companies and may not be able to obtain favorable pricing and other terms. For example, agreements with suppliers may include terms that are unfavorable to Nauticus, such as requirements that Nauticus order components and manufacturing units in excess of Nauticus’ demand due to batch number requirements or price thresholds. While Nauticus believes that it may be able to establish alternate supply relationships and can obtain or engineer replacement components for its single source components, Nauticus may be unable to do so in the short term, or at all, at prices or quality levels that are favorable to Nauticus, which could have a material adverse effect on its business, prospects, financial condition and operating results.

Moreover, Nauticus and its suppliers are currently experiencing increases in the cost of, and an interruption in, the supply or shortage of materials. It is unclear how long these challenges will remain. Due to the complexity of Nauticus’ products, each unit is expected to contain several thousand components. Difficulty securing any components and materials could result in delays in the development of these core products, which delays could be compounded if components or units require redesign or reengineering. Any sustained increase, supply interruption or shortage could therefore prevent or delay the commercialization of Nauticus’ products and materially and negatively impact Nauticus’ business, prospects, financial condition and operating results. Nauticus and its suppliers use various materials in their businesses and products, including for example semiconductors, energy storage materials, commodity materials and specialty metal alloys, and the prices for these materials fluctuate. The available supply of some of these materials and components is currently and may continue to be unstable, depending on market conditions and global demand, and could adversely affect Nauticus’ business and operating results. Risks relating to Nauticus’ supply chain include:

•        “Buy American” or other similar requirements that may be imposed on government contractors;

•        an increase in the cost, or decrease in the available supply, of semiconductor chips, electrical components, commodity materials and specialty alloys;

•        disruption in the supply of lithium ion batteries due to quality issues or recalls; and

•        fluctuations in the value of any foreign currencies in which manufactured parts, commercial components and related raw material purchases are or may be denominated against the U.S. dollar.

Nauticus’ business is also dependent on the continued supply of lithium ion battery cells. While Nauticus believes several sources of cells are available, Nauticus has to date not finally sourced or validated a supplier for its commercial production and it may have limited flexibility in changing cell suppliers once contracted. Any disruption in the supply of battery cells from such suppliers could disrupt production of Nauticus’ products. Furthermore, fluctuations or shortages in raw materials or components and other economic conditions may cause Nauticus to experience significant increases in freight charges and material costs. Substantial increases in the prices for Nauticus’ materials or prices charged to it, such as those charged by battery cell suppliers, would increase Nauticus’ operating costs, and could reduce its margins if the increased costs cannot be recouped through increased RaaS subscription offering or unit sales prices. Any attempts to increase product prices in response to increased material costs could result in cancellations of orders and reservations and therefore materially and adversely affect Nauticus’ brand, image, business, prospects, financial condition and operating results.

Nauticus’ potential transition to an outsourced manufacturing business model may not be successful, which could harm its ability to deliver products and recognize revenue.

Nauticus intends to transition from a manufacturing model in which it primarily manufactured and assembled its products at a smaller scale at its existing Webster, Texas location, to one where it relies on one or more third-party manufacturers. Nauticus is in negotiations with third parties to provide contract manufacturing of its products. Moreover, Nauticus may not be able to contract with potential counterparties on commercially reasonable terms or at all. Nauticus believes the use of third-party manufacturers will have benefits, but in the near term, while it is beginning manufacturing with one or more new partners, Nauticus may lose revenue and incur increased costs.

Reliance on third-party manufacturers reduces Nauticus’ control over the manufacturing process, including reduced control over quality, product costs and product supply and timing. Nauticus may experience delays in shipments or issues concerning product quality from its third-party manufacturers. If any of Nauticus’ third-party manufacturers experience interruptions, delays or disruptions in supplying its products, including by natural disasters, the global COVID-19 pandemic, other health epidemics and outbreaks, or work stoppages or capacity constraints, Nauticus’ ability to ship products to distributors and customers would be delayed. In addition, unfavorable economic conditions could result in financial distress among third-party manufacturers upon which Nauticus relies, thereby increasing the risk of disruption of supplies necessary to fulfil Nauticus production requirements and meet customer demands. While Nauticus takes measures to protect its trade secrets, the use of third-party manufacturers may also risk disclosure of its innovative and proprietary technologies, which could adversely affect Nauticus’ business.

Additionally, if any of Nauticus’ future third-party manufacturers experience quality control problems in their manufacturing operations and Nauticus’ products do not meet customer requirements, Nauticus could be required to recall the units or cover the cost of repair or replacement of any defective products. These delays or product quality issues could have an immediate and material adverse effect on Nauticus’ ability to fulfill orders and could have a negative effect on its operating results. In addition, such delays or issues with product quality could adversely affect Nauticus’ reputation and its relationship with its customers.

If any third-party manufacturers experience financial, operational, manufacturing capacity or other difficulties, or experience shortages in required components, or if they are otherwise unable or unwilling to continue to manufacture Nauticus’ products in required volumes or at all, Nauticus’ supply may be disrupted, it may be required to seek alternate manufacturers and it may be required to re-design its products. It would be time-consuming, and could be costly and impracticable, to begin to use new manufacturers and designs, and such changes could cause significant interruptions in supply and could have an adverse effect on Nauticus’ ability to meet its scheduled product deliveries and may subsequently lead to the loss of sales.

If Nauticus is unable to contract with a third-party manufacturing partner, Nauticus would need to develop its own manufacturing facilities, which may not be feasible and, if feasible, would significantly increase its capital expenditures and operating expenditures, and would significantly delay or inhibit production of its robotic systems.

Nauticus does not have a definitive agreement with a third-party manufacturing partner to commercially manufacture its robotic ocean vehicles and it may be unable to enter into such agreements with third-party manufacturing partners and other key suppliers for manufacturing on terms and conditions acceptable to Nauticus. Although negotiations are continuing with potential counterparties, Nauticus may not be able to contract with potential counterparties on commercially reasonable terms or at all. If Nauticus is unable to enter into such definitive agreements or is only able to do so on terms that are less commercially favorable to Nauticus, it may be unable to timely identify adequate strategic relationship opportunities, or form strategic relationships, and consequently, Nauticus may not be able to fully carry out its business plans. There can be no assurance that Nauticus would be able to partner with other third parties or establish its own production capacity to meet its needs on acceptable terms, or at all. The expense and time required to complete any transition and to assure that robotic systems manufactured at facilities of new third-party partners comply with Nauticus’ quality standards and regulatory requirements would likely be greater than currently anticipated. If Nauticus needs to develop its own manufacturing and production capabilities, which may not be feasible, it would significantly increase Nauticus’ capital and operating expenditures and would significantly delay production of Nauticus’ robotic systems. This may require Nauticus to attempt to raise or borrow additional money, which may not be successful. Also, it may require Nauticus to change the anticipated pricing of its RaaS subscription offering, which would adversely affect Nauticus’ margins and cash flows. Any of the foregoing could adversely affect Nauticus’ business, prospects, financial condition and operating results. Accordingly, investors should not place undue reliance on Nauticus’ statements about its production plans or their feasibility in the timeframe anticipated, or at all. Nauticus may not be able to implement its business strategy in the timeframe anticipated, or at all.

Nauticus may be unable to adequately control the costs associated with its operations.

Nauticus will require significant capital to develop and grow its business, including developing and producing its commercial robotic systems and other products, establishing or expanding design, research and development, production, sales and maintenance and service facilities and building Nauticus’ brand. Nauticus has incurred and expects to continue incurring significant expenses which will impact its profitability, including research and development expenses, procurement costs, sales, marketing and distribution expenses as Nauticus builds its brand and markets its robotic systems, and general and administrative expenses as Nauticus scales its operations, identifies and commits resources to investigate new areas of demand and incurs costs as a public company. In addition, Nauticus may incur significant costs servicing, maintaining and refurbishing its robotic ocean vehicles, and it expects that the cost to repair and service its robotic systems will increase over time as its vehicles age. Nauticus’ ability to become profitable in the future will not only depend on its ability to complete the design and development of its robotic vehicles to meet projected performance metrics, identify and investigate new areas of demand and successfully market its robotic systems and RaaS subscription model, but also to sell, whether outright or through subscriptions, its ocean systems at prices needed to achieve its expected margins and control its costs, including the risks and costs associated with operating, maintaining and financing Nauticus’ robotic systems. If Nauticus is unable to efficiently design, develop, manufacture, market, deploy, distribute and service its robotic systems in a cost-effective manner, Nauticus’ margins, profitability and prospects would be materially and adversely affected.

Nauticus, any manufacturing partners, and suppliers may rely on complex machinery for production, which involves a significant degree of risk and uncertainty in terms of operational performance and costs.

Nauticus, any third-party manufacturing partners, and suppliers may rely on complex machinery for the production and assembly of Nauticus’ robotic systems, which will involve a significant degree of uncertainty and risk in terms of operational performance and costs. Nauticus’ facilities, and those of any third-party manufacturing partners and suppliers consist or are expected to consist of large-scale machinery combining many components. These components may suffer unexpected malfunctions from time to time and will depend on repairs and spare parts to resume operations, which may not be available when needed. Unexpected malfunctions of these components may significantly affect the intended operational efficiency. Operational performance and costs can be difficult to predict and are often influenced by factors outside of Nauticus’ or any third-party manufacturing partners’ and suppliers’ control, such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, fire, seismic activity and natural disasters. Should operational risks materialize, it may result in the personal injury to or death of workers, the loss of production equipment, damage to production facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material adverse effect on Nauticus’ business, prospects, financial condition and operating results.

Nauticus faces risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt its operations.

Nauticus’ facilities or operations or those of any third-party manufacturers or suppliers could be adversely affected by events outside of its or their control, such as natural disasters, wars, health epidemics, and other calamities. Although Nauticus has servers that are hosted both onsite and at an offsite location, its backup system runs nightly, but does not capture data on a real-time basis and it may be unable to recover certain data in the event of a server failure. Nauticus cannot assure you that any backup systems will be adequate to protect it from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events. Any of the foregoing events may give rise to interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect Nauticus’ ability to provide services.

Nauticus currently targets many customers that are large corporations with substantial negotiating power, exacting product standards and potentially competitive internal solutions. If Nauticus is unable to sell its products to these customers, its prospects and results of operations will be adversely affected.

Nauticus’ expects that many of its potential customers will be large, multinational corporations with substantial negotiating power relative to Nauticus and, in some instances, may have internal solutions that are competitive to Nauticus’ products. These large, multinational corporations also have significant development resources, which may allow them to acquire or develop independently, or in partnership with others, competitive technologies.

Meeting the technical requirements and securing binding commitments from any of these companies will require a substantial investment of Nauticus’ time and resources. Nauticus cannot assure you that its products will secure binding commitments from these or other companies or that it will generate meaningful revenue from the sales of its products to these key potential customers. If Nauticus’ products are not selected by these large corporations or if these corporations develop or acquire competitive technology, it will have an adverse effect on Nauticus’ business.

Nauticus operates in a competitive industry that is subject to rapid technological change, and Nauticus expects competition to increase.

Nauticus’ product offerings compete in a broad competitive landscape that includes incumbent actors, and emerging players in the blue technology markets, particularly companies focused on deploying ocean services with large vessels, tethered hydraulic and hybrid-electric ROVs, survey and hovering AUVs, electric platforms, remote monitoring, and other autonomy and perception technologies applied to adjacent ocean markets including autonomous shipping and subsea mining.

A breakdown of the competitive landscape by Nauticus product area:

•        Nauticus’ electric ocean robots and software platform compete with other tethered hydraulic and electric remotely operated vehicles (ROVs) and autonomous underwater vehicles (AUVs) for performing inspection, maintenance, repair, and physical interventions of ocean assets for sectors including offshore wind, oil & gas, aquaculture, port management, and defense & intel markets.

•        Nauticus’ underlining autonomy software platform includes modern robotics and automation technologies for autonomous navigation, manipulation, data orchestration and compression, behavior and mission execution and could face additional competition from the automotive and aerospace sectors working to solve similar challenges in different markets. At the most basic level, these software platforms are similar in nature and Nauticus’ software could also be reciprocated in additional markets outside of the blue technologies and ocean services space.

•        Nauticus’ RaaS model (a business model planned for future commercial services but yet to be implemented) faces a varied competitive landscape that not only includes long established and largely undifferentiated ocean services companies like Oceaneering International, Subsea7, and Saipem, but other emerging companies such as Ocean Infinity and Reach Subsea that are bringing new approaches to the markets targeted by Nauticus Robotics and may evolve to a competitive stature in these markets. Nauticus also faces competition from bluetech software companies like Seebyte, Greensea, and but as Nauticus expands markets could face more boarder competition from autonomy software automotive companies diversify into the ocean markets like Toyota, Tesla, or Uber.

•        Nauticus’ robotic platforms also compete with other unmanned vehicles manufactures offered by companies such as Saab, Forum, and Mitsubishi and traditional automation and robotics companies like ABB and Fanuc. These companies have products that are commercially available and in development. Nauticus expects some products currently in development to become commercially available in the next few years and present a competitive threat to Nauticus’ products.

Nauticus’ competitor base may change or expand as Nauticus continues to develop and commercialize its robotic systems in the future. These or other competitors may develop new technologies or products that provide superior results to customers or are less expensive than Nauticus’ products. Nauticus’ technologies and products could have reduced competitiveness by such developments.

Nauticus’ competitors may respond more quickly to new or emerging technologies, undertake more extensive marketing campaigns, have greater financial, marketing, manufacturing and other resources than Nauticus does, or may be more successful in attracting potential customers, employees and strategic partners. In addition, potential customers could have long-standing or contractual relationships with competitors. Potential customers may be reluctant to adopt Nauticus’ products, particularly if they compete with or have the potential to compete with, or diminish the need/utilization of products or technologies supported through these existing relationships. If Nauticus is not able to compete effectively, its business, prospects, financial condition, and operating results will be negatively impacted.

In addition, because Nauticus operates in a new market, the actions of its competitors could adversely affect its business. Adverse events such as product defects or legal claims with respect to competing or similar products could cause reputational harm to the ocean robotics market on the whole and, accordingly, Nauticus’ business.

Nauticus’ financial results may vary significantly from period to period due to fluctuations in its operating costs, product demand and other factors.

Nauticus expects its period-to-period financial results to vary based on its operating costs and product demand, which Nauticus anticipates will fluctuate as the pace at which it continues to design, develop and manufacture new robotic systems, increase production capacity and establish or expand design, research and development, production, sales and service facilities. Additionally, Nauticus’ revenues from period to period may fluctuate as it identifies and investigates areas of demand, adjusts volumes and adds new product derivatives based on market demand and margin opportunities, develops and introduces new robotic systems or introduces existing robotic systems to new markets for the first time, as well as the introduction of its RaaS subscription model (a business model planned for future commercial services that has yet to be implemented). As a result of these factors, Nauticus believes that quarter-to-quarter comparisons of its financial results, especially in the short term, are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance. Moreover, Nauticus’ financial results may not meet expectations of equity research analysts, ratings agencies or investors, who may be focused only on quarterly financial results. If any of this occurs, the trading price of our securities following the Business Combination could fall substantially, either suddenly or over time.

If Nauticus fails to maintain an effective system of internal controls, its ability to produce timely and accurate financial statements or comply with applicable regulations could be adversely affected.

Nauticus expects that the requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq will continue to increase its legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on personnel, systems and resources.

The Sarbanes-Oxley Act requires, among other things, that Nauticus maintain effective disclosure controls and procedures and internal control over financial reporting. Nauticus is continuing to develop and refine its disclosure controls, internal control over financial reporting and other procedures that are designed to ensure that information required to be disclosed by it in the reports that it will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to its principal executive and financial officers. Nauticus is in the process of upgrading its finance and accounting systems to an enterprise system suitable for a public company, and a delay could impact its ability or prevent it from timely reporting its operating results, timely filing required reports with the SEC and complying with Section 404 of the Sarbanes-Oxley Act. The development and implementation of the standards and controls necessary for Nauticus to achieve the level of accounting standards required of a public company may require costs greater than expected.

The current controls and any new controls that Nauticus develops may be inadequate because of changes in conditions of Nauticus’ business. Further, weaknesses in its internal controls have been identified in connection with the preparation of financial statements for the years ended December 31, 2021 and 2020 and may be discovered in the future. As of March 31, 2022, Nauticus has filled positions of Senior Accountant and Accounts Receivable to remediate this weakness in its internal controls. In addition, Nauticus has recently added a Chief Financial Officer to strengthen its internal controls and financial reporting. Nauticus plans to transition two current contracted personnel to accounting leadership and controller positions. Nauticus is also strengthening internal controls over financial reporting by implementing an ERP system containing workflows and business rules that ensure process is followed by approved policies, roles, and procedures. The Company expects to complete the ERP implementation within 6 months.

The resulting fully integrated system will enhance financial reporting and transactional interfaces. Nauticus will also add RaaS operations personnel as required when the production Aquanauts are completed, commissioned, and put into service. Nauticus’ management will make an assessment of these remediation steps and add additional staff, if necessary to remediate the weakness.

Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could adversely affect Nauticus’ operating results or cause it to fail to meet its reporting obligations and may result in a restatement of its financial statements for prior periods. Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of Nauticus’ internal control over financial reporting that Nauticus is required to include in its periodic reports that it will file with the SEC under Section 404 of the Sarbanes-Oxley Act. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in Nauticus’ reported financial and other information.

In order to maintain and improve the effectiveness of its disclosure controls and procedures and internal control over financial reporting, Nauticus has expended and anticipates that after the closing of the Business Combination will continue to expend significant resources, including accounting-related costs, and provide significant management oversight. Any failure to maintain the adequacy of its internal controls, or consequent inability to produce accurate financial statements on a timely basis, could increase operating costs and could materially and adversely affect Nauticus’ ability to operate its business. If Nauticus’ internal controls are perceived as inadequate or if Nauticus is perceived to be unable to produce timely or accurate financial statements, investors may lose confidence in its operating results and the stock price of Nauticus’ securities following the Business Combination could decline.

Nauticus’ independent registered public accounting firm is not required to formally attest to the effectiveness of internal control over financial reporting until after Nauticus is no longer an emerging growth company. At such time, the independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which Nauticus’ controls are documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on Nauticus’ business, prospects, financial condition and operating results.

Nauticus has yet to achieve positive operating cash flow and, given its projected funding needs, its ability to generate positive cash flow is uncertain.

Nauticus has had negative cash flow from operating activities of $4.2 million for the three months ended March 31, 2022, and $5.9 million and $4.5 million for the years ended December 31, 2021, and 2020, respectively. Nauticus expects to continue to have negative cash flow from operating and investing activities for the remainder of 2022 as it expects to incur research and development, sales and marketing, and general and administrative expenses and make capital expenditures in its efforts to increase sales, engage in development work and ramp up operations. Nauticus’ business also will at times require significant amounts of working capital to build inventory and support the growth of additional products. An inability to generate positive cash flow for the near term may adversely affect Nauticus’ ability to raise needed capital for its business on reasonable terms, diminish supplier or customer willingness to enter into transactions with Nauticus, and have other adverse effects that may decrease its long-term viability. There can be no assurance that Nauticus will achieve positive cash flow in the near future or at all.

Nauticus’ ability to use net operating loss carryforwards and other tax attributes may be limited in connection with the Business Combination or other ownership changes.

Nauticus has incurred losses during its history and does not expect to become profitable in the near future, and may never achieve profitability. To the extent that Nauticus continues to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire.

Under the Tax Act, as modified by the CARES Act, U.S. federal net operating loss carryforwards generated in taxable periods beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such net operating loss carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to the Tax Act or the CARES Act. Suspensions or other restrictions on the use of net operating losses or tax credits, possibly with retroactive effect, may result in Nauticus’ existing net operating losses or tax credits expiring or otherwise being unavailable to offset future income tax liabilities.

In addition, the net operating loss carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), these federal net operating loss carryforwards and other tax attributes may become subject to an annual limitation in the event of certain cumulative changes in the ownership of Nauticus. An “ownership change” pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups of stockholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. The ability of Nauticus to utilize net operating loss carryforwards and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including potential changes in connection with the Business Combination or other transactions. Similar rules may apply under state tax laws. Nauticus has not yet determined the amount of the cumulative change in its ownership resulting from the Business Combination or other transactions, or any resulting limitations on its ability to utilize its net operating loss carryforwards and other tax attributes. If Nauticus earns taxable income, such limitations could result

in increased future income tax liability to Nauticus and its future cash flows could be adversely affected. Nauticus has recorded a full valuation allowance related to its net operating loss carryforwards and other deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.

Nauticus expects to incur substantial R&D costs and devote significant resources to identifying and commercializing new products, which could significantly reduce its profitability and may never result in revenue to Nauticus.

Nauticus’ future growth depends on penetrating new markets, adapting existing products to new applications and customer requirements, and introducing new products that achieve market acceptance. Nauticus plans to incur substantial, and potentially increasing, R&D costs as part of its efforts to design, develop, manufacture, and commercialize new products and enhance existing products. Nauticus’ R&D expenses were $1.2 million for the three months ended March 31, 2022, and $3.5 million and $5.0 million for the years ended December 31, 2021 and 2020, respectively, and are likely to grow in the future. Because Nauticus accounts for R&D as an operating expense, these expenditures will adversely affect its results of operations in the future. Further, Nauticus’ R&D program may not produce successful results, and its new products may not achieve market acceptance, create additional revenue or become profitable.

Nauticus is subject to evolving laws, regulations, standards, policies, and contractual obligations related to data privacy and security laws and regulations, and its actual or perceived failure to comply with such obligations could harm Nauticus’ reputation, subject it to significant fines and liability, or otherwise adversely affect its business, prospects, financial condition and operating results.

Nauticus is subject to or affected by a number of federal, state and local laws and regulations, as well as contractual obligations and industry standards, that impose certain obligations and restrictions with respect to data privacy and security, and govern Nauticus’ collection, storage, retention, protection, use, processing, transmission, sharing and disclosure of personal information, including that of its employees, customers and others. Most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities and others of security breaches involving certain types of data. Such laws may be inconsistent or may change or additional laws may be adopted. In addition, Nauticus’ agreements with certain customers may require Nauticus to notify them in the event of a security breach. Such mandatory disclosures are costly, could lead to negative publicity, result in penalties or fines, result in litigation, may cause Nauticus’ customers to lose confidence in the effectiveness of Nauticus’ security measures and require Nauticus to expend significant capital and other resources to respond to and/or alleviate problems caused by the actual or perceived security breach.

The global data protection landscape is rapidly evolving, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. Nauticus may not be able to monitor and react to all developments in a timely manner. For example, California adopted the California Consumer Privacy Act (“CCPA”), which became effective in January 2020. The CCPA establishes a privacy framework for covered businesses, including an expansive definition of personal information and data privacy rights for California residents. The CCPA includes a framework with potentially severe statutory damages and private rights of action. The CCPA requires covered businesses to provide new disclosures to California residents, provide them new ways to opt-out of certain disclosures of personal information, and allow for a new cause of action for data breaches. Additionally, a new privacy law, the California Privacy Rights Act (“CPRA”), was approved by California voters in the November 3, 2020 election. The CPRA creates obligations relating to consumer data beginning on January 1, 2022, with implementing regulations expected on or before July 1, 2022, and enforcement beginning July 1, 2023. The CPRA significantly modifies the CCPA, potentially resulting in further uncertainty. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States. Other states have begun to propose and enact similar laws. For example, Virginia has enacted the Virginia Consumer Data Protection Act, which provides for obligations similar to the CCPA, and which will go into effect January 1, 2023. As Nauticus expands its operations, the CCPA, CPRA, and other laws and regulations relating to privacy and data security may increase Nauticus’ compliance costs and potential liability. Compliance with any applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and Nauticus may be required to put in place additional mechanisms to comply with such laws and regulations.

Additionally, as Nauticus’ international presence expands, it may become subject to or face increasing obligations under laws and regulations in countries outside the United States, many of which, such as the European Union’s General Data Protection Regulation (“GDPR”) and national laws supplementing the GDPR, as well as legislation substantially implementing the GDPR in the United Kingdom, are significantly more stringent than those currently enforced in

the United States. The GDPR requires companies to meet stringent requirements regarding the handling of personal data of individuals located in the European Economic Area (“EEA”). The GDPR also includes significant penalties for noncompliance, which may result in monetary penalties of up to the higher of €20 million or 4% of a group’s worldwide turnover for the preceding financial year for the most serious violations. The United Kingdom’s version of the GDPR, the UK GDPR, which it maintains along with its Data Protection Act (collectively, the “UK GDPR”), also provides for substantial penalties that, for the most serious violations, can go up to the greater of £17.5 million or 4% of a group’s worldwide turnover for the preceding financial year. Many other jurisdictions globally are considering or have enacted legislation providing for local storage of data or otherwise imposing privacy, data protection and data security obligations in connection with the collection, use and other processing of personal data.

Nauticus publishes privacy policies and other documentation regarding its collection, processing, use and disclosure of personal information and/or other confidential information. Although Nauticus endeavors to comply with its published policies and other documentation, Nauticus may at times fail to do so or may be perceived to have failed to do so. Moreover, despite its efforts, Nauticus may not be successful in achieving compliance, including if Nauticus’ employees, contractors, service providers or vendors fail to comply with its published policies and documentation. Such failures can subject Nauticus to potential action by governmental or regulatory authorities if they are found to be deceptive, unfair, or misrepresentative of its actual practices. Any actual or perceived inability of Nauticus to adequately address privacy and security concerns or comply with applicable laws, rules and regulations relating to privacy, data protection or data security, or applicable privacy notices, could lead to investigations, claims, and proceedings by governmental entities and private parties, damages for contract breach, and other significant costs, penalties, and other liabilities. Any such claims or other proceedings could be expensive and time-consuming to defend and could result in adverse publicity. Any of the foregoing may have an adverse effect on Nauticus’ business, prospects, results of operations, and financial condition.

Nauticus is subject to cybersecurity risks to its operational systems, security systems, infrastructure, integrated software in its products and data processed by Nauticus or third-party vendors.

Nauticus’ business and operations involve the collection, storage, processing, and transmission of personal data and certain other sensitive and proprietary data of collaborators, customers, and others. Additionally, Nauticus maintains sensitive and proprietary information relating to its business, such as its own proprietary information and personal data relating to its employees. An increasing number of organizations have disclosed breaches of their information security systems and other information security incidents, some of which have involved sophisticated and highly targeted attacks. Nauticus may be a target for attacks by state-sponsored actors and others designed to disrupt its operations or to attempt to gain access to its systems or data that is processed or maintained in its business. The ongoing COVID-19 pandemic has increased security risks due to personnel working remotely.

Nauticus is at risk for interruptions, outages and breaches of its: (a) operational systems, including business, financial, accounting, product development, data processing or production processes, owned by Nauticus or its third-party vendors or suppliers; (b) facility security systems, owned by Nauticus or its third-party vendors or suppliers; (c) transmission control modules or other in-product technology, owned by Nauticus or its third-party vendors or suppliers; (d) the integrated software in Nauticus units; or (e) customer data that Nauticus processes or its third-party vendors or suppliers process on its behalf. Because techniques used to obtain unauthorized access to or to sabotage information systems change frequently and may not be known until launched against a target, Nauticus may be unable to anticipate or prevent these attacks, react in a timely manner, or implement adequate preventive measures, and may face delays in its detection or remediation of, or other responses to, security breaches and other privacy-and security-related incidents. Such incidents could: materially disrupt Nauticus’ operational systems; result in loss of intellectual property, trade secrets or other proprietary or competitively sensitive information; compromise certain information of customers, employees, suppliers, or others; jeopardize the security of Nauticus’ facilities; or affect the performance of in-product technology and the integrated software in Nauticus’ units. Certain efforts may be state-sponsored or supported by significant financial and technological resources, making them even more difficult to detect, remediate, and otherwise respond to.

Nauticus plans to include product services and functionality that utilize data connectivity to monitor performance and timely capture opportunities to enhance performance and for safety and cost-saving preventative maintenance. The availability and effectiveness of Nauticus’ services depend on the continued operation of information technology and communications systems. Nauticus’ systems will be vulnerable to damage or interruption from, among others, physical theft, fire, terrorist attacks, natural disasters, power loss, war, telecommunications failures, viruses, denial or degradation of service attacks, ransomware, social engineering schemes, insider theft or misuse or other attempts to

harm Nauticus’ systems. Nauticus intends to use its product services and functionality to log information about each unit’s use in order to aid Nauticus in diagnostics and servicing. Nauticus’ customers may object to the use of this data, which may require Nauticus to implement new or modified data handling policies and mechanisms, increase Nauticus’ unit maintenance costs and costs associated with data processing and handling, and harm its business prospects.

Although Nauticus is in the process of implementing certain systems and processes that are designed to protect its data and systems within its control, prevent data loss, and prevent other security breaches and security incidents, these security measures cannot guarantee security. The IT and infrastructure used in Nauticus’ business may be vulnerable to cyberattacks or security breaches, and third parties may be able to access data, including personal data and other sensitive and proprietary data of Nauticus and its customers, collaborators and partners, its employees’ personal data, or other sensitive and proprietary data, accessible through those systems. Employee error, malfeasance, or other errors in the storage, use, or transmission of any of these types of data could result in an actual or perceived privacy or security breach or other security incident.

Moreover, there are inherent risks associated with developing, improving, expanding and updating Nauticus’ current systems, such as the disruption of Nauticus’ data management, procurement, production execution, finance, supply chain and sales and service processes. These risks may affect Nauticus’ ability to manage its data and inventory, procure parts or supplies or manufacture, deploy, deliver and service its units, adequately protect its intellectual property or achieve and maintain compliance with, or realize available benefits under, applicable laws, regulations and contracts. Nauticus cannot be sure that these systems upon which it relies, including those of its third-party vendors or suppliers, will be effectively implemented, maintained or expanded as planned. If Nauticus does not successfully implement, maintain or expand these systems as planned, its operations may be disrupted, its ability to accurately and timely report its financial results could be impaired, and deficiencies may arise in its internal control over financial reporting, which may impact Nauticus’ ability to certify its financial results. Moreover, Nauticus’ proprietary information or intellectual property could be compromised or misappropriated and its reputation may be adversely affected. If these systems do not operate as Nauticus expects them to, Nauticus may be required to expend significant resources to make corrections or find alternative sources for performing these functions.

Any actual or perceived security breach or security incident, or any systems outages or other disruption to systems used in Nauticus’ business, could interrupt Nauticus’ operations, result in loss or improper access to, or acquisition or disclosure of, data or a loss of intellectual property protection, harm Nauticus’ reputation and competitive position, reduce demand for its products, damage Nauticus’ relationships with customers, partners, collaborators, or others, or result in claims, regulatory investigations, and proceedings and significant legal, regulatory, and financial exposure, and any such incidents or any perception that Nauticus’ security measures are inadequate could lead to loss of confidence in Nauticus and harm to its reputation, any of which could adversely affect Nauticus’ business, financial condition, and results of operations. Any actual or perceived breach of privacy or security, or other security incident, impacting any entities with which Nauticus shares or discloses data (including, for example, its third-party technology providers) could have similar effects. Nauticus expects to incur significant costs in an effort to detect and prevent privacy and security breaches and other privacy- and security-related incidents, and may face increased costs and requirements to expend substantial resources in the event of an actual or perceived privacy or security breach or other incident.

Nauticus is subject to U.S. and foreign anti-corruption and anti-money laundering laws and regulations. Nauticus can face criminal liability and other serious consequences for violations, which can harm its business, prospects, financial condition and operating results.

Nauticus is subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, and other anti-corruption, anti-bribery and anti-money laundering laws in countries in which Nauticus conducts activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, business partners, third-party intermediaries, representatives, and agents from authorizing, promising, offering or providing, directly or indirectly, improper payments or anything else of value to government officials, political candidates, political parties, or commercial partners for the purpose of obtaining or retaining business or securing an improper business advantage.

Nauticus has direct and indirect interactions with foreign officials, including in furtherance of sales to governmental entities in non-U.S. countries. Nauticus sometimes leverages third parties to conduct its business abroad, and its third-party business partners, representatives, and agents may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. Nauticus can be held liable for the corrupt or other illegal activities of its employees or these third-parties, even if Nauticus does not explicitly authorize or

have actual knowledge of such activities. The FCPA and other applicable laws and regulations laws also require that Nauticus keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions. While Nauticus has policies and procedures to address compliance with such laws, there can be no assurance that all of Nauticus’ employees, business partners, third-party intermediaries, representatives, and agents will not take actions in violation of its policies and applicable law, for which Nauticus may be ultimately held responsible. Nauticus’ exposure for violating these laws increases as its international presence expands and as it increases sales and operations in foreign jurisdictions.

Any violations of the laws and regulations described above may result in whistleblower complaints, adverse media coverage, investigations, substantial civil and criminal fines and penalties, damages, settlements, prosecution, enforcement actions, imprisonment, the loss of export or import privileges, suspension or debarment from government contracts, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences, any of which could adversely affect Nauticus’ business, prospects, financial condition and operating results. In addition, responding to any investigation or action will likely result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees.

Nauticus is subject to governmental export and import controls and laws that could subject Nauticus to liability if Nauticus is not in compliance with such laws.

Nauticus’ products are subject to export control, import and economic sanctions laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control. Exports of Nauticus’ robotic systems and technology must be made in compliance with these laws and regulations. If Nauticus fails to comply with these laws and regulations, Nauticus and certain of its employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on Nauticus and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers.

Moreover, international sales of certain of Nauticus’ products are subject to U.S. laws, regulations and policies like the International Traffic in Arms Regulations and other export laws and regulations and may be subject to first obtaining licenses, clearances or authorizations from various regulatory entities. If Nauticus is not allowed to export its products or the clearance process is burdensome and costly, Nauticus’ ability to generate revenue would be adversely affected.

In addition, changes to Nauticus’ ocean robotic systems, or changes in applicable export control, import, or economic sanctions laws and regulations may create delays in the introduction and sale of Nauticus’ robotic systems and solutions or, in some cases, prevent the export or import of Nauticus’ robotic systems to certain countries, governments, or persons altogether. Compliance with such laws and regulations may also be costly and require time and attention from Nauticus management. Any change in export, import, or economic sanctions laws and regulations, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons, or technologies targeted by such laws and regulations, could also result in decreased use of Nauticus’ robotic systems, as well as Nauticus’ decreased ability to export or market its robotic systems to potential customers. Any decreased use of Nauticus’ robotic systems or limitation on Nauticus’ ability to export or market its robotic systems would likely adversely affect Nauticus’ business, prospects, financial condition and operating results.

Nauticus’ management team will have broad discretion in making strategic decisions to execute their growth plans, and there can be no assurance that Nauticus’ management’s decisions will result in successful achievement of Nauticus’ business objectives or will not have unintended consequences that negatively impact Nauticus’ growth prospects.

Nauticus’ management will have broad discretion in making strategic decisions to execute their growth plans and may devote time and company resources to new or expanded solution offerings, potential acquisitions, prospective customers or other initiatives that do not necessarily improve Nauticus’ operating results or contribute to its growth. Management’s failure to make strategic decisions that are ultimately accretive to Nauticus’ growth may result in unfavorable returns and uncertainty about Nauticus’ prospects, each of which could cause the price of the Common Stock to decline.

As part of growing our business, we have and may make acquisitions. If we fail to successfully select, execute, or integrate our acquisitions, then our business, results of operations and financial condition could be materially adversely affected, and our stock price could decline.

Failure to successfully identify, complete, manage and integrate acquisitions could materially and adversely affect our business, financial condition and results of operations and could cause Nauticus’ stock price to decline.

From time to time, we may undertake acquisitions to add new products and technologies, acquire talent, gain new sales channels, or enter into new markets or sales territories. In addition to possible stockholder approval, we may need approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable laws and regulations, and a failure to obtain such approvals and licenses could result in delays and increased costs and may disrupt our business strategy. Furthermore, acquisitions and the subsequent integration of new assets, businesses, key personnel, customers, vendors, and suppliers require significant attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our operations. Acquired assets or businesses may not generate the financial results we expect. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant.

Any acquisitions, partnerships, or joint ventures that we enter into could disrupt our operations and have a material adverse effect on our business, financial condition and results of operations.

From time to time, we may evaluate potential strategic acquisitions of businesses, including partnerships or joint ventures with third parties. We may not be successful in identifying acquisition, partnership, and joint venture candidates. In addition, we may not be able to continue the operational success of such businesses or successfully finance or integrate any businesses that we acquire or with which we form a partnership or joint venture. We may have potential write-offs of acquired assets and/or an impairment of any goodwill recorded as a result of acquisitions. Furthermore, the integration of any acquisition may divert management’s time and resources from our core business and disrupt our operations or may result in conflicts with our business. Any acquisition, partnership or joint venture may not be successful, may reduce our cash reserves, may negatively affect our earnings and financial performance and, to the extent financed with the proceeds of debt, may increase our indebtedness. Further, depending on market conditions, investor perceptions of Nauticus and other factors, we might not be able to obtain financing on acceptable terms, or at all, to implement any such transaction. We cannot ensure that any acquisition, partnership, or joint venture we make will not have a material adverse effect on our business, financial condition, and results of operations.

If we are unable to adapt to and satisfy customer demands in a timely and cost-effective manner, our ability to grow our business may suffer.

The success of our business depends in part on effectively engineering and implementing technologies related to subsea and surface vessels, ROVs, subsea robotic manipulators, and AI-based, full-stack vehicle control and manipulation software. These technologies are packaged for commercial and defense customers in products that provide innovative solutions to challenges in all maritime markets including subsea energy, offshore wind, and defense applications. If for any reason we are unable to continue to manufacture, design and develop technologies as planned or provide the services and products that our customers expect from us, this could have a material adverse effect on our business, financial condition, and results of operations. If our current or future product and service offerings do not meet expected performance or quality standards, including with respect to customer satisfaction, this could cause operational delays. In addition, any delay in manufacturing new products as planned could increase costs and cause our products and services to be less attractive to potential new customers. Further, certain government bodies may have priority with respect to the use of our products and services for national defense reasons, which may impact our cadence of producing and selling products and services to other customers. Any production, operational or manufacturing delays or other unplanned changes to our ability to design, develop and manufacture our products or offer our services could have a material adverse effect on our business, financial condition, and results of operations.

If we fail to respond to commercial industry cycles in terms of our cost structure, manufacturing capacity, and/or personnel needs, our business could be seriously harmed.

The timing, length, and severity of the up-and-down cycles in the commercial subsea, ocean surface, and defense industries are difficult to predict. The cyclical nature of the industries in which we operate affects our ability to accurately predict future revenue, and in some cases, future expense levels. During down cycles in our industry, the financial results of our customers may be negatively impacted, which could result not only in a decrease in orders but also a weakening of their financial condition that could impair our ability to recognize revenue or to collect on outstanding receivables. When cyclical fluctuations result in lower-than-expected revenue levels, operating results may be adversely affected, and cost reduction measures may be necessary in order for us to remain competitive and financially sound. We must be in a position to adjust our cost and expense structure to reflect prevailing market

conditions and to continue to motivate and retain our key employees. If we fail to respond, then our business could be seriously harmed. In addition, during periods of rapid growth, we must be able to increase engineering and manufacturing capacity and personnel to meet customer demand. We can provide no assurance that these objectives can be met in a timely manner in response to industry cycles. Each of these factors could adversely impact our operating results and financial condition.

Our systems, products, technologies and services and related equipment may have shorter useful lives than we anticipate.

Our growth strategy depends in part on developing systems, products, technologies, and services. These reusable systems, products, technologies and services and systems will have a limited useful life. While we intend to design our products and technologies for a certain lifespan, which corresponds to a number of cycles, there can be no assurance as to the actual operational life of a product or that the operational life of individual components will be consistent with its design life. A number of factors will impact the useful lives of our products and systems, including, among other things, the quality of their design and construction, the durability of their component parts and availability of any replacement components, and the occurrence of any anomaly or series of anomalies or other risks affecting the technology during launch and in orbit. In addition, any improvements in technology may make our existing products, designs, or any component of our products prior to the end of its life obsolete. If our systems, products, technologies and services and related equipment have shorter useful lives than we currently anticipate, this may lead to delays in increasing the rate of our follow on work and new business, which would have a material adverse effect on our business, financial condition, and results of operations. In addition, we are continually learning, and as our engineering and manufacturing expertise and efficiency increases, we aim to leverage this learning to be able to manufacture our products and equipment using less of our currently installed equipment, which could render our existing inventory obsolete.

Risks Related to Government Contracts

Many of our contracts contain performance obligations that require innovative design capabilities, are technologically complex, require state-of-the-art manufacturing expertise, or are dependent upon factors not wholly within our control. Failure to meet these obligations could adversely affect our profitability and future prospects. Early termination of client contracts or contract penalties could adversely affect our results of operations.

We design, develop, and manufacture technologically advanced and innovative products and services, which are applied by our customers in a variety of environments. Problems and delays in development or delivery as a result of issues with respect to design, technology, licensing and intellectual property rights, labor, inability to achieve learning curve assumptions, manufacturing materials or components could prevent us from meeting requirements. Either we or the customer may generally terminate a contract as a result of a material uncured breach by the other. If we breach a contract or fail to perform in accordance with contractual service levels, delivery schedules, performance specifications, or other contractual requirements set forth therein, the other party thereto may terminate such contract for default, and we may be required to refund money previously paid to us by the customer or to pay penalties or other damages. Even if we have not breached, we may deal with various situations from time to time that may result in the amendment or termination of a contract. These steps can result in significant current period charges and/or reductions in current or future revenue, and/or delays in collection of outstanding receivables and costs incurred on the contract. Other factors that may affect revenue and profitability include inaccurate cost estimates, design issues, unforeseen costs and expenses not covered by insurance or indemnification from the customer, diversion of management focus in responding to unforeseen problems, and loss of follow-on work.

We rely on a limited number of suppliers for certain raw materials and supplied components, which has caused and may continue to cause supply chain disruptions. We may not be able to obtain sufficient raw materials or supplied components to meet our manufacturing, design, and operating needs, or obtain such materials on favorable terms or at all, which could impair our ability to fulfill our orders in a timely manner or increase our costs of design and production.

Our ability to produce our current and future systems, products, technologies and services and other components of operation is dependent upon sufficient availability of raw materials and supplied components, which we secure from a limited number of suppliers. As disclosed herein, this has caused and may continue to cause supply chain disruptions. Global supply chains have recently experienced disruption as a result of industry capacity constraints,

material availability and global logistics delays arising from transportation capacity of ocean shipping containers and a prolonged delay in resumption of operations by one or more key suppliers as a result of COVID-19. Our reliance on suppliers to secure raw materials and supplied components has exposed us and may continue to expose us to volatility in the prices and availability of these materials. We may not be able to obtain sufficient supplies of raw materials or supplied components on favorable terms or at all, which could result in delays in the manufacture of our systems, products, technologies and services or increased costs.

In addition, we may in the future experience delays in manufacturing or operation as we go through the requalification process with any replacement third-party supplier, as well as the limitations imposed by the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”), or other restrictions on transfer of sensitive technologies. Moreover, the imposition of tariffs on such raw materials or supplied components could have a material adverse effect on our operations. Prolonged disruptions in the supply of any of our key raw materials or components, difficulty qualifying new sources of supply, implementing use of replacement materials or new sources of supply or any volatility in prices could have a material adverse effect on our ability to operate in a cost-efficient, timely manner and could cause us to experience cancellations or delays of scheduled missions, customer cancellations or reductions in our prices and margins, any of which could harm our business, financial condition and results of operations.

To date, Nauticus has experienced supply chain impacts, particularly in electronic components, that have delayed ongoing projects. In response, Nauticus has made efforts to expand its supplier base to locate and source project materials to mitigate procurement delays. In light of recent world events, we anticipate continued challenges in this area over the near term as we work to minimize impacts on projects and deliverable timelines.

We use estimates when accounting for certain contracts and changes in these estimates may have a significant impact on our financial results.

Our quarterly and annual sales are affected by a variety of factors that may lead to significant variability in our operating results. We evaluate the contract value and cost estimates for performance obligations at least quarterly, and more frequently when circumstances change significantly. Changes in estimates and assumptions related to the status of certain long-term contracts which could have a material adverse effect on our operating results, financial condition, and/or cash flows.

The U.S. government’s budget deficit and the national debt, as well as any inability of the U.S. government to complete its budget process for any government fiscal year and consequently having to shut down or operate on funding levels equivalent to its prior fiscal year pursuant to a “continuing resolution,” could have an adverse impact on our business, financial condition, results of operations and cash flows.

Considerable uncertainty exists regarding how future budget and program decisions will unfold, including the defense spending priorities of the U.S. government, what challenges budget reductions will present for the defense industry and whether annual appropriations bills for all agencies will be enacted for U.S. government fiscal 2022 and thereafter due to many factors, including but not limited to, changes in the political environment, including before or after a change to the leadership within the government administration, and any resulting uncertainty or changes in policy or priorities and resultant funding. The U.S. government’s budget deficit and the national debt could have an adverse impact on our business, financial condition, results of operations and cash flows in a number of ways, including the following:

•        The U.S. government could reduce or delay its spending on, reprioritize its spending away from, or decline to provide funding for the government programs in which we participate;

•        U.S. government spending could be impacted by alternate arrangements to sequestration, which increases the uncertainty as to, and the difficulty in predicting, U.S. government spending priorities and levels; and

•        We may experience declines in revenue, profitability, and cash flows as a result of reduced or Delayed orders or payments or other factors caused by economic difficulties of our customers and prospective customers, including U.S. federal, state, and local governments.

Furthermore, we believe continued budget pressures could have serious negative consequences for the security of the United States, the defense industrial base and the customers, employees, suppliers, investors and communities that rely on companies in the defense industrial base. Budget and program decisions made in this environment would have long-term implications for Nauticus and the entire defense industry.

We depend significantly on U.S. government contracts, which often are only partially funded, subject to immediate termination, and heavily regulated and audited. The termination or failure to fund, or negative audit findings for, one or more of these contracts could have an adverse impact on our business, financial condition, results of operations and cash flows.

Over its lifetime, a U.S. government program may be implemented by the award of many different individual contracts and subcontracts. The funding of U.S. government programs is subject to U.S. Congressional appropriations. In recent years, U.S. government appropriations have been affected by larger U.S. government budgetary issues and related legislation. Although multi-year contracts may be authorized and appropriated in connection with major procurements, the U.S. Congress generally appropriates funds on a government fiscal year basis. Procurement funds are typically made available for obligation over the course of one to three years. Consequently, programs often initially receive only partial funding, and additional funds are obligated only as the U.S. Congress authorizes further appropriations. We cannot predict the extent to which total funding and/or funding for individual programs will be included, increased, or reduced as part of the annual appropriations process ultimately approved by U.S. Congress and the President of the United States or in separate supplemental appropriations or continuing resolutions, as applicable. The termination of funding for a U.S. government program would result in a loss of anticipated future revenue attributable to that program, which could have an adverse impact on our operations. In addition, the termination of a program or the failure to commit additional funds to a program that already has been started could result in lost revenue and increase our overall costs of doing business.

Generally, U.S. government contracts are subject to oversight audits by U.S. government representatives. Such audits could result in adjustments to our contract costs. Any costs found to be improperly allocated to a specific contract will not be reimbursed, and such costs already reimbursed must be refunded. We have recorded contract revenue based on costs we expect to realize upon final audit. However, we do not know the outcome of any future audits and adjustments, and we may be required to materially reduce our revenue or profits upon completion and final negotiation of audits. Negative audit findings could also result in termination of a contract, forfeiture of profits, suspension of payments, fines or suspension or debarment from U.S. Government contracting or subcontracting for a period of time.

In addition, U.S. government contracts generally contain provisions permitting termination, in whole or in part, without prior notice at the U.S. government’s convenience upon payment only for work done and commitments made at the time of termination. For some contracts, we are a subcontractor and not the prime contractor, and in those arrangements, the U.S. Government could terminate the prime contractor for convenience without regard for our performance as a subcontractor. We can give no assurance that one or more of our U.S. government contracts will not be terminated under those circumstances. Also, we can give no assurance that we would be able to procure new contracts to offset the revenue or backlog lost as a result of any termination of our U.S. government contracts. Because a significant portion of our revenue is dependent on our performance and payment under our U.S. government contracts, the loss of one or more large contracts could have a material adverse impact on our business, financial condition, results of operations and cash flows.

Our U.S. government business also is subject to specific procurement regulations and a variety of socioeconomic and other requirements. These requirements, although customary in U.S. government contracts, increase our performance and compliance costs. These costs might increase in the future, thereby reducing our margins, which could have an adverse effect on our business, financial condition, results of operations and cash flows. In addition, the U.S. government has and may continue to implement initiatives focused on efficiencies, affordability and cost growth and other changes to its procurement practices. These initiatives and changes to procurement practices may change the way U.S. government contracts are solicited, negotiated, and managed, which may affect whether and how we pursue opportunities to provide our products and services to the U.S. government, including the terms and conditions under which we do so, which may have an adverse impact on our business, financial condition, results of operations and cash flows. For example, contracts awarded under the Department of Defense’s Other Transaction Authority for research and prototypes generally require cost-sharing and may not follow, or may follow only in part, standard U.S. government contracting practices and terms, such as the Federal Acquisition Regulation (“FAR”) and Cost Accounting Standards.

Failure to comply with applicable regulations and requirements could lead to fines, penalties, repayments, or compensatory or treble damages, or suspension or debarment from U.S. government contracting or subcontracting for a period of time. Among the causes for debarment are violations of various laws and regulations, including those related to procurement integrity, export control (including ITAR), U.S. government security, employment practices, protection of the environment, accuracy of records, proper recording of costs and foreign corruption. The termination of a U.S. government contract or relationship as a result of any of these acts would have an adverse impact on our operations and could have an adverse effect on our standing and eligibility for future U.S. government contracts.

The terms of certain of our current and likely future contracts are highly sensitive and we are limited in our ability to disclose such terms.

Our success, in large part, depends on our ability to maintain protection over the terms of certain of our current and likely future contracts and agreements, each of which is a highly negotiated agreement with sensitive information that, if publicly disclosed, would be beneficial for our and our partners’ competitors to learn and harmful to our and our partners’ commercial interests. We are limited in our ability to disclose the terms of these agreements, including terms that may affect our expected cash flows or the value of any collateral, and have taken precautions to protect the disclosure of the sensitive information in such agreements. Therefore, we have not allowed third parties, except for CLAQ during due diligence pursuant to the Non-Disclosure Agreement dated August 11, 2021, to review the terms of these agreements. If the terms of these agreements were to be disclosed, our ability to compete could be hindered and our relationships with our partners could be damaged, both of which could have a material adverse effect on our business, financial condition, and results of operations. Furthermore, our relationships with our partners could also be damaged, and they may take legal action against us, if they believe that we have disclosed any terms of these agreements without their prior consent.

Thus the nature of current and future contracts with the U.S. government will limit our ability to disclose sensitive terms such as contract scope, schedules, and budgets, and, in some cases, the specific end user. Notwithstanding the above, our current government contracts, while sensitive, were disclosed under a non-disclosure agreement to CLAQ’s management and Board members for their review and evaluation.

Additionally, Nauticus is committed to complying with our disclosure obligations under federal securities laws. Any future material contracts that are of national security concern will be disclosed in redacted form, and unredacted versions made available to the SEC’s staff for confidential, non-disclosable, review, in accordance with SEC regulations.

Disputes with our subcontractors or the inability of our subcontractors to perform, or our key suppliers to timely deliver our components, parts or services, has caused and could continue to cause our products, systems or services to be produced or delivered in an untimely or unsatisfactory manner.

We engage subcontractors on many of our contracts. We may have disputes with our subcontractors, including regarding the quality and timeliness of work performed by the subcontractor, customer concerns about the subcontract or subcontractor, our failure to extend existing task orders or issue new task orders under a subcontract, our hiring of the personnel of a subcontractor or vice versa or the subcontractor’s failure to comply with applicable law. In addition, there are certain parts, components, and services for many of our products, systems, technologies, and services that we source from other manufacturers or vendors. Some of our suppliers, from time to time, have experienced and may continue to experience financial and operational difficulties, which may impact their ability to supply the materials, components, subsystems, and services that we require. Tariffs recently imposed on certain materials and other trade issues may create or exacerbate existing materials shortages and may result in further supplier business closures. Our supply chain could also be disrupted by external events, such as natural disasters or other significant disruptions (including extreme weather conditions, medical epidemics, acts of terrorism, cyber-attacks and labor disputes), governmental actions and legislative or regulatory changes, including product certification or stewardship requirements, sourcing restrictions, product authenticity and climate change or greenhouse gas emission standards, or availability constraints from increased demand from customers. In addition, the ongoing COVID-19 pandemic has resulted in increased travel restrictions and extended shutdown of certain businesses across the globe. These or any further political or governmental developments or health concerns could result in social, economic, and labor instability. Any inability to develop alternative sources of supply on a cost-effective and timely basis could materially impair our ability to manufacture and deliver products, systems, and services to our customers. We can give no assurances that we will be free from disputes with our subcontractors; material supply constraints or problems; or component, subsystems, or services problems in the future. Also, our subcontractors and other suppliers may not be

able to acquire or maintain the quality of the materials, components, subsystems, and services they supply, which may result in greater product returns, service problems and warranty claims and could harm our business, financial condition, results of operations and cash flows. In addition, in connection with our government contracts, we are required to procure certain materials, components and parts from supply sources approved by the U.S. government and we rely on our subcontractors and suppliers to comply with applicable laws, regulations and other requirements regarding procurement of counterfeit, unauthorized or otherwise non-compliant parts or materials, including parts or materials they supply to us, and in some circumstances, we rely on their certifications as to their compliance. From time to time, there are components for which there may be only one supplier, which may be unable to meet our needs. Each of these subcontractor and supplier risks could have a material adverse effect on our business, financial condition, results of operations and cash flows.

To date, Nauticus has encountered some supply chain disruptions stemming from limited availability of certain raw materials. These supply chain issues have affected some, but not all, of our subcontractors and their ability to procure raw materials in a cost effective and timely manner. This has been evidenced by schedule extensions in the expected delivery of the Aquanauts that are under contract for fabrication with International Submarine Engineering, Ltd. as well as the Hydronauts under contract for construction with Diverse Marine. Nauticus continues to monitor these contractor issues and works closely with the supply chain providers to adjust other elements of the project to minimize schedule impacts and ensure minimal to no disruption to its daily operations.

We have government customers, which subjects us to risks including early termination, audits, investigations, sanctions and penalties.

We derive a substantial portion of our revenue from contracts with U.S. Department of Defense agencies and may enter into additional contracts with the U.S. or foreign governments in the future. This subjects us to statutes and regulations applicable to companies doing business with the government, including the FAR. These government contracts customarily contain provisions that give the government substantial rights and remedies, many of which are not typically found in commercial contracts and which are unfavorable to contractors. For instance, most U.S. government agencies include provisions that allow the government to unilaterally terminate or modify contracts for convenience, and in that event, the counterparty to the contract may generally recover only its incurred or committed costs and settlement expenses and profit on work completed prior to the termination. If the government terminates a contract for default, the defaulting party may be liable for any extra costs incurred by the government in procuring undelivered items from another source.

Some of our federal government contracts are subject to the approval of appropriations being made by the U.S. Congress to fund the expenditures under these contracts. In addition, government contracts normally contain additional requirements that may increase our costs of doing business, reduce our profits, and expose us to liability for failure to comply with these terms and conditions. These requirements include, for example:

•        specialized disclosure and accounting requirements unique to government contracts;

•        financial and compliance audits that may result in potential liability for price adjustments, recoupment of government funds after such funds have been spent, civil and criminal penalties, or administrative sanctions such as suspension or debarment from doing business with the U.S. government;

•        public disclosures of certain contract and company information; and

•        mandatory socioeconomic compliance requirements, including labor requirements, non-discrimination and affirmative action programs and environmental compliance requirements.

Government contracts are also generally subject to greater scrutiny by the government, which can initiate reviews, audits, and investigations regarding our compliance with government contract requirements. In addition, if we fail to comply with government contracting laws, regulations and contract requirements, our contracts may be subject to termination, and we may be subject to financial and/or other liability under our contracts, the Federal Civil False Claims Act (including treble damages and other penalties), or criminal law. In particular, the False Claims Act’s “whistleblower” provisions also allow private individuals, including present and former employees, to sue on behalf of the U.S. government. Any penalties, damages, fines, suspension, or damages could adversely affect our ability to operate our business and our financial results.

Our reputation and ability to do business may be impacted by the improper conduct of our employees, agents, or business partners.

We have implemented compliance controls, training, policies and procedures designed to prevent and detect reckless or criminal acts from being committed by our employees, agents or business partners that would violate the laws of the jurisdictions in which we operate, including laws governing payments to government officials, such as the U.S. Foreign Corrupt Practices Act (“FCPA”), the protection of export controlled or classified information, such as ITAR, false claims, procurement integrity, cost accounting and billing, competition, information security and data privacy and the terms of our contracts. This risk of improper conduct may increase as we continue to grow and expand our operations. We cannot ensure, however, that our controls, training, policies and procedures will prevent or detect all such reckless or criminal acts, and we have been adversely impacted by such acts in the past, which have been immaterial in nature. If not prevented, such reckless or criminal acts could subject us to civil or criminal investigations, monetary and non-monetary penalties and suspension and debarment by the U.S. government and could have a material adverse effect on our ability to conduct business, our results of operations and our reputation. In addition, misconduct involving data security lapses resulting in the compromise of personal information or the improper use of our customer’s sensitive or classified information could result in remediation costs, regulatory sanctions against us and serious harm to our reputation and could adversely impact our ability to continue to contract with the U.S. government.

Risks Related to CLAQ’s Business and the Business Combination

CLAQ’s independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about CLAQ’s ability to continue as a “going concern.”

As of March 31, 2022, CLAQ had $296,381 in cash held outside of the Trust Account and a working capital deficit of $220,239. Further, CLAQ has incurred and expects to continue to incur significant costs in pursuit of its initial business combination. CLAQ cannot assure you that its plans to raise capital or to consummate an initial business combination will be successful. These factors, among others, raise substantial doubt about CLAQ’s ability to continue as a going concern. CLAQ’s financial statements contained in this proxy statement/prospectus do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should CLAQ be unable to continue as a going concern.

Additional risk factors not presently known to CLAQ or that it currently deems immaterial may also impair CLAQ’s business or results of operations. CLAQ may disclose changes to such risk factors or disclose additional risk factors from time to time in CLAQ’s future filings with the SEC.

CLAQ will be forced to liquidate the Trust Account if it cannot consummate a business combination by July 19, 2022 (the date that is 12 months from the closing of the IPO), or if extended, January 19, 2023 (the date that is 18 months from the closing of the IPO). In the event of a liquidation, CLAQ’s public stockholders will receive $10.10 per share of Common Stock and the Warrants and Rights will expire worthless.

If CLAQ is unable to complete a business combination by July 19, 2022, or if extended, January 19, 2023, CLAQ will be forced to liquidate, the per-share liquidation distribution will be $10.10. Warrants and Rights will expire worthless.

In connection with the recent restatement of CLAQ’s financial statements, CLAQ’s management has concluded that its disclosure controls and procedures were not effective as of December 31, 2021 due to a material weakness in internal control over financial reporting solely related to its accounting for complex financial instruments. If CLAQ is unable to maintain an effective system of disclosure controls and procedures and internal control over financial reporting, it may not be able to accurately report its financial results in a timely manner, which may adversely affect investor confidence in CLAQ and materially and adversely affect its business and financial results.

As previously disclosed in CLAQ’s Current Report on Form 8-K filed with the SEC on March 29, 2022, after consultation with its independent registered public accounting firm, CLAQ’s management team and its audit committee concluded that it was appropriate to restate its previously issued audited balance sheet as of July 19, 2021 (the “Audited Balance Sheet”) included as Exhibit 99.1 to its Current Report on Form 8-K filed with the SEC on July 23, 2021 and CLAQ’s unaudited and interim financial statements as of and for the three months ended September 30, 2021 contained in CLAQ’s Quarterly Report on Form 10-Q filed with the SEC on November 12, 2021 (the “Q3 Form 10-Q”). Accordingly, on March 29, 2022, CLAQ filed Amendment No. 1 to the Q3 Form 10-Q and a restated Audited Balance Sheet, which is included as Exhibit 99.4 to the Annual Report on Form 10-K filed with the SEC on March 29, 2022. As part of such process, CLAQ identified a material weakness in its internal control over financial reporting, solely related to its accounting for complex financial instruments.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of CLAQ’s annual or interim consolidated financial statements will not be prevented or detected and corrected on a timely basis. Effective internal controls are necessary for CLAQ to provide reliable financial reports and prevent fraud. CLAQ expects to take steps to remediate the material weakness, but there is no assurance that any remediation efforts will ultimately have the intended effects.

If CLAQ identifies any new material weaknesses in the future, any such newly identified material weakness could limit its ability to prevent or detect a misstatement of CLAQ’s accounts or disclosures that could result in a material misstatement of CLAQ’s annual or interim consolidated financial statements. In such case, CLAQ may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in CLAQ’s financial reporting and its stock price may decline as a result. CLAQ cannot assure you that the measures it has taken to date, or any measures it may take in the future, will be sufficient to avoid potential future material weaknesses.

CLAQ may not be able to complete an initial business combination with a U.S. target company if such initial business combination is subject to U.S. foreign investment regulations and review by a U.S. government entity such as the Committee on Foreign Investment in the United States (CFIUS), or ultimately prohibited.

Neither CLAQ Co-Sponsors is, is controlled by, or has substantial ties with a non-U.S. person. However, certain investors involved in our pending business combination transaction with Nauticus are Canadian citizens. We do not expect CLAQ or the post-combination company to be considered a “foreign person” under the regulations administered by CFIUS. However, if our initial business combination with a U.S. business is subject to CFIUS review, the scope of which was expanded by the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”), to include certain non-passive, non-controlling investments in sensitive U.S. businesses and certain acquisitions of real estate even with no underlying U.S. business. FIRRMA, and subsequent implementing regulations that are now in force, also subjects certain categories of investments to mandatory filings. If our potential initial business combination with a U.S. business falls within CFIUS’s jurisdiction, we may determine that we are required to make a mandatory filing or that we will submit a voluntary notice to CFIUS, or to proceed with the initial business combination without notifying CFIUS and risk CFIUS intervention, before or after closing the initial business combination. CFIUS may decide to block or delay our initial business combination, impose conditions to mitigate national security concerns with respect to such initial business combination or order us to divest all or a portion of a U.S. business of the combined company without first obtaining CFIUS clearance, which may limit the attractiveness of or prevent us from pursuing certain initial business combination opportunities that we believe would otherwise be beneficial to us and our shareholders. As a result, the pool of potential targets with which we could complete an initial business combination may be limited and we may be adversely affected in terms of competing with other special purpose acquisition companies which do not have similar foreign ownership issues.

Moreover, the process of government review, whether by the CFIUS or otherwise, could be lengthy and we have limited time to complete our initial business combination. If we cannot complete our initial business combination by July 19, 2022 (or October 19, 2022 if extended by three months under the Current Charter and Trust Agreement) because the review process drags on beyond such timeframe or because our initial business combination is ultimately prohibited by CFIUS or another U.S. government entity, we may be required to liquidate. If we liquidate, our public shareholders may only receive $10.21 per share, and our warrants and rights will expire worthless. This will also cause you to lose the investment opportunity in a target company and the chance of realizing future gains on your investment through any price appreciation in the combined company.

Because the market price of the Combined Company will fluctuate, Nauticus’ stockholders cannot be sure of the value of the Merger Consideration they will receive. In addition, there can be no assurance that any Earnout Shares will be issued.

Release of the Earnout Shares is tied to the volume-weighted average price of the Combined Company Common Stock during a 5-year period following the signing of the Merger Agreement. Accordingly, at the time of providing written consent to the Business Combination, Nauticus stockholders will not know or be able to calculate the market value of the shares of CLAQ Common Stock they would receive as Merger Consideration upon the completion of the Business Combination. Stock price changes may result from a variety of factors, including changes in the business, operations or prospects of Nauticus, regulatory considerations and general business, market, industry or economic conditions. Many of these factors are outside of the control of CLAQ and Nauticus.

(7)      Includes 8,625,000 Public Warrants and the issuance of 862,500 shares of Common Stock pursuant to the Rights. Non-redeeming public stockholders could suffer additional dilution in their ownership and voting interest of the combined company upon exercise of the Public Warrants held by redeeming CLAQ public stockholder who continue to hold these warrants, which could have an aggregate value of $3,967,500, based on the closing trading price per Public Warrant as of May 16, 2022.

(8)      Includes 4,312,500 outstanding founder shares and 7,175,000 Private Warrants.

(9)      Total of 4,312,500 outstanding founder shares includes 1,437,500 founder shares held by the Sponsor, 2,595,000 founder shares held by CleanTech Investments, and 280,000 founder shares held by the officers and directors of CleanTech. Please see the section titled “Beneficial Ownership of Securities.”

(10)    Assumes the sale of an aggregate of 3,530,000 shares of CleanTech Common Stock, for a purchase price of $10.00 per share and an aggregate purchase price of $35,300,000, conversion of the Debentures at a conversion price of $15.00 and exercise and conversion of the Warrants income Common Stock.

You must tender your Common Stock in order to validly seek redemption at the Meeting of stockholders.

In connection with tendering your Common Stock for redemption, you must elect either to physically tender your share certificates to Continental or to deliver your Common Stock to Continental electronically using DTC’s DWAC (Deposit/Withdrawal At Custodian) System, in each case at least two business days before the Meeting. The requirement for physical or electronic delivery ensures that a redeeming holder’s election to redeem is irrevocable once the Business Combination is consummated. Any failure to observe these procedures will result in your loss of redemption rights in connection with the vote on the Business Combination.

If third parties bring claims against CLAQ, the proceeds held in trust could be reduced and the per share liquidation price received by CLAQ’s public stockholders may be less than $10.10.

CLAQ’s placing of funds in trust may not protect those funds from third party claims against CLAQ. Although CLAQ has received from many of the vendors, service providers (other than its independent accountants) and prospective target businesses with which it does business executed agreements waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of CLAQ’s public stockholders, they may still seek recourse against the Trust Account. Additionally, a court may not uphold the validity of such agreements. Accordingly, the proceeds held in trust could be subject to claims which could take priority over those of CLAQ’s public stockholders. If CLAQ liquidates the Trust Account before the completion of a business combination and distributes the proceeds held therein to its public stockholders, the Co-Sponsors have contractually agreed that they will be liable to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us, but only if such a vendor or prospective target business does not execute such a waiver. However, CLAQ cannot assure you that they will be able to meet such obligation. Therefore, the per-share distribution from the Trust Account for our public stockholders may be less than $10.10 per share due to such claims.

Additionally, if CLAQ is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in CLAQ’s bankruptcy estate and subject to the claims of third parties with priority over the claims of its stockholders. To the extent any bankruptcy claims deplete the Trust Account, CLAQ may not be able to return $10.10 to our public stockholders.

Any distributions received by CLAQ stockholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, CLAQ was unable to pay its debts as they fell due in the ordinary course of business.

CLAQ’s Certificate of Incorporation provides that it will continue in existence only until the date that is 12 months from the closing of the IPO, or July 19, 2022, unless the time period to consummate an initial business combination has been extended to 18 months from the closing of the IPO, or January 19, 2023. If CLAQ is unable to consummate a transaction within the required time periods, upon notice from CLAQ, the trustee of the Trust Account will distribute the amount in its Trust Account to its public stockholders. Concurrently, CLAQ shall pay, or reserve for payment, from funds not held in trust, its liabilities and obligations, although CLAQ cannot assure you that there will be sufficient funds for such purpose.

•        repayment of an interest-free loan of $267,000 (as of June 30, 2022) by CleanTech Sponsor since the loan will become payable only after Closing of the Business Combination, or the date on which CLAQ determines that it is unable to effect a business combination.

•        CLAQ’s other Co-sponsor, CleanTech Investments, is an affiliate of Chardan, and CLAQ’s director, Mr. Jonas Grossman, is the Managing Partner and President of Chardan. If an initial business combination, such as the Business Combination, is not completed, Chardan will lose an aggregate of approximately $23.6 million (not including any extension loan which must be paid before July 19, 2022), comprised of the following:

•        approximately $14.5 million (based on the closing price of $10.07 per share of CLAQ common stock on the Nasdaq Stock Market as of June 29, 2022) of the 1,437,500 founder shares CleanTech Investment holds;

•        approximately $0.8 million (based on the closing price of $0.32 per Public Warrant on the Nasdaq Stock Market as of June 29, 2022) of the 2,391,667 Private Warrants CleanTech Investment holds;

•        a marketing fee of $6,037,500 for certain services pursuant to a Business Combination Marketing Agreement;

•        a placement fee of $2,118,000 (i.e., 6.0% of the PIPE Investment that is not sold to an affiliate of Chardan) for certain services pursuant to the Financial Advisory Agreement (pursuant to the Financial Advisory Agreement, Chardan also has a right of first refusal to act as a book-running manager with minimum economics of 15% for the first two public or private equity offerings by CLAQ or any successor or subsidiary of CLAQ);

•        repayment of an interest-free loan of $133,000 (as of June 30, 2022) by CleanTech Investments since the loan will become payable only after Closing of the Business Combination, or the date on which CLAQ determines that it is unable to effect a business combination; and

•        the $10,000 monthly administrative fee under the Administrative Support Agreement pursuant to which CLAQ may delay payment of the same until the consummation of a business combination. As of June 30, 2022, there is an accrued and unpaid balance of $113,333 owed to Chardan under the Administrative Support Agreement.

•        If an initial business combination, such as the Business Combination, is not completed, the Initial Stockholders will lose a combined aggregate amount of approximately $46.1 million (including the Co-sponsors’ loans and securities held based on the closing price of $10.07 per share of CLAQ common stock and $0.32 per Public Warrant on June 29, 2022), and the Initial Stockholders together with their affiliates (including Chardan) will lose a combined aggregate amount of approximately $54.4 million (including Chardan’s fees contingent upon the Closing of the Business Combination.)

•        If the proposed Business Combination is not completed, CLAQ’s Initial Stockholders will not have the potential ownership interest of approximately 6.8% (assuming no redemption) or 8.6% (assuming maximum redemption) in the combined company, assuming exercise and conversion of all securities.

•        As of the date of this proxy statement/prospectus, ATW is the only purchaser for the Debentures and associated Warrants in the Debt Financing. ATW is managed by ATW Partners Opportunities Management, LLC, which is an affiliate of Chardan, and our director, Mr. Jonas Grossman, is the Managing Partner and President of Chardan.

•        The exercise of CLAQ’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the transaction may result in a conflict of interest when determining whether such changes or waivers are appropriate and in our stockholders’ best interest.

•        If the Business Combination is completed, Nauticus will designate all members of the Combined Company’s Board of Directors, except for the Transocean Designee).

See “Proposal 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination” beginning on page 127 for additional information.

CLAQ and Nauticus have incurred and expect to incur significant costs associated with the Business Combination. Whether or not the Business Combination is completed, the incurrence of these costs will reduce the amount of cash available to be used for other corporate purposes by the Combined Company if the Business Combination is completed or by CLAQ if the Business Combination is not completed.

CLAQ and Nauticus expect to incur significant costs associated with the Business Combination. Whether or not the Business Combination is completed, CLAQ expects to incur approximately $1,400,000 in expenses for legal and accounting services (including an anticipated amount of $100,000 of accrued and unpaid administrative fees owed to Chardan under the Administrative Support Agreement). These expenses will reduce the amount of cash available to be used for other corporate purposes by the Combined Company if the Business Combination is completed or by CLAQ if the Business Combination is not completed. Of the estimated transaction costs, $0.3 million has already been incurred and reflected in the historical financial statements of CLAQ. If the Business Combination is completed, CLAQ estimates the transaction costs for CLAQ to consist of (i) $6.0 million pursuant to a Business Combination Marketing Agreement with Chardan, (ii) $1.0 million in legal costs; (iii) $0.7 million pursuant to letter agreements with Roth and Lake Street, and (iv) approximately $0.6 million of miscellaneous and estimated printing and accounting services; and for Nauticus to consist of (a) $7.6 million pursuant to an amended and restated financial advisory agreement with Coastal, (b) $2.1 million pursuant to a Financial Advisory Agreement with Chardan, representing 6.0% of the gross proceeds received from the PIPE Investment, (c) $2.0 million in legal costs, and (d) $1.8 million pursuant to a letter agreement dated March 23, 2022 with Cowen, in which Nauticus has agreed to pay Cowen an advisory fee upon closing of the Business Combination.

CLAQ will incur significant transaction costs in connection with transactions contemplated by the Merger Agreement.

CLAQ will incur significant transaction costs in connection with the Business Combination. If the Business Combination is not consummated, CLAQ may not have sufficient funds to seek an alternative business combination and may be forced to liquidate and dissolve.

The unaudited pro forma condensed combined and consolidated financial information included in this proxy statement/prospectus may not be indicative of what the Combined Company’s actual financial position or results of operations would have been.

The unaudited pro forma condensed combined and consolidated financial information in this proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what Combined Company’s actual financial position or results of operations would have been had the Business Combination been completed on the dates indicated. See the section titled “Unaudited Pro Forma Condensed Combined and Consolidated Financial Information” for more information.

In the event that a significant number of Common Stock are redeemed, our Common stock may become less liquid following the Business Combination.

If a significant number of Common Stock are redeemed, CLAQ may be left with a significantly smaller number of stockholders. As a result, trading in the shares of the Combined Company may be limited and your ability to sell your shares in the market could be adversely affected. The Combined Company intends to apply to list its shares on the Nasdaq Stock Market (“Nasdaq”), and Nasdaq may not list the common stock on its exchange, which could limit investors’ ability to make transactions in CLAQ’s securities and subject CLAQ to additional trading restrictions.

The Combined Company will be required to meet the initial listing requirements to be listed on the Nasdaq Stock Market. However, the Combined Company may be unable to maintain the listing of its securities in the future.

If the Combined Company fails to meet the continued listing requirements and Nasdaq delists its securities, CLAQ could face significant material adverse consequences, including:

•        a limited availability of market quotations for its securities;

•        a limited amount of news and analyst coverage for the Combined Company; and

•        a decreased ability to issue additional securities or obtain additional financing in the future.

CLAQ may waive one or more of the conditions to the Business Combination without resoliciting shareholder approval for the Business Combination.

CLAQ may agree to waive, in whole or in part, some of the conditions to its obligations to complete the Business Combination, to the extent permitted by applicable laws. The Board will evaluate the materiality of any waiver to determine whether amendment of this proxy statement/prospectus and resolicitation of proxies is warranted. In some instances, if the Board determines that a waiver is not sufficiently material to warrant resolicitation of stockholders, CLAQ has the discretion to complete the Business Combination without seeking further shareholder approval. For example, it is a condition to CLAQ’s obligations to close the Business Combination that there be no applicable law and no injunction or other order restraining or imposing any condition on the consummation of the Business Combination, however, if the Board determines that any such order or injunction is not material to the business of Nauticus, then the Board may elect to waive that condition without shareholder approval and close the Business Combination.

CLAQ’s stockholders will experience immediate dilution as a consequence of the issuance of common stock as consideration in the Business Combination (including the Earnout Shares), PIPE Investment and the Nauticus Convertible Notes Conversion. Having a minority share position may reduce the influence that CLAQ’s current stockholders have on the management of CLAQ.

It is anticipated that upon completion of the Business Combination and assuming no redemptions by CLAQ public stockholders, CLAQ’s public stockholders (other than the PIPE Investment investors) will retain an ownership interest of approximately 28.5% in the Combined Company, the PIPE Investment investors will own approximately 5.6% of the Combined Company, the Co-Sponsors, officers, directors and other holders of founder shares will retain an ownership interest of approximately 6.8% of the Combined Company, and the Nauticus stockholders will own approximately 59.1% (including the 7,500,000 Earnout Shares) of the Combined Company. As a result of the Merger, an aggregate of 4,850,999 shares of CLAQ Common Stock will be issued to the holders of Nauticus Convertible Notes.

The ownership percentage with respect to the Combined Company does not take into account (i) the redemption of any Public Common Stock by the CLAQ public stockholders or (ii) the issuance of any additional shares upon the closing of the Business Combination under the Incentive Award Plan. If the actual facts are different from these assumptions (which they are likely to be), the percentage ownership retained by the CLAQ stockholders will be different. See “Unaudited Pro Forma Condensed Combined and Consolidated Financial Information.”

Changes in applicable laws or regulations, or a failure to comply with any applicable laws and regulations, may adversely affect CLAQ’s business, including its ability to negotiate and complete its initial business combination and results of operations.

CLAQ is subject to the federal securities laws, the SEC rules and regulations and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly.

Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on CLAQ’s business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on CLAQ’s business, including its ability to negotiate and complete its initial business combination and results of operations.

On March 30, 2022, the SEC issued proposed rules relating to, among other items, enhancing disclosures in business combination transactions involving special purpose acquisition companies (“SPACs”) such as CLAQ, amending the scope of a safe harbor for financial projections, and increasing the potential liability of certain participants in proposed business combination transactions. These proposed rules, if adopted, whether in the form proposed or in revised form, may materially adversely affect CLAQ’s ability to negotiate and complete its initial business combination and may increase the costs and time related thereto.

Risks Related to Combined Company’s Common Stock

Because the Combined Company will become a public reporting company by means other than a traditional underwritten initial public offering, the Combined Company’s stockholders may face additional risks and uncertainties.

Because the Combined Company will become a public reporting company by means of consummating the Business Combination rather than by means of a traditional underwritten initial public offering, there is no independent third-party underwriter selling the shares of the Combined Company’s common stock, and, accordingly, the Combined Company’s stockholders will not have the benefit of an independent review and investigation of the type normally performed by an unaffiliated, independent underwriter in a public securities offering. Due diligence reviews typically include an independent investigation of the background of the company, any advisors and their respective affiliates, review of the offering documents and independent analysis of the plan of business and any underlying financial assumptions. Because there is no independent third-party underwriter selling the shares of the Combined Company’s common stock, you must rely on the information included in this proxy statement/prospectus. Although CLAQ performed a due diligence review and investigation of Nauticus in connection with the Business Combination, the lack of an independent due diligence review and investigation increases the risk of investment in the Combined Company because it may not have uncovered facts that would be important to a potential investor.

In addition, because the Combined Company will not become a public reporting company by means of a traditional underwritten initial public offering, security or industry analysts may not provide, or be less likely to provide, coverage of the Combined Company. Investment banks may also be less likely to agree to underwrite secondary offerings on behalf of the Combined Company than they might if the Combined Company became a public reporting company by means of a traditional underwritten initial public offering, because they may be less familiar with the Combined Company as a result of more limited coverage by analysts and the media. The failure to receive research coverage or support in the market for the Combined Company’s common stock could have an adverse effect on the Combined Company’s ability to develop a liquid market for the Combined Company’s common stock. See “— Risks Related to the Combined Company’s Common Stock — If securities or industry analysts do not publish research or reports about the Combined Company, or publish negative reports, the Combined Company’s stock price and trading volume could decline.”

The market price of the Combined Company’s common stock is likely to be highly volatile, and you may lose some or all of your investment.

Following the Business Combination, the market price of Combined Company’s common stock is likely to be highly volatile and may be subject to wide fluctuations in response to a variety of factors, including the following:

•        the impact of COVID-19 pandemic on Nauticus’ business;

•        the inability to obtain or maintain the listing of the Combined Company’s shares of common stock on Nasdaq;

•        the inability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, Nauticus’ ability to grow and manage growth profitably, and retain its key employees;

•        changes in applicable laws or regulations;

•        risks relating to the uncertainty of Nauticus’ projected financial information;

•        risks related to the organic and inorganic growth of Nauticus’ business and the timing of expected business milestones; and

•        the amount of redemption requests made by CLAQ’s stockholders.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors, as well as general economic, political, regulatory and market conditions, may negatively affect the market price of the Combined Company’s common stock, regardless of the Combined Company’s actual operating performance.

Volatility in the Combined Company’s share price could subject the Combined Company to securities class action litigation.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. If the Combined Company faces such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm its business.

If securities or industry analysts do not publish research or reports about the Combined Company, or publish negative reports, the Combined Company’s stock price and trading volume could decline.

The trading market for the Combined Company’s common stock will depend, in part, on the research and reports that securities or industry analysts publish about the Combined Company. The Combined Company does not have any control over these analysts. If the Combined Company’s financial performance fails to meet analyst estimates or one or more of the analysts who cover the Combined Company downgrade its common stock or change their opinion, the Combined Company’s stock price would likely decline. If one or more of these analysts cease coverage of the Combined Company or fail to regularly publish reports on the Combined Company, it could lose visibility in the financial markets, which could cause the Combined Company’s stock price or trading volume to decline.

Because the Combined Company does not anticipate paying any cash dividends in the foreseeable future, capital appreciation, if any, would be your sole source of gain.

The Combined Company currently anticipates that it will retain future earnings for the development, operation and expansion of its business and do not anticipate declaring or paying any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of the Combined Company’s shares of common stock would be your sole source of gain on an investment in such shares for the foreseeable future.

Future sales of shares of the Combined Company’s common stock may depress its stock price.

Sales of a substantial number of the Combined Company’s common stock in the public market after the closing of the Business Combination, or the perception that these sales might occur, could depress the market price of the Combined Company’s common stock and could impair its ability to raise capital through the sale of additional equity securities.

The Combined Company is an emerging growth company, and the Combined Company cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make its shares less attractive to investors.

After the completion of the Business Combination, the Combined Company will be an emerging growth company, as defined in the JOBS Act. For as long as the Combined Company continues to be an emerging growth company, it may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including exemption from compliance with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation 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. The Combined Company will remain an emerging growth company until the earlier of (1) the date (a) July 19, 2026, (b) in which the Combined Company has total annual gross revenue of at least $1.07 billion or (c) in which the Combined Company is deemed to be a large accelerated filer, which means the market value of shares of the Combined Company’s common stock that are held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which the Combined Company has issued more than $1.0 billion in non-convertible debt during the prior three-year period.

In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. The Combined Company has elected to use this extended transition period for complying with new or revised accounting standards and, therefore, the Combined Company will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Even after the Combined Company no longer qualifies as an emerging growth company, it may still qualify as a “smaller reporting company,” which would allow it to take advantage of many of the same exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements of Section 404 and reduced disclosure obligations regarding executive compensation in this proxy statement/prospectus and the Combined Company’s periodic reports and proxy statements.

Our stock price has fluctuated historically and may continue to fluctuate.

Our stock price can be volatile. Among the factors that may affect the volatility of our stock price are the following:

•        Speculation in the investment community or the press about, or actual changes in, our competitive position, organizational structure, executive team, operations, financial condition, financial reporting and results, expense discipline, strategic transactions, or progress on achieving expected benefits;

•        The announcement of new products, services, acquisitions, or dispositions by us or our competitors;

•        Increases or decreases in revenue or earnings, changes in earnings estimates by the investment community, and variations between estimated financial results and actual financial results; and

•        Sales of a substantial number of shares of our common stock by large shareholders.

THE MEETING

General

CLAQ is furnishing this proxy statement/prospectus to the CLAQ stockholders as part of the solicitation of proxies by the Board for use at the Meeting of CLAQ stockholders to be held on            , 2022 and at any adjournment or postponement thereof. This proxy statement/prospectus is first being furnished to our stockholders on or about             , 2022 in connection with the vote on the Proposals. This proxy statement/prospectus provides you with the information you need to know to be able to vote or instruct your vote to be cast at the Meeting.

Date, Time and Place

The Meeting will be held virtually at                         .m., Eastern Time, on            and conducted exclusively via live audio cast at            , or such other date, time and place to which such meeting may be adjourned or postponed, for the purposes set forth in the accompanying notice. There will not be a physical location for the Meeting, and you will not be able to attend the meeting in person. We are pleased to utilize the virtual stockholder meeting technology to provide ready access and cost savings for our stockholders and CLAQ. The virtual meeting format allows attendance from any location in the world. You will be able to attend, vote your shares, view the list of stockholders entitled to vote at the Meeting and submit questions during the Meeting via a live audio cast available at            .

Virtual Meeting Registration

To register for the virtual meeting, please follow these instructions as applicable to the nature of your ownership of our common stock.

If your shares are registered in your name with Continental and you wish to attend the online-only virtual meeting, go to            , enter the control number you received on your proxy card and click on the “Click here” to preregister for the online meeting link at the top of the page. Just prior to the start of the meeting you will need to log back into the meeting site using your control number. Pre-registration is recommended but is not required in order to participate in the virtual Meeting.

Beneficial stockholders who wish to participate in the online-only virtual meeting must obtain a legal proxy by contacting their account representative at the bank, broker, or other nominee that holds their shares and email a copy (a legible photograph is sufficient) of their legal proxy to            . Beneficial stockholders who email a valid legal proxy will be issued a meeting control number that will allow them to register to attend and participate in the online-only meeting. After contacting Continental a beneficial holder will receive an email prior to the meeting with a link and instructions for entering the virtual Meeting. Beneficial stockholders should contact Continental at least five business days prior to the meeting date.

Accessing the Virtual Meeting Audio Cast

You will need your control number for access. If you do not have your control number, contact Continental at the phone number or email address below. Beneficial investors who hold shares through a bank, broker or other intermediary, will need to contact them and obtain a legal proxy. Once you have your legal proxy, contact Continental to have a control number generated. Continental contact information is as follows: 917-            -             or email proxy@continentalstock.com.

Record Date; Who is Entitled to Vote

CLAQ has fixed the close of business on            , 2022, as the record date for determining those CLAQ stockholders entitled to notice of and to vote at the Meeting. As of the close of business on            , 2022, there were 21,562,500 shares of common stock issued and outstanding and entitled to vote, of which 17,250,000 are Public Common Stock, 4,312,500 are founder shares held by the Initial Stockholders. Each holder of shares of common stock is entitled to one vote per share on each Proposal. If your shares are held in “street name,” you should contact your broker, bank or other nominee to ensure that shares held beneficially by you are voted in accordance with your instructions.

In connection with our IPO, we entered into certain letter agreements pursuant to which the Initial Stockholders agreed to vote any shares of common stock owned by them in favor of our initial business combination (the “Letter Agreement”). The Initial Stockholders also entered into a certain support agreement with Nauticus, pursuant to which they agreed to, among other things, vote in favor of the Business Combination Proposal and the other Proposals (the “Sponsor Support Agreement”). As of the date of this proxy statement/prospectus, the Initial Stockholders hold approximately 20.0% of the outstanding common stock.

Quorum and Required Vote for Shareholder Proposals

A quorum of CLAQ stockholders is necessary to hold a valid meeting. A quorum will be present at the Meeting if a majority of the shares of common stock issued and outstanding is present in person by virtual attendance or represented by proxy and entitled to vote at the Meeting. Abstentions by virtual attendance and by proxy will count as present for the purposes of establishing a quorum but broker non-votes will not.

Approval of the Business Combination Proposal, the Bylaws Proposal, the Stock Plan Proposal, the Nasdaq Merger Proposal, the Nasdaq PIPE Proposal, and the Adjournment Proposal will each require the affirmative vote of the holders of a majority of the issued and outstanding shares of common stock present in person by virtual attendance or represented by proxy and entitled to vote at the Meeting or any adjournment thereof. Approval of the Charter Approval Proposal will require the approval of a majority of the issued and outstanding shares of common stock. Attending the Meeting either in person by virtual attendance or represented by proxy and abstaining from voting and a broker non-vote will have the same effect as voting against the Charter Approval Proposal. Approval of the Directors Proposal will require a plurality of the votes cast.

Along with the approval of the Charter Approval Proposal, the Bylaws Proposal, the Directors Proposal, the Stock Plan Proposal, the Nasdaq Merger Proposal, the Nasdaq PIPE Proposal and the approval of the Business Combination Proposal are conditions to the consummation of the Business Combination. If the Business Combination Proposal is not approved, the Business Combination will not take place. Approval of this Business Combination Proposal is also a condition to Proposal 2, Proposal 3, Proposals 4A-4E, Proposal 5, Proposal 6, Proposal 7 and Proposal 8. If the Charter Approval Proposal, the Bylaws Proposal, the Directors Proposal, the Stock Plan Proposal, the Nasdaq Merger Proposal or the Nasdaq PIPE Proposal are not approved, unless waived, this Business Combination Proposal will have no effect (even if approved by the requisite vote of our stockholders at the Meeting of any adjournment or postponement thereof) and the Business Combination will not occur.

Voting Your Shares

Each share of common stock that you own in your name entitles you to one vote on each Proposal for the Meeting. Your proxy card shows the number of shares of common stock that you own.

There are two ways to ensure that your shares of common stock are voted at the Meeting:

•        You can vote your shares by signing, dating and returning the enclosed proxy card in the pre-paid postage envelope provided. If you submit your proxy card, your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares will be voted, as recommended by our board. Our Board recommends voting “FOR” each of the Proposals. If you hold your shares of common stock in “street name,” which means your shares are held of record by a broker, bank or other nominee, you should follow the instructions provided to you by your broker, bank or nominee to ensure that the votes related to the shares you beneficially own are properly represented and voted at the Meeting.

•        You can participate in the virtual Meeting and vote during the Meeting even if you have previously voted by submitting a proxy as described above. However, if your shares are held in the name of your broker, bank or another nominee, you must get a proxy from the broker, bank or other nominee. That is the only way CLAQ can be sure that the broker, bank or nominee has not already voted your shares.

IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF THE BUSINESS COMBINATION PROPOSAL (AS WELL AS THE OTHER PROPOSALS).

Revoking Your Proxy

If you give a proxy, you may revoke it at any time before it is exercised by doing any one of the following:

•        you may send another proxy card with a later date;

•        if you are a record holder, you may notify our proxy solicitor, Advantage Proxy, in writing before the Meeting that you have revoked your proxy; or

•        you may participate in the virtual Meeting, revoke your proxy, and vote during the virtual Meeting, as indicated above.

Who Can Answer Your Questions About Voting Your Shares

If you have any questions about how to vote or direct a vote in respect of your shares of common stock, you may contact Advantage Proxy, our proxy solicitor as follows:

ADVANTAGE PROXY
P.O. Box 13581
Des Moines, WA 98198
Toll Free: (877) 870-8565
Collect: (206) 870-8565
Email: ksmith@advantageproxy.com

No Additional Matters May Be Presented at the Meeting

This Meeting has been called only to consider the approval of the Business Combination Proposal, the Charter Approval Proposal, the Bylaws Proposal, the Governance Proposals, the Directors Proposal, the Stock Plan Proposal, the Nasdaq Merger Proposal, the Nasdaq PIPE Proposal, and the Adjournment Proposal. Under our Certificate of Incorporation, other than procedural matters incident to the conduct of the Meeting, no other matters may be considered at the Meeting if they are not included in the notice of the Meeting.

Approval of the Business Combination Proposal, the Bylaws Proposal, the Governance Proposals, the Directors Proposal, the Stock Plan Proposal, the Nasdaq Merger Proposal, the Nasdaq PIPE Proposal, and the Adjournment Proposal will each require the affirmative vote of the holders of a majority of the issued and outstanding shares of common stock present in person by virtual attendance or represented by proxy and entitled to vote at the Meeting or any adjournment thereof. Approval of the Charter Approval Proposal will require the approval of a majority of the issued and outstanding shares of common stock.

Redemption Rights

Pursuant to our Certificate of Incorporation, a holder of Common Stock may demand that CLAQ redeem such Common Stock for cash in connection with a business combination. You may not elect to redeem your Common Stock prior to the completion of a business combination.

If you are a public stockholder and you seek to have your shares redeemed, you must submit your request in writing that we redeem your Public Common Stock for cash no later than            a.m./p.m.., Eastern Time on            , 2022 (at least two business days before the Meeting). The request must be signed by the applicable stockholder in order to validly request redemption. A stockholder is not required to submit a proxy card or vote in order to validly exercise redemption rights. The request must identify the holder of the Common Stock to be redeemed and must be sent to Continental at the following address:

Continental Stock Transfer & Trust Company

1 State Street, 30th floor
New York, NY 10004
Attention:            
Email:            

You must tender the Common Stock for which you are electing redemption at least two business days before the Meeting by either:

•        Delivering certificates representing the Common Stock to Continental, or

•        Delivering the Common Stock electronically through the DWAC system.

Any corrected or changed written demand of redemption rights must be received by Continental at least two business days before the Meeting. No demand for redemption will be honored unless the holder’s shares have been delivered (either physically or electronically) to Continental at least two business days prior to the vote at the Meeting.

Public stockholders may seek to have their Common Stock redeemed regardless of whether they vote for or against the Business Combination and whether or not they are holders of Common Stock as of the Record Date. Any public stockholder who holds Common Stock of CLAQ on or before            , 2022 (at least two business days before the Meeting) will have the right to demand that his, her or its Common Stock be redeemed for a pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid, at the consummation of the Business Combination.

In connection with tendering your shares for redemption, you must elect either to physically tender your certificates to Continental or deliver your Common Stock to Continental electronically using DTC’s DWAC (Deposit/Withdrawal At Custodian) System, in each case, at least two business days before the Meeting.

If you wish to tender through the DWAC system, please contact your broker and request delivery of your Common Stock through the DWAC system. Delivering Common Stock physically may take significantly longer. In order to obtain a physical certificate, a stockholder’s broker and/or clearing broker, DTC, and Continental will need to act together to facilitate this request. It is CLAQ’s understanding that stockholders should generally allot at least two weeks to obtain physical certificates from Continental. CLAQ does not have any control over this process or over the brokers or DTC, and it may take longer than two weeks to obtain a physical certificate. Stockholders who request physical certificates and wish to redeem may be unable to meet the deadline for tendering their Common Stock before exercising their redemption rights and thus will be unable to redeem their Common Stock.

In the event that a stockholder tenders its Common Stock and decides prior to the consummation of the Business Combination that it does not want to redeem its Common Stock, the stockholder may withdraw the tender. In the event that a stockholder tenders Common Stock and the Business Combination is not completed, these Common Stock will not be redeemed for cash and the physical certificates representing these Common Stock will be returned to the stockholder promptly following the determination that the Business Combination will not be consummated. CLAQ anticipates that a stockholder who tenders Common Stock for redemption in connection with the vote to approve the Business Combination would receive payment of the redemption price for such Common Stock soon after the completion of the Business Combination.

If properly demanded by CLAQ’s public stockholders, CLAQ will redeem each Common Stock into a pro rata portion of the funds available in the Trust Account, calculated as of two business days prior to the anticipated consummation of the Business Combination. As of            , 2022, this would amount to approximately $10.10 per share. If you exercise your redemption rights, you will be exchanging your Common Stock for cash and will no longer own the Common Stock.

Notwithstanding the foregoing, a holder of the Common Stock, together with any affiliate of his or her or any other person with whom he or she is acting in concert or as a “group” (as defined in Section 13(d)-(3) of the Exchange Act) will be restricted from seeking redemption rights with respect to more than 20% of the Common Stock.

If too many public stockholders exercise their redemption rights, we may not be able to meet certain closing conditions, and as a result, would not be able to proceed with the Business Combination.

Appraisal Rights

Appraisal rights are not available to security holders of CLAQ in connection with the proposed Business Combination.

Proxies and Proxy Solicitation Costs

CLAQ is soliciting proxies on behalf of the Board. This solicitation is being made by mail but also may be made by telephone or in person. CLAQ and its directors, officers and employees may also solicit proxies in person, by telephone or by other electronic means. Any solicitation made and information provided in such a solicitation will be consistent with the written proxy statement/prospectus and proxy card. CLAQ will bear the cost of solicitation. Advantage Proxy, a proxy solicitation firm that CLAQ has engaged to assist it in soliciting proxies, will be paid a fixed fee of approximately $10,000 and be reimbursed out-of-pocket expenses.

CLAQ will ask banks, brokers and other institutions, nominees and fiduciaries to forward its proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. CLAQ will reimburse them for their reasonable expenses.

PROPOSAL 1 — THE BUSINESS COMBINATION PROPOSAL

We are asking our stockholders to adopt the Merger Agreement and approve the Business Combination and the other transactions contemplated thereby. Our stockholders should read carefully this proxy statement/prospectus in its entirety, including the subsection below titled “The Merger Agreement,” for more detailed information concerning the Business Combination and the terms and conditions of the Merger Agreement. We also urge our stockholders to read carefully the Merger Agreement in its entirety before voting on this Proposal. A copy of the Merger Agreement is attached as Annex A to this proxy statement/prospectus.

General

On December 16, 2021, CleanTech Acquisition Corp., a Delaware corporation (“CleanTech” or “CLAQ”), entered into an Agreement and Plan of Merger (the “Merger Agreement,” and together with the other agreements and transactions contemplated by the Merger Agreement, the “Business Combination”) with CleanTech Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of CleanTech (“Merger Sub”), and Nauticus Robotics, Inc., a Texas corporation (“Nauticus” or “Nauticus Robotics”). Pursuant to the terms of the Merger Agreement, a business combination between CleanTech and Nauticus will be effected through the merger of Merger Sub with and into Nauticus, with Nauticus surviving the merger as a wholly owned subsidiary of CleanTech (the “Merger”). The Board of Directors of CleanTech (the “Board”) has unanimously (i) approved and declared advisable the Merger Agreement, the Merger and the other transactions contemplated thereby and (ii) resolved to recommend approval of the Merger Agreement and related matters by the stockholders of CleanTech. On January 30, 2022, the Merger Agreement was amended to, among other things, (i) correct certain defined terms in the Merger Agreement; and (ii) include the cash available from the Debt Financing in meeting the “Minimum Cash Condition” defined in the Merger Agreement. On June 6, 2022, the Merger Agreement was further amended to increase the aggregate number of shares of the Combined Company’s Common stock to be reserved for issuance pursuant to the Incentive Plan (defined below) from 5% to 10% of the fully diluted outstanding shares of its Common Stock after Closing, which share reserve shall be automatically increased on an annual basis by 3% of the total number of Common Stock outstanding as provided under the Incentive Plan.

The Merger Agreement

The following is a summary of the material terms of the Merger Agreement. The following summary does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, a copy of which is attached as Annex A to this proxy statement/prospectus.

The Merger Agreement contains representations and warranties that CLAQ and Merger Sub, on the one hand, and Nauticus, on the other hand, have made to one another as of specific dates. The assertions embodied in the representations and warranties are qualified by information in confidential disclosure schedules exchanged by the parties to the Merger Agreement. Some of these schedules contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Merger Agreement. You should not rely on the representations and warranties described below as current characterizations of factual information about CLAQ or Nauticus, because they were made as of specific dates, may be intended merely as a risk allocation mechanism between CLAQ and Merger Sub, and Nauticus and are modified by the disclosure schedules.

The Merger Consideration

The Business Combination implies a $561 million post-closing equity value and a current equity value of Nauticus at $300 million. Prior to the Closing, Nauticus will (i) effect the Nauticus Preferred Stock Conversion, (ii) effect the Nauticus Convertible Notes Conversion, and (iii) convert each share of Nauticus Common Stock (including shares of Nauticus Common Stock outstanding as a result of the Nauticus Preferred Stock Conversion and Nauticus Convertible Notes Conversion, but excluding shares of the holders who perfect rights of appraisal under Delaware law) into the right to receive (a) the Per Share Merger Consideration and (b) Earnout Shares. As a result of these transactions, each outstanding share of Nauticus Common Stock will have a value at the time of the Business Combination of $10.00 (based on the $300 million equity value of Nauticus).

In addition, in connection with the Closing, CLAQ will issue the Earn-Out Shares to the former holders of Nauticus Common Stock and such holders will deliver the Earnout-Out Shares to the Escrow Agent. The release of the Earn-Out Shares to the former holders of Nauticus Common Stock will be subject to restrictions linked to milestones (based on the achievement of certain target prices of CleanTech Common Stock following the Closing) as further described in the section entitled “Proposal 1 — The Business Combination Proposal — The Merger

Agreement — Treatment of Nauticus Securities — Earn-Out Shares.” In the event such milestones are not met, all of the Earn-Out Shares will be automatically released to CleanTech for cancellation and the former holders of Nauticus Common Stock shall not have any right to receive such Earnout Shares or any benefit therefrom.

Treatment of Nauticus Securities

Preferred Stock.    Immediately prior to the Effective Time, each share of Nauticus Preferred Stock that is issued and outstanding immediately prior to such time shall automatically convert into shares of Nauticus Common stock, par value $0.01 per share (the “Nauticus Common Stock”), in accordance with its Certificate of Incorporation (collectively, the “Nauticus Preferred Stock Conversion”). As a result of the Merger, an aggregate of 15,062,524 shares of CLAQ Common Stock will be issued to the holders of Nauticus Preferred Stock.

Convertible Notes.    Immediately prior to the Effective Time, each of (i) that certain Unsecured Convertible Promissory Note, dated June 19, 2021, by and between Goradia Capital, LLC and Nauticus, as amended on December 16, 2021, (ii) that certain Unsecured Convertible Promissory Note, August 3, 2021, by and between Material Impact Fund II, L.P. and Nauticus, as amended on December 16, 2021, (iii) that certain Unsecured Convertible Promissory Note, dated October 22, 2021, by and between In-Q-Tel, Inc. and Nauticus, as amended on December 16, 2021, (iv) that certain Unsecured Convertible Promissory Note, dated July 28, 2020, by and between Schlumberger Technology Corporation and Nauticus, as amended on December 16, 2021 and (v) that certain Unsecured Convertible Promissory Note, dated December 7, 2020, by and between Transocean Inc. and Nauticus, as amended on December 16, 2021 (each, a “Nauticus Convertible Note” and collectively, the “Nauticus Convertible Notes”) shall automatically convert into shares of Nauticus Common Stock in accordance with the terms of each such Nauticus Convertible Note (collectively, the “Nauticus Convertible Notes Conversion”). As a result of the Merger, an aggregate of 5,299,543 shares of CLAQ Common Stock will be issued to the holders of Nauticus Convertible Notes. Please see “Risk Factors — CLAQ’s stockholders will experience immediate dilution as a consequence of the issuance of common stock as consideration in the Business Combination, PIPE Investment and the Nauticus Convertible Notes Conversion. Having a minority share position may reduce the influence that CLAQ’s current stockholders have on the management of CLAQ” for dilution considerations.

Common Stock.    At the Effective Time, following the Nauticus Preferred Stock Conversion and Nauticus Convertible Notes Conversion, each share of Nauticus Common Stock (including shares of Nauticus Common Stock outstanding as a result of the Nauticus Preferred Stock Conversion and Nauticus Convertible Notes Conversion, but excluding shares of the holders of which perfect rights of appraisal under Delaware law) will be converted into the right to receive the Per Share Merger Consideration and the Earnout Shares (as defined below). As a result of the Merger, an aggregate of 9,669,216 shares of CLAQ Common Stock will be issued to the holders of Nauticus Common Stock (not including the Earnout Shares).