reAlpha Tech Corp. 10-Q

ITEM 1A. RISK FACTORS Factors that could cause our actual results to differ materially from those in this report include the risk factors described under the “Risk Factors” section of our final prospectus dated October 23, 2023, filed with the SEC pursuant to Rule 424(b)(4) (the “Prospectus”) under the Securities Act, and the risk factors included in the reports and other documents we filed with the SEC subsequent to that date. There are no material changes from the risk factors set forth in the Prospectus or such prior filings, except as set forth below. The market price and trading volume of our common stock may continue to be highly volatile, which could lead to a loss of all or part of a stockholder’s investment. The market price of our common stock has fluctuated widely since our common stock began trading on October 23, 2023 on Nasdaq. Further, the stock markets generally have experienced, and will probably continue to experience, extreme price and volume fluctuations that have affected the market price of the shares of many small-cap companies. These fluctuations have often been unrelated to the operating results of such companies and in recent times have been exacerbated by investors’ concerns stemming from the COVID-19 pandemic, geopolitical issues and changes in macroeconomic conditions. Factors that may affect the volatility of our stock price include the following: ● anticipated or actual fluctuations in our quarterly or annual operating results; ● fluctuations in interest rates; ● our success, or lack of success, in developing and marketing our products and services; ● terrorist attacks, natural disasters and the effects of climate change, regional and global conflicts, sanctions, laws and regulations that prohibit or limit operations in certain jurisdictions, public health crises (such as the COVID-19 pandemic) or other such events impacting countries where we have operations; ● changes in macroeconomic conditions, including inflationary pressures; ● changes in financial estimates by us or of securities or industry analysts; ● the issuance of new or updated research reports by securities or industry analysts ● the announcement of new products, services, or technological innovations by us or our competitors; ● the announcement of new customers, partners or suppliers; ● the ability to collect our outstanding accounts receivable; ● changes in our executive leadership; ● regulatory developments in our industry affecting us, our customers or our competitors; ● competition; ● actual or purported “short squeeze” trading activity; and ● the sale or attempted sale of a large amount of common stock, including sales of common stock following exercises of outstanding warrants. 33 In addition, the market price and trading volume of our common stock has, since our listing on Nasdaq, and may continue to exhibit, extreme volatility, including within a single trading day. Such volatility could cause purchasers of our common stock to incur substantial losses. For example, on October 23, 2023, the day we began trading on Nasdaq, the trading price of our common stock ranged from an intra-day high of $575.41 to an intra-day low of $23.01, on trading volume of approximately 32.2 thousand shares, and on December 14, 2023, the closing price of our common stock was $2.28, and the trading price of our common stock ranged from an intra-day high of $2.50 to an intra-day low of $2.18, on trading volume of approximately 435,572 shares. With respect to these such instances of trading volatility, including on October 23, 2023, we are not aware of any material changes in our financial condition or results of operations that would explain such price volatility or trading volume, which we believe reflect market and trading dynamics unrelated to our operating business or prospects and outside of our control. We are thus unable to predict when such instances of trading volatility will occur or how long such dynamics may last. Under these circumstances, we would caution you against investing in our common stock unless you are prepared to incur the risk of incurring substantial losses. A proportion of our common stock may be traded by short sellers which may put pressure on the supply and demand for our common stock, creating further price volatility. In particular, a possible “short squeeze” due to a sudden increase in demand of our common stock that largely exceeds supply may lead to sudden extreme price volatility in our common stock. Investors may purchase our common stock to hedge existing exposure in our common stock or to speculate on the price of our common stock. Speculation on the price of our common stock may involve long and short exposures. To the extent aggregate short exposure exceeds the number of common stock available for purchase in the open market, investors with short exposure may have to pay a premium to repurchase our common stock for delivery to lenders of our common stock. Those repurchases may in turn, dramatically increase the price of our common stock until investors with short exposure are able to purchase additional common stock to cover their short position. This is often referred to as a “short squeeze.” Following such a short squeeze, once investors purchase the shares necessary to cover their short position, the price of our common stock may rapidly decline. A short squeeze could lead to volatile price movements in our shares that are not directly correlated to the performance or prospects of our company and could cause purchasers of our common stock to incur substantial losses. Further, stockholders may institute securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business. The Common Warrants contain “full ratchet” anti-dilution provisions, which may result in a greater number of common stock issued upon exercise of the Common Warrants than if the Common Warrants were exercised at the exercise price in effect at the time of this offering. The Common Warrants issued in connection with our recent public offering of securities (see “Recent Developments – Follow-On Offering” section above) contain “full ratchet” anti-dilution provisions. If in the future, while any of the Common Warrants are outstanding, we issue securities at an effective purchase price per common stock that is less than the applicable exercise price of the Common Warrants as then in effect, we will be required, subject to certain limitations and adjustments as provided in the Common Warrants, to further reduce the relevant exercise price, subject to a floor price of $1.44, which will result in a greater number of common stock being issuable upon the exercise of the Common Warrants, which in turn will have a greater dilutive effect on our stockholders. The potential for such additional issuances may depress the price of common stock regardless of our business performance. We may find it more difficult to raise additional equity capital while any of the Common Warrants are outstanding. 34 Price protection provisions attached to our GEM Warrants issued on October 23, 2023, reduced the amount of capital we will receive upon exercise of such GEM Warrants and may also result in dilution to our stockholders. On October 23, 2023, in connection with our direct listing on Nasdaq, we issued five-year warrants to purchase up to 1,700,884 shares of our common stock, at an exercise price of $406.67 per share, to GEM Yield Bahamas Limited in accordance with that certain Share Purchase Agreement (the “GEM Agreement”), dated December 1, 2022, between us and GEM (as defined above) (the “GEM Warrants”). Pursuant to the terms of the GEM Warrants, the exercise price of such warrants was reset to $371.90 (the “Adjusted Exercise Price”) on the date of the closing of our recent public offering and shall be further subject to adjustment as provided in the GEM Warrants. The exercise price of the GEM Warrants is further subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock; upon issuance of additional common stock or common stock equivalents, as determined by a formula set forth in the GEM Warrants; and upon the anniversary of the GEM Warrants’ issuance. Holders of GEM Warrants are entitled to exercise their GEM Warrants at the Adjusted Exercise Price. We may incur penalties under the Registration Rights Agreement, which may materially affect our results of operations . In connection with the GEM Agreement, we entered into a Registration Rights Agreement with GEM on December 1, 2022 (the “Registration Rights Agreement”). The Registration Rights Agreement provides that the Company has to file a registration statement for the resale of the shares of common stock issued to GEM under the GEM Agreement (the “GEM Registration Statement”) on the 30 th calendar day after the Listing Date (as defined above) (the “Filing Deadline”). In connection with our recent public offering, we entered into a Securities Purchase Agreement on November 21, 2023, between us and the investors signatory thereto, pursuant to which, we cannot file publicly the GEM Registration Statement for a period of 14 days after the closing date of this offering. In accordance with the Registration Rights Agreement, we may be subject to a penalty of $10,000 for each day following the Filing Deadline until the GEM Registration Statement has been filed with the Securities and Exchange Commission. Incurring these penalties may adversely affect our business, results of operations and financial condition and limit cash available for other business purposes in order to comply with the Registration Rights Agreement. We may not obtain the necessary regulatory approvals or satisfy all of the closing conditions to complete the Acquisitions. The completion of the Acquisitions (as defined above) is subject to satisfaction or waiver of certain closing conditions set out in the Purchase Agreements (as defined above), which with respect to the Second Purchase Agreement (as defined above), includes the receipt of regulatory approval from the Department of Industries of Nepal for the transactions contemplated by the Second Purchase Agreement. Furthermore, the closing of the First Acquisition is contingent upon the satisfaction or waiver of all of the closing conditions set out in the Second Purchase Agreement. There can be no assurance that the Acquisitions will be completed as described, and whether we will obtain the required regulatory approval from the Department of Industries of Nepal. In the event we do not complete the Acquisitions, we will have incurred significant amount of professional and legal fees and expenses without adding any value or benefit to us or our stockholders. 35 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS There are no transactions that have not been previously included in a Current Report on Form 8-K. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. MINE SAFETY DISCLOSURES Not applicable.