Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
There have been no material
changes to our risk factors since those disclosed in “Part I, Item 1A. Risk Factors” of our Form 10-K, except as set forth
below.
We have a history
of operating losses, and we may not be able to generate sufficient revenue to achieve and sustain profitability.
We have not achieved profitability and have incurred losses since inception.
For the quarter ended March 31, 2025, we recorded a net loss of $2,850,351. For the year ended December 31, 2024, we recorded a net loss
of $26,023,028, which included a loss of $18,339,635 from discontinued operations related to our former rental business and operations
of our subsidiary, Roost Enterprises, Inc., and a loss of $7,462,809 from continuing operations. As of March 31, 2025, we had an accumulated
deficit of $41,110,855 and outstanding indebtedness of $5,949,708. While we have experienced some revenue growth over recent periods,
we may not be able to sustain or increase our growth or achieve profitability in the future. We intend to continue to invest diligently
in sales and marketing efforts. In addition, we expect to incur significant additional legal, accounting, and other expenses related to
our being a public company as compared to when we were a private company. While our revenue has grown since our inception, if our revenue
declines or fails to grow at a rate faster than these increases in our operating expenses, we will not be able to achieve and maintain
profitability in future periods. As a result, we may continue to generate losses. Additionally, we may encounter unforeseen operating
expenses, difficulties, complications, delays, and other unknown factors that may result in losses in future periods. If these losses
exceed our expectations or our revenue growth expectations are not met in future periods, our financial performance will be harmed.
Our ongoing disputes
with GYBL may be costly, time consuming and, if adversely determined against us, could result in a significant downward adjustment of
the GEM Warrants’ exercise price, and potentially other penalties and expenses, which could have a material adverse effect on our
financial position and business operations.
On November 1, 2024, we filed a lawsuit against GYBL in the Court (as
defined above), pursuant to which we asserted two causes of action: (i) rescission of the GEM Warrants issued to GYBL pursuant to Section
29(b) of the Exchange Act due to GYBL’s underlying violation of Section 15(a) of the Exchange Act for effecting
the GEM Warrants as an unregistered dealer, and (ii) in the alternative, a declaratory judgment that the exercise price adjustment calculation
of the GEM Warrants is governed by the terms provided in the GEM Warrants, rather than the terms of the GEM Agreement. Following a motion
to dismiss filed by GYBL on January 17, 2025, the Court granted such motion to dismiss on March 14, 2025. On April 15, 2025, we
filed an appeal of the Court’s decision dismissing our case to the Second Circuit (as defined above). The briefing schedule at the
Second Circuit is being held in abeyance in order to allow two previously filed appeals, filed by two other public companies on identical
issues against other similar investors, be resolved first. However, if and when the appellate briefing moves forward, there is no assurance
that it will be successful.
Additionally,
following the Court’s grant of GYBL’s motion to dismiss our lawsuit, GYBL filed a separate lawsuit against us, in which GYBL
is asserting two causes of action against us: (1) breach of the terms of the GEM Warrants, and (2) declaratory relief concerning the validity
and enforceability of the GEM Warrants. In addition to the declaratory relief, GYBL is seeking monetary damages in an amount to be determined
at trial, specific performance of the GEM Warrants and attorneys’ fees and litigation costs.
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Given
the ongoing disputes with GYBL, including our pending appeal with the United States Court of Appeals for the Second Circuit and GYBL’s
lawsuit against us, the exercise price of the GEM Warrants have not been adjusted pursuant to the GEM Warrant’s terms while these
disputes are pending, and, to the extent any shares of common stock are sold pursuant to an equity offering, for instance, at a price
per share that is below the then-current exercise price of the GEM Warrants, we do not plan to adjust the exercise price of the GEM
Warrants pending resolution of such disputes. A final adverse ruling against us in pending lawsuits and any subsequent appeals, or in
any other claim or counterclaim, as applicable, sought by GYBL, could lead to a significant downward adjustment to the current exercise
price of the GEM Warrants, additional expenses incurred related to the lawsuits during the ongoing disputes, including, but
not limited to, attorney’s fees, and any other remedies the court may deem just.
Further,
any lawsuit and subsequent appeals may be expensive, may divert management’s time away from our operations, and may affect the availability
and premiums of our liability insurance coverage, regardless of whether our claims are meritorious, or ultimately lead to a judgment against
us. We cannot assure you that we will be able to be successful in lawsuits, or any subsequent appeal, against GYBL or resolve any current
or future litigation matters, in which case those litigation matters, including the disputes with GYBL, could have a material and adverse
effect on our business, financial condition, operating results and cash flows.
We expect our business
model and pricing models to continue to evolve.
Our
business model has a limited track record, and as we continue growing our business and operations, we may continue to experiment with
different pricing models and introduce new offerings and services. We expect that the services and technology offerings associated with
our business model, including the reAlpha platform, will continue to rapidly evolve. Thus, in order to stay current with the industry,
we may need to modify our offerings to remain relevant. Further, we have not yet made a final determination regarding how we will charge
clients and how certain incentives we offer through the reAlpha platform, such as commission refunds, for example, will be applied to
customers utilizing our offerings and the reAlpha platform, as applicable. We cannot guarantee we will be able to produce commercially
successful offerings or develop a pricing model for such offerings that is acceptable to our customers and enable us to operate profitably.
We cannot offer any assurance that modifications we make to our offerings or business model will be successful or will not harm our business.
If the changes we make are not successful, or if we fail to make appropriate changes, it would have a material adverse effect on our business,
prospects or operations and potentially on our ability to continue as a going concern.
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.