Item 1A. Risk Factors
Item
1A. Risk Factors
Any
investment in our securities involves a high degree of risk. You should carefully consider the risks described below as well as other
information provided to you in this document, including information in the section of this document entitled “Cautionary Note Regarding
Forward Looking Statements.”
Our
business, financial condition or operating results could be materially adversely affected by any of these risks. In such case, the trading
price of our common stock could decline, and our stockholders may lose all or part of their investment in our securities.
39
Risks
Related to Our Business
We
will require substantial additional capital to support our operations and growth plans, and such capital may not be available on terms
acceptable to us, if at all. This could hamper our growth and adversely affect our business.
Revenues
generated from our operations are not presently sufficient to sustain our operations and our current liabilities substantially exceeded
our current assets as of December 31, 2024. Therefore, we will need to raise additional capital in the future to continue our operations.
We
anticipate that our principal sources of liquidity will only be sufficient to fund our activities through June 30, 2025. In order to
have sufficient cash to fund our operations beyond June 30, 2025, we will need to raise additional equity or debt capital.
There
can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms
that are acceptable to us. We will be required to pursue sources of additional capital through various means, including debt or equity
financings. Future financings through equity investments are likely to be dilutive to existing stockholders. Also, the terms of securities
we may issue in future capital transactions may be more favorable for new investors. Newly issued securities may include preferences,
superior voting rights, the issuance of warrants or other derivative securities, and the issuances of incentive awards under equity employee
incentive plans, which may have additional dilutive effects. Further, we may incur substantial costs in pursuing future capital and/or
financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may
also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants,
which will adversely impact our financial condition. Our ability to obtain needed financing may be impaired by such factors as the capital
markets and our history of losses, which could impact the availability or cost of future financings. If the amount of capital we are
able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs,
even to the extent that we reduce our operations accordingly, we may be required to curtail or cease operations.
Uncertain
geopolitical conditions could adversely affect our results of operations.
Uncertain
geopolitical conditions, including the war in Israel and invasion of Ukraine, sanctions, and other potential impacts on this region’s
economic environment and currencies, may cause demand for our products and services to be volatile, cause abrupt changes in our customers’
buying patterns, and interrupt our ability to supply products or limit customers’ access to financial resources and ability to
satisfy obligations to us. Specifically, terrorist attacks, the outbreak of war, or the existence of international hostilities could
damage the world economy, adversely affect the availability of and demand for crude oil and petroleum products and adversely affect both
the price of our fuel and our ability to obtain fuel.
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Operating
and litigation risks may not be covered by insurance.
Our
operations are subject to all of the operating hazards and risks normally incidental to handling, storing, transporting and otherwise
providing combustible liquids such as gasoline for use by consumers. These risks could result in substantial losses due to personal injury
and/or loss of life, and severe damage to and destruction of property and equipment arising from explosions and other catastrophic events,
including acts of terrorism. Additionally, environmental contamination could result in future legal proceedings. There can be no assurance
that our insurance coverage will be adequate to protect us from all material expenses related to pending and future claims or that such
levels of insurance would be available in the future at economical prices. Moreover, defense and settlement costs may be substantial,
even with respect to claims and investigations that have no merit. If we cannot resolve these matters favorably, our business, financial
condition, results of operations and future prospects may be materially adversely affected.
Future
climate change laws and regulations and the market response to these changes may negatively impact our operations.
Increased
regulation of greenhouse (GHG) emissions, from products such as petroleum and diesel, could impose significant additional costs on us,
our suppliers, and our customers. Some states have adopted laws and regulations regulating the emission of GHGs for some industry sectors.
Mandatory reporting by our customers and suppliers could have an effect on our operations or financial condition.
The
adoption of additional federal or state climate change legislation or regulatory programs to reduce emissions of GHGs could also require
us or our suppliers to incur increased capital and operating costs, with resulting impact on product price and demand. The impact of
new legislation and regulations will depend on a number of factors, including (i) which industry sectors would be impacted, (ii) the
timing of required compliance, (iii) the overall GHG emissions cap level, (iv) the allocation of emission allowances to specific sources,
and (v) the costs and opportunities associated with compliance. At this time, we cannot predict the effect that climate change regulation
may have on our business, financial condition or operations in the future.
Our
auditors have included an explanatory paragraph in their opinion regarding our ability to continue as a going concern. If we are unable
to continue as a going concern, our securities will have little or no value.
M&K
CPA’s, PLLC, our independent registered public accounting firm for the fiscal year ended December 31, 2024, has included an explanatory
paragraph in their opinion that accompanies our audited consolidated financial statements as of and for the year ended December 31, 2024,
indicating that our current liquidity position raises substantial doubt about our ability to continue as a going concern. If we are unable
to improve our liquidity position, we may not be able to continue as a going concern.
We
anticipate that we will continue to generate operating losses and use cash in operations through the foreseeable future. As further set
forth above, we anticipate that we will need significant additional capital by June 30, 2025, or we may be required to curtail or cease
operations.
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If
we are unable to protect our information technology systems against service interruption, misappropriation of data, or breaches of security
resulting from cyber security attacks or other events, or we encounter other unforeseen difficulties in the operation of our information
technology systems, our operations could be disrupted, our business and reputation may suffer, and our internal controls could be adversely
affected.
In
the ordinary course of business, we rely on information technology systems, including the Internet and third-party hosted services, to
support a variety of business processes and activities and to store sensitive data, including (i) intellectual property, (ii) our proprietary
business information and that of our suppliers and business partners, (iii) personally identifiable information of our customers and
employees, and (iv) data with respect to invoicing and the collection of payments, accounting, procurement, and supply chain activities.
In addition, we rely on our information technology systems to process financial information and results of operations for internal reporting
purposes and to comply with financial reporting, legal, and tax requirements. Despite our security measures, our information technology
systems may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, sabotage, or other disruptions. A loss
of our information technology systems, or temporary interruptions in the operation of our information technology systems, misappropriation
of data, or breaches of security could have a material adverse effect on our business, financial condition, results of operations, and
reputation.
Moreover,
the efficient execution of our business is dependent upon the proper functioning of our internal systems. Any significant failure or
malfunction of this information technology system may result in disruptions of our operations. Our results of operations could be adversely
affected if we encounter unforeseen problems with respect to the operation of this system.
High
fuel prices can lead to customer conservation and attrition, resulting in reduced demand for our product.
Prices
for fuel are subject to volatile fluctuations in response to changes in supply and other market conditions. During periods of high fuel
costs our prices generally increase. High prices can lead to customer conservation and attrition, resulting in reduced demand for our
product.
Low
fuel prices may also result in less demand for our product.
Low
fuel prices may lead to us being unable to attract customers due to the fact that we charge a delivery price that may make our pricing
less competitive.
Changes
in commodity market prices may have a negative effect on our gross margin.
Our
current fuel supplier agreements set terms and establishes formulas based on Oil Price Information Service (OPIS) pricing as of the time
of wholesale acquisition, and we do not store inventory. OPIS is a leading source for worldwide petroleum pricing. There is a mark-up
for retail fuel prices above wholesale cost, per standard practice in the retail fuel distribution model. Cost of goods sold includes
direct labor, including drivers. Our gross margin as a percentage of revenue decreases as a result of increase in fuel costs.
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The
decline of the retail fuel market may impact our potential to get new customers.
The
retail gasoline industry has been declining over the past several years, with no or modest growth or decline in total demand foreseen
in the next several years. Accordingly, we expect that year-to-year industry volumes will be principally affected by weather patterns.
Therefore, our ability to grow within the industry is dependent on our ability to acquire other retail distributors and to achieve internal
growth, which includes the success of our sales and marketing programs designed to attract and retain customers. Any failure to retain
and grow our customer base would have an adverse effect on our results.
Competition
in the fuel delivery industry may negatively impact our operations.
We
compete with other mobile fuel delivery companies nationwide. There is little to no barrier to entry and therefore, our competition in
the industry may grow. Our ability to compete in our current markets and expand to new markets may be negatively impacted by our competitors’
successes. Additionally, fuel competes with other sources of energy, some of which are less costly on an equivalent energy basis. In
addition, we cannot predict the effect that the development of alternative energy sources might have on our operations. We compete for
customers against suppliers of electricity. Electricity is becoming a competitor of fuel. The convenience and efficiency of electricity
make it an attractive energy source for vehicle drivers. The expansion of the electric vehicle industry may have a negative impact on
our customer base.
Our
trucks transport hazardous flammable fuel, which may cause environmental damage and liability to us.
Due
to the hazardous nature and flammability of our product, we face the risk of a simple accident causing serious damage to life and property.
Additionally, a spill of our product may result in environmental damage, the liability for which our Company may not be able to overcome.
If we are involved in a spill, leak, fire, explosion or other accident involving hazardous substances or if there are releases of fuel
or fuel products we own or are transporting, our operations could be disrupted and we could be subject to material liabilities, such
as the cost of investigating and remediating contaminated properties or claims by customers, employees or others who may have been injured,
or whose property may have been damaged. These liabilities, to the extent not covered by insurance, could have a material adverse effect
on our business, financial condition and results of operations. Some environmental laws impose strict liability, which means we could
have liability without regard to whether we were negligent or at fault.
In
addition, compliance with existing and future environmental laws regulating fuel storage terminals, fuel delivery vessels and/or storage
tanks that we own or operate may require significant capital expenditures and increased operating and maintenance costs. The remediation
and other costs required to clean up or treat contaminated sites could be substantial and may not be covered by insurance.
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Our
cash flow and net income may decrease if we are forced to comply with new governmental regulation surrounding the transportation of fuel.
We
are subject to various federal, state, and local safety, health, transportation, and environmental laws and regulations governing the
storage, distribution, and transportation of fuel. It is possible we will incur increased costs as a result of complying with new safety,
health, transportation and environmental regulations and such costs will reduce our net income. It is also possible that material environmental
liabilities will be incurred, including those relating to claims for damages to property and persons.
Our
current dependence on a single fuel supplier increases our risk of an interruption in fuel supply, impacting our operations.
Although
we are in the process of establishing other sources, we currently purchase almost all of our fuel needs from two principal suppliers
in Florida. We do not have a written agreement with the largest supplier, and as such, if fuel from this source was interrupted, the
cost of procuring replacement fuel and transporting that fuel from alternative locations might be materially higher and, at least on
a short-term basis, our earnings could be negatively affected. This supplier is also a shareholder in the Company.
Our
profitability is subject to fuel pricing and inventory risk.
The
retail fuel business is a “margin-based” business in which gross profits are dependent upon the excess of the sales price
over the fuel supply costs. Fuel is a commodity, and, as such, its unit price is subject to volatile fluctuations in response to changes
in supply or other market conditions. We have no control over supplies, commodity prices or market conditions. Consequently, the unit
price of the fuel that we and other marketers purchase can change rapidly over a short period of time, including daily.
44
Loss
of a major customer could result in a decrease in our future sales and earnings.
In
any given quarter or year, sales of our products may be concentrated in a few major customers. We anticipate that a limited number of
customers in any given period may account for a substantial portion of our total net revenue for the foreseeable future. The business
risks associated with this concentration, including increased credit risks for these and other customers and the possibility of related
bad debt write-offs, could negatively affect our margins and profits. Additionally, the Company does not have any long-term agreements
with its customers. All customer agreements are cancelable at any time by either party and as such there cannot be any assurance that
any customer will continue to use the Company’s services. The loss of a major customer, whether through competition or consolidation,
or a termination in sales to any major customer, could result in a decrease of our future sales and earnings.
We
operate in a new industry segment and may be subject to new and existing laws, regulations and oversight
The
Company operates in a new industry segment, on-demand mobile fuel delivery, in which new state and local law adoptions are occurring.
Effective December 31, 2020, Florida adopted Florida Fire Prevention Code (“Code”) Section 42.12 recognizing and setting
various requirements for the consumer on-demand mobile fuel delivery business. Permitting authority is contemplated under an “Authority
Having Jurisdiction” (“AHJ”). Other pre-existing Code provisions similarly contemplate AHJ permitting for commercial
mobile fueling. Miami-Dade County, where most of our business is conducted, adopted the Code by reference. Unlike some other states and
counties, neither Florida nor Miami-Dade County have designated an AHJ for mobile fueling. Miami-Dade’s extensive permitting and
fee schedule does not contemplate or assert permitting authority over mobile fueling, consumer or commercial. We may be subject to oversight,
including audits, in existing or future areas of operation. If we cannot comply with the Code, or County, State or Federal rules and
regulations or the laws, rules and regulations or oversight in areas in which we currently operate or may seek to operate, we could lose
the ability to service those areas and our earnings could be affected.
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NextNRG
has a very limited operating history, which makes it difficult to evaluate its business and prospects.
NextNRG
has a very limited operating history, which makes it difficult to evaluate its business and prospects or forecast its future results.
NextNRG is subject to the same risks and uncertainties frequently encountered by new companies in rapidly evolving markets. NextNRG’s
financial results in any given quarter can be influenced by numerous factors, many of which it is unable to predict or are outside of
its control, including:
●
perceptions
about EV quality, safety (in particular with respect to lithium-ion battery packs), design, performance and cost, especially if adverse
events or accidents occur that are linked to the quality or safety of Evs;
●
the
limited range over which Evs may be driven on a single battery charge and concerns about running out of power while in use;
●
concerns
regarding the stability of the electrical grid;
●
improvements
in the fuel economy of the internal combustion engine;
●
consumers’
desire and ability to purchase a luxury automobile or one that is perceived as exclusive;
●
the
environmental consciousness of consumers;
●
volatility
in the cost of oil and gasoline;
●
consumers’
perceptions of the dependency of the United States on oil from unstable or hostile countries and the impact of international conflicts;
●
government
regulations and economic incentives promoting fuel efficiency and alternate forms of energy;
●
access
to charging stations, standardization of EV charging systems and consumers’ perceptions about convenience and cost to charge
an EV; and
●
the
availability of tax and other governmental incentives to purchase and operate Evs or future regulation requiring increased use of
nonpolluting vehicles.
To
date, NextNRG has not generated significant revenues or achieved profitability, and may never generate significant revenues or become
profitable.
NextNRG
has incurred net losses since inception and may not be able to achieve or maintain profitability in the future. NextNRG’s expenses
will likely increase in the future as it develops and launches its products, expands into new markets, increases its sales and marketing
efforts and continues to invest in technology. These efforts to grow its business may be more costly than NextNRG expects and may not
result in increased revenue or growth in its business. NextNRG will likely be required to make significant capital investments and incur
recurring or new costs, and its investments (if any) may not generate sufficient returns and its results of operations, financial condition
and liquidity may be adversely affected. Any failure to increase revenues sufficiently to keep pace with such investments and other expenses
could prevent NextNRG from achieving or maintaining profitability or positive cash flow on a consistent basis or at all. If NextNRG is
unable to successfully address these risks and challenges as it encounters them, its business, financial condition, results of operations
and prospects could be adversely affected. If it is unable to generate adequate revenue growth and manage expenses, NextNRG may continue
to incur net losses in the future, which may be substantial, and it may never be able to achieve or maintain profitability. NextNRG also
expects its costs and expenses to increase in future periods, which could negatively affect future results of operations if revenues
do not increase. In particular, NextNRG intends to continue to expend significant funds to further develop its technology. Furthermore,
if NextNRG’s future growth and operating performance fail to meet investor or analyst expectations, or if it has future negative
cash flow or losses resulting from investment in technology or expanding operations, this could have a material adverse effect on its
business, financial condition and results of operations.
46
The
market for NextNRG’s platform and services may not be as large as NextNRG believes it to be.
We
believe the market for our values-aligned platform is substantial, but it is still relatively new, and it is uncertain to what extent
or how widespread market acceptance of our platform will be or how long such acceptance, if achieved, may be sustained. Our success will
depend on the willingness of people to widely adopt the NextNRG experience, values and the products and services that we offer through
our platform. If the public does not perceive our products and services sold through our platform to be beneficial, or chooses not to
adopt them as a result of concerns regarding privacy, accessibility, or for other reasons, including an unwillingness to confirm that
they respect our five core values or as a result of negative incidents or experiences they encounter through our platform, or instead
opt to use alternatives to our platform, then the market for our platform may not continue to grow, may grow slower than we expect, or
may not achieve the growth potential we expect, any of which could materially adversely affect our business, financial condition, and
results of operations.
NextNRG
has limited experience with respect to determining the optimal prices and pricing structures for its products and services, which may
impact its financial results.
NextNRG
expects that it may need to change its pricing model from time to time, including as a result of competition, global economic conditions,
changes in product mix or pricing studies. Similarly, as NextNRG introduces new products and services, it may have difficulty determining
the appropriate price structure for future products and services, including because we may pursue business lines or enter markets in
which NextNRG’s current management team has limited prior experience. In addition, as new and existing competitors introduce new
products or services that compete with NextNRG’s, or revise their pricing structures, it may be unable to attract new customers
at the same price or based on the same pricing model as it has used historically. As a result, NextNRG may be required from time to time
to revise its pricing structure or reduce prices, which could adversely affect its business, operating results, and financial condition.
47
NextNRG
is in a highly competitive EV charging services industry and there can be no assurance that it will be able to compete with many of its
competitors which are larger and have greater financial resources.
NextNRG
faces strong competition from competitors in the EV charging services industry, including competitors who could duplicate its model.
Many of these competitors may have substantially greater financial, marketing and development resources and other capabilities than NextNRG.
In addition, there are very few barriers to entry into the market for its services. There can be no assurance, therefore, that any of
NextNRG’s current and future competitors, many of whom may have far greater resources, will not independently develop services
that are substantially equivalent or superior to its services. Additionally, there is no guarantee that NextNRG’s wireless EV charging
solutions will be accepted by the market.
NextNRG’s
competitors may be able to provide customers with different or greater capabilities or benefits than it can provide in areas such as
technical qualifications, past contract performance, geographic presence and driver price. Further, many of its competitors may be able
to utilize substantially greater resources and economies of scale to develop competing products and technologies, divert sales away from
NextNRG by winning broader contracts or hire away our employees by offering more lucrative compensation packages. In the event that the
market for EV charging stations expands, NextNRG expects that competition will intensify as additional competitors enter the market and
current competitors expand their product lines. In order to secure contracts successfully when competing with larger, well-financed companies,
NextNRG may be forced to agree to contractual terms that provide for lower aggregate payments to it over the life of the contract, which
could adversely affect its margins. NextNRG’s failure to compete effectively with respect to any of these or other factors could
have a material adverse effect on its business, prospects, financial condition or operating results.
NextNRG’s
revenue growth ultimately depends on consumers’ willingness to adopt electric vehicles with wireless charging capabilities in a
market which is still in its early stages.
NextNRG’s
growth is highly dependent upon the adoption by consumers of EVs, and it is subject to a risk of any reduced demand for EVs. If the market
for EVs does not gain broader market acceptance or develops slower than expected, NextNRG’s business, prospects, financial condition
and operating results will be harmed. The market for alternative fuel vehicles is relatively new, rapidly evolving, characterized by
rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, frequent
new vehicle announcements, long development cycles for EV original equipment manufacturers, and changing consumer demands and behaviors.
Factors that may influence the purchase and use of alternative fuel vehicles, specifically Evs, include:
●
perceptions
about EV quality, safety (in particular with respect to lithium-ion battery packs), design, performance and cost, especially if adverse
events or accidents occur that are linked to the quality or safety of EVs;
●
the
limited range over which EVs may be driven on a single battery charge and concerns about running out of power while in use;
●
concerns
regarding the stability of the electrical grid;
48
●
improvements
in the fuel economy of the internal combustion engine;
●
consumers’
desire and ability to purchase a luxury automobile or one that is perceived as exclusive;
●
the
environmental consciousness of consumers;
●
volatility
in the cost of oil and gasoline;
●
consumers’
perceptions of the dependency of the United States on oil from unstable or hostile countries and the impact of international conflicts;
●
government
regulations and economic incentives promoting fuel efficiency and alternate forms of energy;
●
access
to charging stations, standardization of EV charging systems and consumers’ perceptions about convenience and cost to charge
an EV; and
●
the
availability of tax and other governmental incentives to purchase and operate EVs or future regulation requiring increased use of
nonpolluting vehicles.
The
influence of any of the factors described above may negatively impact the widespread consumer adoption of EVs, which would materially
and adversely affect NextNRG’s business, operating results, financial condition and prospects.
Risks
Related to Ownership of Our Common Stock and this Offering
Our
stock price is expected to fluctuate significantly.
Our
common stock is approved for listing on The Nasdaq Capital Market under the symbol “NXXT” and began trading on September
15, 2021. There can be no assurance that an active trading market for our shares will be sustained. The market price of shares of our
common stock could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control,
including:
●
actual
or anticipated fluctuations in our financial condition and operating results;
●
geopolitical
developments affecting supply and demand for oil and gas and an increase or decrease in the price of fuel;
●
actual
or anticipated changes in our growth rate relative to our competitors;
●
competition
from existing companies in the space or new competitors that may emerge;
●
issuance
of new or updated research or reports by securities analysts;
49
●
fluctuations
in the valuation of companies perceived by investors to be comparable to us;
●
share
price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
●
additions
or departures of key management or technology personnel;
●
disputes
or other developments related to proprietary rights, including intellectual property, litigation matters, and our ability to obtain
patent protection for our technologies;
●
announcement
or expectation of additional debt or equity financing efforts;
●
sales
of our common stock by us, our insiders or our other stockholders; and
●
general
economic and market conditions.
These
and other market and industry factors may cause the market price and demand for our common stock to fluctuate substantially, regardless
of our actual operating performance, which may limit or prevent investors from readily selling their shares of common stock and may otherwise
negatively affect the liquidity of our common stock. In addition, the stock market in general has experienced extreme price and volume
fluctuations that have often been unrelated to or disproportionate to the operating performance of the Company.
A
significant percentage of the Company’s common stock is held by a small number of shareholders.
One
Chief Executive Officer and Executive Chairman controls approximately 68.14% of our outstanding common stock as of March 25, 2025, and
our officers and directors collectively own approximately 80.62% of our outstanding common stock. As a result, these shareholders are
able to influence the outcome of shareholder votes on various matters, including the election of directors and extraordinary corporate
transactions, including business combinations. In addition, the conversion of existing convertible notes, occurrence of sales of a large
number of shares of our common stock, or the perception that these conversions or sales could occur, may affect our stock price and could
impair our ability to obtain capital through an offering of equity securities. Furthermore, the current ratios of ownership of our common
stock reduce the public float and liquidity of our common stock, which can in turn affect the market price of our common stock.
50
Our
Amended and Restated Certificate of Incorporation includes an exclusive forum provision that identifies the Court of Chancery of the
State of Delaware as the exclusive forum for certain litigation, including any derivative actions, which could limit our stockholders’
ability to obtain a favorable judicial forum for disputes with us, our directors, officers or employees.
Our
Amended and Restated Certificate of Incorporation provides that unless we consent in writing to the selection of an alternative forum,
the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought
on behalf of the Company; (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee
of the Company to the Company or the Company’s stockholders; (iii) any action asserting a claim against the Company arising pursuant
to any provision of the General Corporation Law of Delaware, the Amended and Restated Certificate of Incorporation or the Bylaws of the
Company; or (iv) any action asserting a claim against the Company governed by the internal affairs doctrine. To the extent that any such
claims may be based upon federal law claims, Section 27 of the Securities Exchange Act of 1934, as amended, creates exclusive federal
jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.
Furthermore, Section 22 of the Securities Act of 1933, as amended, provides for concurrent jurisdiction for federal and state courts
over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder, and as
such, the exclusive jurisdiction clauses of our Amended and Restated Certificate of Incorporation would not apply to such suits. The
choice of forum provisions in our Amended and Restated Certificate of Incorporation may limit a stockholder’s ability to bring
a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage
such lawsuits against us and our directors, officers and other employees. By agreeing to these provisions, however, stockholders will
not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. Furthermore, the
enforceability of similar choice of forum provisions in other companies’ certificates of incorporation and bylaws has been challenged
in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. If a
court were to find the choice of forum provisions in our Amended and Restated Certificate of Incorporation” to be inapplicable
or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could
adversely affect our business and financial condition.
We
have never paid dividends on our capital stock, and we do not anticipate paying any dividends in the foreseeable future. Consequently,
any gains from an investment in our common stock will likely depend on whether the price of our common stock increases.
We
have not paid dividends on any of our classes of capital stock to date and we currently intend to retain our future earnings, if any,
to fund the development and growth of our business. In addition, the terms of any future indebtedness we may incur could preclude us
from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain from an investment
in our common stock for the foreseeable future. Consequently, in the foreseeable future, you will likely only experience a gain from
your investment in our common stock if the price of our common stock increases.
51
If
we fail to comply with the continued listing requirements of NASDAQ, we would face possible delisting, which would result in a limited
public market for our shares and make obtaining future debt or equity financing more difficult for us.
On
August 22, 2023, the Company received a letter from the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market
LLC (“Nasdaq”) indicating that the Company’s stockholders’ equity as reported in its Quarterly Report on Form
10-Q for the quarterly period ended June 30, 2023 (the “Form 10-Q”), did not satisfy the continued listing requirement under
Nasdaq Listing Rule 5550(b)(1), which requires that a listed company’s stockholders’ equity be at least $2,500,000 (the “Equity
Rule”). As reported in its Form 10-Q, the Company’s stockholders’ equity as of June 30, 2023 was approximately $1,799,365.
As of June 30, 2024, the Company’s stockholders’ deficit was ($4,833,450). The Staff’s notice had no immediate impact
on the listing of the Company’s common stock on Nasdaq.
Upon
submission of the Company’s plan to regain compliance, the Staff granted the Company an extension until February 20, 2024 to comply
with this requirement.
On
February 21, 2024, the Company received a delist determination letter (the “Delist Letter”) from the Staff advising the Company
that the Staff had determined that the Company did not meet the terms of the extension. Specifically, the Company did not complete its
proposed transaction to regain compliance with the Equity Rule and evidence compliance on or before February 20, 2024.
The
Company requested an appeal of the Staff’s determination and such hearing occurred on May 2, 2024. At the hearing, the Company
presented its plan for regaining compliance with the Equity Rule and requested a further extension to complete the execution of its plan.
On May 13, 2024, we received an extension until July 12, 2024, to regain compliance with the Equity Rule.
On
August 30, 2024, the Company received a letter from Nasdaq confirming that the Company has (i) regained compliance with the Equity Rule,
as required by the Panel’s decision dated May 13, 2024, as amended, and (ii) in application of Listing Rule 5815(d)(4)(B), the
Company will be subject to a mandatory panel monitor for a period of one year from the date of such letter. If, within that one-year
monitoring period, the Staff finds that the Company is no longer in compliance with the Equity Rule, then, notwithstanding Listing Rule
5810(c)(2), the Company will not be permitted to provide Staff with a plan of compliance with respect to such deficiency and Staff will
not be permitted to grant additional time for the Company to regain compliance with respect to such deficiency, nor will the Company
be afforded an applicable cure or compliance period pursuant to Listing Rule 5810(c)(3). Instead, the Staff will issue a Delist Determination
Letter, and the Company will have an opportunity to request a new hearing with the initial Panel or a newly convened Hearings Panel if
the initial Panel is unavailable. The Company will have the opportunity to respond/ present to the Hearings Panel as provided by Listing
Rule 5815(d)(4)(C) and the Company’s securities may at that time be delisted from Nasdaq.
52
On
January 10, 2025, the Company received a letter from the Staff indicating that the Company no longer complies with Nasdaq rules for continued
listing because the Company has not yet held an annual meeting of stockholders within one year after the end of the Company’s fiscal
year ended December 31, 2023, as required pursuant to Nasdaq Listing Rule 5620(a) (the “Annual Meeting Requirement”). The
Company has 45 calendar days to submit a plan to regain compliance and, if the Staff accepts the Company’s plan, the Staff can
grant an exception of up to 180 calendar days from December 31, 2024, or until June 30, 2025, to regain compliance. The Company plans
to timely submit such a plan for the Staff’s consideration. There can be no assurance that the Staff will accept the Company’s
plan to regain compliance with the Annual Meeting Requirement, or that the Company will evidence compliance with the Annual Meeting Requirement
during any extension period that the Staff may grant. If the Staff does not accept the Company’s plan, the Company will have the
opportunity to appeal that decision to a Nasdaq Hearings Panel. Prior to receiving the deficiency letter from the Nasdaq regarding the
Annual Meeting Requirement, on December 31, 2024, the Company filed with the Securities and Exchange Commission a definitive proxy statement
on Schedule 14A relating to its planned annual meeting of stockholders for the fiscal year ended December 31, 2023. The stockholders
meeting for the fiscal year ended December 31, 2024 was held on January 16, 2025. On January 22, 2025, the Company received a letter
from the Staff of Nasdaq confirming that the Company has regained compliance with the Annual Meeting Requirement.
If
we are unable to achieve and maintain compliance with such listing standards or other Nasdaq listing requirements in the future, we could
be subject to suspension and delisting proceedings. A delisting of our common stock and our inability to list on another national securities
market could negatively impact us by: (i) reducing the liquidity and market price of our common stock; (ii) reducing the number of investors
willing to hold or acquire our common stock, which could negatively impact our ability to raise equity financing; (iii) limiting our
ability to use certain registration statements to offer and sell freely tradable securities, thereby limiting our ability to access the
public capital markets; and (iv) impairing our ability to provide equity incentives to our employees.
We
have elected to take advantage of specified reduced disclosure requirements applicable to an “emerging growth company” under
the JOBS Act, the information that we provide to stockholders may be different than they might receive from other public companies.
As
a company with less than $1 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” under
the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise
applicable generally to public companies. These provisions include:
●
only
two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly
reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
●
reduced
disclosure about our executive compensation arrangements;
53
●
no
non-binding advisory votes on executive compensation or golden parachute arrangements;
●
exemption
from the auditor attestation requirement in the assessment of our internal control over financial reporting and delaying the adoption
of new or revised accounting standards that have different effective dates for public and private companies until those standards
apply to private companies.
We
have elected to take advantage of the above-referenced exemptions and we may take advantage of these exemptions for up to five years
or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more
than $1 billion in annual revenues, we have more than $700 million in market value of our stock held by non-affiliates, or we issue more
than $1 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced
burdens.
Additional
stock offerings in the future may dilute your percentage ownership of our company.
Given
our plans and expectations that we may need additional capital and personnel, we may need to issue additional shares of common stock
or securities convertible or exercisable for shares of common stock, including convertible preferred stock, notes, stock options or warrants.
The issuance of additional securities in the future will dilute the percentage ownership of then current stockholders.
The
Company is a “controlled company” within the meaning of the applicable rules of Nasdaq and, as a result, we qualify for exemptions
from certain corporate governance requirements. If the Company relies on these exemptions, its stockholders will not have the same protections
afforded to stockholders of companies that are subject to such requirements.
The
Company is currently a “controlled company” within the meaning of the applicable rules of Nasdaq. Michael D. Farkas, the
Chief Executive Officer and Executive Chairman of NextNRG, is the holder (through NextNRG) and the beneficial owner of approximately
68.14% of the Company’s common stock and therefore controls a majority of the voting power of the Company’s outstanding common
stock and accordingly, he has the ability to determine all matters requiring approval by stockholders. As a result, we qualify for exemptions
from certain corporate governance requirements. If the Company relies on these exemptions, which it does not intend to do, its stockholders
will not have the same protections afforded to stockholders of companies that are subject to such requirements. Under these rules, a
company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is
a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirements:
●
that
a majority of the board consists of independent directors;
54
●
for
an annual performance evaluation of the nominating and corporate governance and compensation committees;
●
that
the controlled company has a nominating and corporate governance committee that is composed entirely of independent directors with
a written charter addressing the committee’s purpose and responsibilities; and
●
that
the controlled company has a compensation committee that is composed entirely of independent directors with a written charter addressing
the committee’s purpose and responsibility.
While
the Company does not intend to rely on these exemptions, the Company may use these exemptions now or in the future. As a result, the
Company’s stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq
corporate governance requirements.