Item 1A. Risk Factors.
Investing in our Common Stock involves a high degree of risk. You should consider carefully the following risks, together with all the other information in this Annual Report, including the section titled “Forward-Looking Statements,” and “Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report. The risks described below are not the only ones we face. Any of the following risks could materially and adversely affect our business. If any of the following risks actually materializes, our operating results, financial condition and liquidity could be materially adversely affected. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. As a result, the trading price of our Common Stock could decline and you could lose part or all of your investment. Our business, financial condition and results of operations could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.
Risks Related to Our Financial Condition
Our limited operating history makes it difficult for us to evaluate our future business prospects.
We were incorporated in February 2021. We cannot assure you that we will be able to operate our business successfully or profitably or find additional suitable investments. W e only have a few years of audited financial statements. Any investment decision will not be made with the same data as would be available as if we had a longer history of public reporting. There can be no assurance that we will be able to generate sufficient revenue from operations to pay our operating expenses. The results of our operations and the execution on our business plan depends primarily on the demand for the recycling and composting services, logistics services and, to a lesser extent, the performance of our currently held properties, competition, our ability to monetize our real estate business, the availability of adequate equity and debt financing, and conditions in the financial markets and economic conditions.
You should consider our business and prospects in light of the risks and significant challenges we face as a new entrant into our industry. If we fail to adequately address any or all of these risks and challenges, our business, prospects, financial condition, results of operations, and cash flows may be materially and adversely affected.
We have entered into new lines of business which may not be successful.
In June 2025, in connection with our acquisition of Resource Group and ZEI, we entered into two new lines of business transforming targeted organic green waste materials into engineered, environmentally friendly soil and mulch products, and logistics. There can be no assurance that there will be demand for our services in these markets. Even if such a market develops, there can be no assurance that we would be able to maintain that market.
Our auditors have expressed substantial doubt about our ability to continue as a going concern.
We have generated limited revenue and have incurred significant net losses in each year since inception. For the year ended December 31, 2025 we incurred a net loss of $15,957,099 as compared to a net loss of $8,908,475 for the year ended December 31, 2024. We expect to continue to incur operating losses as we scale our organics processing and logistics operations, invest in equipment and infrastructure, and work toward achieving profitability across our business segments. We cannot offer any assurance as to our future financial results. Our inability to achieve profitability from our current operating plans or to raise capital to cover any potential shortfall would have a material adverse effect on our ability to meet our obligations as they become due. If we are not able to secure additional funding, if, and when needed, we would be forced to curtail our operations or take other action in order to continue to operate. A significant portion of our funding for operations has been from debt and equity financings and not revenue generated from operations. These and other factors raise substantial doubt about our ability to continue as a going concern. The auditor’s report included in this Annual Report contains an explanatory paragraph regarding our ability to continue as a going concern. If we are unable to generate sufficient revenue to meet our operating needs and are unable to meet our obligations and are forced to curtail or cease our business operations, our stockholders could suffer a complete loss of any investment made in our securities.
Our business strategy includes growth plans. Our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth or investments effectively.
Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in significant growth stages of development. We cannot assure you that we will be able to successfully grow our compost or logistics businesses or successfully monetize or generate sales proceeds from our real estate properties. Failure to manage potential transactions to successful conclusions, or failure more generally to manage our growth effectively, could have a material adverse effect on our business, future prospects, financial condition or results of operations and could adversely affect our ability to successfully implement our business strategy.
We will need to raise additional capital to support our long-term business plans and our failure to obtain funding when needed may force us to delay, reduce or eliminate our operational and business plans.
During the year ended December 31, 2025, our operating activities used net cash of approximately $7 million and as of December 31, 2025, our cash was $54,066. We have experienced significant losses since inception and have a significant accumulated deficit as of December 31, 2025, totaling approximately $32 million. We expect to incur additional operating losses in the future and therefore expect our cumulative losses to increase. To date, we have not derived substantial revenue from the properties we own or have an interest in. We expect to potentially generate revenue through our growth of our compost and logistics businesses and sales of property, if any. There is uncertainty as to our ability to monetize our real estate properties or to generate sales proceeds. We expect our expenses to increase as operations increase from our compost and logistics businesses.
Although in October 2025 we raised approximately $9,000,000 and in February 2026 we raised approximately $6,000,000, unless we generate significant revenue from our compost and logistics businesses, we believe we will need to raise additional capital to fund our business expansion plans and we cannot be certain that funding will be available to us on acceptable terms on a timely basis, or at all. To meet our financing needs, we are considering multiple alternatives, including, but not limited to, additional equity and debt financings. Our ability to raise capital through the sale of securities may be limited by our number of authorized shares of Common Stock and various rules of the SEC and Nasdaq that place limits on the number and dollar amount of securities that we may sell. Any additional sources of financing will likely involve the issuance of our equity or debt securities, which will have a dilutive effect on our stockholders, assuming we are able to sufficiently increase our authorized number of shares of Common Stock. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that may impact our ability to conduct our business. Our current outstanding debentures prohibit us from engaging in certain types of financing while the debentures are outstanding. If we fail to raise additional funds on acceptable terms, we may be unable to complete planned development work.
We previously identified a material weakness in our internal control over financial reporting and we may, in the future, identify additional material weaknesses or otherwise fail to maintain an effective system of internal control over financial reporting or adequate disclosure controls and procedures, which may result in material errors in our financial statements or cause us to fail to meet our period reporting obligations.
Management and our Audit Committee, in consultation with M&K CPAS PLLC (“M&K”), our independent registered public accounting firm, determined that there was a material weaknesses in our internal controls as of June 30, 2025, which was remediated as of December 31, 2025. 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 a company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness in our case related to the ineffective design of certain management review controls across a portion of the Company’s financial statements. Specifically, the controls related to the review of internal and externally prepared reports and analysis utilized in the financial reporting process of outside consultants that aid in the preparation of our financial statements. In order to remediate these material weaknesses, we added more external consultants to assist in the preparation of our financial statements, and assist in the expansion of our accounting and finance department as a result of our recent acquisition.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, our management is required to report on the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. Annually, we perform activities that include reviewing, documenting and testing our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, we will not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. If we fail to achieve and maintain an effective internal control environment, we could suffer misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could result in significant expenses to remediate any internal control deficiencies and lead to a decline in our stock price.
We cannot provide assurance that we have identified all, or that we will not in the future have additional, material weaknesses in our internal control over financial reporting. As a result, we may be required to implement further remedial measures and to design enhanced processes and controls to address deficiencies. If we do not effectively remediate the material weaknesses identified by management and maintain adequate internal controls over financial reporting in the future, we may not be able to prepare reliable financial reports and comply with our reporting obligations under the Exchange Act on a timely basis. Any such delays in the preparation of financial reports and the filing of our periodic reports may result in a loss of public confidence in the reliability of our financial statements, which, in turn, could materially adversely affect our business, the market value of our common stock and our access to capital markets.
A prolonged U.S. federal government shutdown could materially and adversely affect our business and operations.
Any disruption in the operations of the U.S. government, including as a result of the recent or future temporary or prolonged shutdowns resulting from the failure of Congress to enact appropriations bills or raise the federal debt ceiling, could materially and adversely affect our business, operations and financial condition. Recently, beginning on October 1, 2025, the U.S. federal government shut down and remained shut down through November 12, 2025, and again beginning on January 31, 2026 through February 3, 2026, during which times certain regulatory agencies, such as the FDA and the SEC, furloughed critical employees and stopped critical activities. During such shutdowns, while the SEC’s EDGAR system remains operational, the unavailability of the SEC staff to review filings, issue and resolve comments, or declare registration statements effective may delay our ability to complete public offerings and obtain timely regulatory approvals. These delays could impact our access to capital markets, hinder strategic transactions, and create uncertainty around our disclosure obligations. Additionally, the lack of interpretive guidance or exemptive relief during a shutdown may increase legal and compliance risks. There can be no assurance that future shutdowns will not materially affect our operations or financial condition.
Federal budget and debt-ceiling disputes may adversely affect capital markets and our financing activities.
Moreover, the uncertainty surrounding government funding debates and debt-ceiling negotiations can negatively affect market conditions, investor sentiment, and the liquidity of small-cap and microcap issuers such as ours. If market volatility or trading disruptions were to occur during the current or future government shutdowns, our ability to execute at-the-market offerings or other financing transactions under our effective shelf registration statement or through private equity offerings could be materially impaired.
Accordingly, any federal government shutdown or protracted budget impasse could materially and adversely affect our regulatory compliance, financing options and capabilities, and overall financial condition.
Under the February 2026 Purchase Agreement, we are subject to certain restrictive covenants that may make it difficult to procure additional financing.
The February 2026 Purchase Agreement contains, among others, the following restrictive covenants: (A) from the date of the Purchase Agreement between us and certain investors until 30 days following the later of (a) the earliest of the date that (i) the initial registration statement registering for resale all shares issuable upon conversion of the 2026 Notes (the “Conversion Shares”) has been declared effective by the SEC, (ii) all of the Conversion Shares and February Warrant Shares have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 and without volume or manner-of-sale restrictions, (iii) following the one year anniversary of the Closing Date provided that a holder of Conversion Shares and October Warrant Shares is not an affiliate of us, or (iv) all of the Shares and February Warrant Shares may be sold pursuant to an exemption from registration under Section 4(a)(1) of the Securities Act without volume or manner-of-sale restrictions and counsel to us has delivered to such holders a standing written unqualified opinion that resales may then be made by such holders of the Conversion Shares and February Warrant Shares pursuant to such exemption which opinion shall be in form and substance reasonably acceptable to such holders; we may not issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or common stock equivalents or file any registration statement or amendment or supplement thereto other than a registration statement providing for the resale of the Warrant Shares and the shares of Common Stock issuable upon conversion of the Notes (the “Conversion Shares”), subject to certain other limited exceptions.
If we require additional funding while these restrictive covenants remain in effect, we may be unable to effect a financing transaction on terms acceptable to us, or at all, while also remaining in compliance with the terms of the October Purchase Agreement, or we may be forced to seek a waiver from the investor party to the October Purchase Agreement, which such investor is not obligated to grant to us.
Additionally, the October Purchase Agreement requires us to hold a meeting of our stockholders at the earliest practicable date (and in no event later than 60 days after the closing) to seek stockholder approval and, if such approval is not obtained at the initial meeting, to hold a second meeting on or prior to the 60th calendar day following such meeting, and thereafter every 90 days to seek stockholder approval until the earlier of the date stockholder approval is obtained or December 31, 2026, whichever is sooner, which may be time consuming and costly.
Risks Related to Engineered Biomass and Organic Recycling
We are subject to extensive environmental laws and regulations that may increase our operating costs or expose us to liability.
Our engineered soils, remediation, and logistics operations involve the handling, transport, and processing of materials that are subject to federal, state, and local environmental laws and regulations. These include those governing air emissions, water discharges, solid and hazardous waste, and site remediation. Compliance with these laws may require significant capital expenditures, administrative resources, and operating restrictions. Any actual or alleged failure to comply could result in civil or criminal penalties, project delays, or reputational harm. In addition, we may be held liable under strict liability statutes such as the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), even for contamination not caused by our own operations.
Changes in environmental laws and standards may impose additional costs and limitations on our operations.
Legislative and regulatory changes related to climate change, PFAS contamination, soil quality, and permitting frameworks may materially impact our business. For example, more stringent discharge thresholds or reclassification of materials we handle could require us to retrofit existing equipment, modify site operations, or alter how we transport and process soils. These changes could limit our ability to obtain or renew environmental permits or require significant new investments to remain in compliance.
We face risks associated with seasonality and weather that may impact our operations and revenue.
Our engineered soils, remediation, and logistics services are subject to seasonal demand and may be significantly affected by weather conditions. Adverse weather, including heavy rain, storms, or flooding, can delay project start times, suspend field operations, reduce hauling efficiency, or result in temporary site closures. These disruptions can negatively affect backlog conversion, customer satisfaction, and quarterly revenue variability.
Our biomass and recycling and organic recycling business is performed in one state, Florida.
To date, ZEI has only performed services in the State of Florida and its business is subject to catastrophic weather and other natural events from time to time. If weather conditions in Florida prevent us from fulfilling purchase orders, we do not have a back up location and our revenue will be impacted.
Our operations are concentrated at a single permitted facility, and any disruption to that facility could severely impair our biomass recycling business.
Substantially all of our biomass recycling operations are conducted at our permitted organics processing facility in Myakka City, Florida. We do not currently operate any secondary processing facilities. A disruption at the Myakka City facility — including as a result of fire, equipment failure, severe weather, flooding, or regulatory action — could render us unable to accept feedstock, process organic waste, or produce and deliver finished engineered soil and mulch products. Any extended shutdown of the Myakka City facility would materially impair our biomass recycling revenue and could result in the loss of customer relationships and permit standing that would be difficult to recover. We do not currently maintain business interruption insurance that we believe would fully offset the financial impact of a prolonged shutdown. The concentration of our processing operations at a single location represents a significant operational risk that is not present in businesses operating multiple facilities.
Our biomass recycling operations are entirely dependent on maintaining permits issued by the Florida Department of Environmental Protection, and any revocation, suspension, or modification of those permits could halt our operations.
Resource Group operates the Myakka City facility under permits issued by the Florida Department of Environmental Protection (“FDEP”) that authorize the receipt, processing, and distribution of organic waste and related materials. Our ability to conduct biomass recycling operations is entirely dependent on maintaining these permits in good standing. FDEP permits are subject to renewal, modification, suspension, and revocation based on compliance history, changes in environmental regulations, community complaints, permit condition violations, and regulatory priorities. The permitting framework governing composting and organic waste processing facilities in Florida has become increasingly scrutinized, and future regulatory changes could impose additional operating conditions or restrict the volume or types of materials we are permitted to process. If any of our FDEP permits were suspended, revoked, or materially modified, we could be required to curtail or cease operations at the Myakka City facility, which would have an immediate and material adverse effect on our revenues, financial condition, and results of operations.
Our business is dependent on a limited number of municipal and government contracts, which may be subject to political and funding risks.
A portion of our revenue derives from government contracts for soil remediation, infrastructure support, and materials supply. These contracts are awarded through competitive bidding and may be subject to delays, renegotiation, or cancellation based on budget availability, political changes, or performance-based reviews. The loss of any significant municipal or agency customer or failure to win expected bids could have a material adverse effect on our financial condition and results of operations.
Our real estate holdings and facility operations require significant capital, management, and regulatory compliance.
We own and lease several properties that house soil processing, storage, and remediation activities. These properties must comply with zoning, permitting, and environmental requirements, and require continuous investment for maintenance, safety, and operational efficiency. If we are unable to operate these facilities profitably or repurpose them for alternative uses, we may not achieve an acceptable return on our invested capital.
Our business relies on skilled labor, specialized equipment, and operational execution to meet customer demands.
The success of our soil processing and remediation operations depends on access to qualified personnel and properly functioning, specialized equipment. Labor shortages, particularly in field services or trucking, including as a result of immigration policies, may constrain our ability to meet project schedules. Furthermore, we have faced challenges hiring employees in our compost business due to the remote location of our facilities. Equipment downtime, supply delays, or execution failures may increase project costs, reduce customer satisfaction, or delay revenue recognition.
Our logistics operations depend on a small number of licensed commercial drivers, and the loss of key drivers or an inability to recruit qualified replacements could materially impair our transportation capacity.
ZEI’s logistics operations are staffed by a workforce of 20 full-time employees, 11 of whom are CDL-licensed commercial drivers. These drivers operate our fleet of grapple trucks, walking floor trailers, and other heavy equipment, and their availability is directly tied to our ability to fulfill customer commitments. The market for CDL-licensed drivers is highly competitive and subject to persistent shortages driven by an aging driver workforce, stringent licensing requirements, and competition from larger carriers offering higher compensation. The loss of two or three experienced drivers could meaningfully reduce ZEI’s operational throughput. We cannot assure you that we will be able to attract and retain a sufficient number of qualified CDL drivers to support our operations, particularly as we seek to grow our logistics volume. If we are unable to maintain adequate driver staffing, our ability to service customers, generate logistics revenue, and support the transportation needs of our biomass recycling operations would be materially and adversely affected.
Our processing and transportation operations depend on a fleet of specialized equipment financed through multiple lenders, and the unavailability of equipment or equipment financing could impair our operational capacity.
Our biomass recycling and logistics operations are dependent on a fleet of specialized processing equipment and transportation vehicles, including trommel screeners, grinders, shredders, grapple trucks, and trailers. As of December 31, 2025, this equipment is financed through approximately fifteen separate equipment finance facilities with multiple lenders. Our ability to conduct operations is contingent on this equipment remaining in good working order, replacement parts being available, and our equipment financing facilities remaining in effect. If we default on any equipment finance obligations, lenders may repossess the collateralized equipment, directly impairing operational capacity. Additionally, if our financial condition deteriorates, we may be unable to refinance maturing equipment facilities or obtain financing for necessary equipment replacements or additions. The loss of access to key pieces of processing or transportation equipment even temporarily could disrupt customer service, reduce throughput, and materially and adversely affect our revenues and results of operations.
Our logistics business involves safety risks and the materialization of such risks will affect our business operations and financial results.
Transportation is a key component of our logistics business and involves inherent safety risks, which may not be eliminated through implementing the current risk management policies and control measures, such as safety inspections on our vehicles and safety awareness training for our drivers. The provision of our logistics services may present risks and dangers, such as improper operation of vehicles, vehicle or equipment failure and other issues arising from driving. The materialization of any of such risks may result in personal injury, business disruption or negative impact on our business.
Our trucking operations involve complex logistics that may be disrupted by operational, regulatory, or market conditions.
Our business includes operating and coordinating a fleet of trucks to transport green waste, engineered soils, and other bulk materials between job sites and our processing facilities. These operations require reliable scheduling, routing, and maintenance systems to ensure timely and compliant deliveries. We rely on third-party owner-operators of vehicles to perform certain of our logistics services, and loss of any such third-party owner-operators, or our inability to engage additional third-party owner-operators as our business grows, could negatively impact our results of operations and financial condition. Disruptions such as driver shortages, increased costs to engage third-party owner operators when needed, increased regulatory oversight on vehicle emissions or weight limits, limited availability of replacement parts, or road access restrictions may negatively impact our efficiency and increase costs. In addition, failure to maintain Department of Transportation compliance, vehicle safety records, or insurance coverage could result in fines or suspension of operations.
We face operational, regulatory, and economic risks associated with green waste projects.
Green waste handling and processing, including the receipt, sorting, and reuse of organic materials such as yard clippings, branches, and wood debris, are subject to environmental and permitting regulations. These projects may involve odor control, vector management, and contamination risks that require specialized handling and site management protocols. Changes in organic waste diversion mandates, composting regulations, or material classification standards may affect our ability to process or resell green waste economically. Additionally, fluctuations in demand from end-markets such as compost facilities, biomass plants, or soil amendment users may limit our ability to monetize collected material, which could increase storage costs or disposal expenses.
Disruptions in the supply chain for key inputs could adversely affect our operations.
Our operations rely heavily on a consistent and cost-effective supply of organic feedstocks and amendments such as yard waste, food scraps, biosolids, wood chips, and bulking agents, many of which are subject to seasonal availability, local collection programs, and third-party contracts. Any disruption to this supply chain—caused by extreme weather events, transportation bottlenecks, labor shortages, or geopolitical instability—could constrain production, increase costs, and impact our ability to meet contractual obligations or serve growing markets.
Compliance with environmental regulations is costly and subject to change.
The engineered soils and composting industry is subject to complex environmental regulations at the federal, state, and local levels, governing areas such as permitting, emissions, stormwater runoff, leachate control, and zoning. Maintaining compliance with these laws requires ongoing investments in monitoring, equipment, and staff training, and changes in regulations—such as stricter air or water standards—could increase operating costs or limit expansion. Failure to comply with such regulations could result in fines, permit revocation, or reputational harm.
Environmental liabilities from contamination or hazardous substances may expose us to financial risk.
The presence of persistent environmental contaminants such as PFAS chemicals or heavy metals in feedstocks or end products presents significant liability risks. These substances, even in trace amounts, may lead to regulatory enforcement, litigation, or cleanup costs if found in compost products, surrounding soil, or water. As environmental scrutiny increases, particularly around “forever chemicals,” we may face escalating compliance costs, legal exposure, and reputational damage from contamination claims.
Product quality issues or contamination could result in liability and damage customer relationships.
We must ensure the safety and quality of our engineered soil and compost products, which are subject to standards related to maturity, nutrient content, pathogens, metals, and physical contaminants. Failure to detect or prevent contamination—such as persistent herbicides, pathogens, or foreign objects—could result in crop damage, product recalls, liability claims, or a loss of customer trust. A significant quality incident could also lead to reputational harm and reduced demand for our products.
Fluctuations in market demand and economic conditions could negatively impact revenue.
Demand for compost and engineered soils can vary based on broader economic cycles, and customer budgets in sectors such as landscaping, agriculture, and construction. Economic downturns or slowdowns in real estate and infrastructure investment may lead to decreased product sales. Additionally, market shifts or temporary demand spikes—such as those seen during the COVID-19 pandemic—pose forecasting challenges that can result in overcapacity or missed opportunities.
We face intense competition and pressure from alternative products.
The market for upcycling, composting, and related logistics technologies is highly competitive and rapidly evolving, driven by increasing regulatory pressure, expanding sustainability mandates, and a growing demand for environmentally conscious supply chain solutions. Resource Group operates in a landscape populated by both established waste management firms and emerging clean technology companies offering composting, upcycling, and organic waste processing systems, many of whom have greater financial resources than we do.
The composting and engineered soils industry is fragmented and competitive, with numerous private companies, municipalities, and vertically integrated waste management firms offering similar products. We also face competition from synthetic fertilizers, topsoil, and emerging soil technologies. Price sensitivity in the market and the commoditized nature of many products limit our pricing flexibility and may require significant investments in innovation and customer service to maintain or grow market share.
Operational hazards at processing sites pose safety and business continuity risks.
Our facilities involve risks associated with high-temperature microbial decomposition, heavy machinery, and exposure to bioaerosols. Operational hazards such as fires, equipment failure, and occupational injuries can disrupt production, endanger employees, and expose us to regulatory enforcement or lawsuits. Proper training, maintenance, and safety protocols are essential to prevent incidents that could affect worker safety or lead to costly shutdowns or remediation. We currently utilize a single building and mill for our compost business. If anything were to limit or prevent our ability to fully utilize such building and equipment, resulting delays could harm our relationship with customers if such delays caused us to miss our scheduled shipment deadlines. We may not be able to identify or secure alternative processing facilities or equipment on a timely basis, or at all, which could prevent us from being able to continue to meet all of our demands on a timely basis. If we fail to meet our manufacturing requirements, our business would be harmed until we are able to secure alternative sources, if any, on commercially reasonable terms.
Odor, noise, and other nuisance issues may lead to community opposition or litigation.
Composting operations generate odors and, to a lesser extent, dust, noise, and truck traffic, which can affect neighboring communities. Despite efforts to manage these impacts, we may face nuisance complaints, lawsuits, or regulatory action if our operations are perceived as detrimental to public welfare. Community resistance to composting sites can also hinder our ability to expand or renew permits, particularly in urban or suburban locations.
Dependence on government policies and incentives could affect long-term viability.
Our industry benefits from supportive government policies, including landfill bans, organics diversion mandates, and infrastructure grants. Changes in these policies—such as reduced funding, weak enforcement, or political opposition—could limit feedstock availability, restrict product markets, or curtail expansion opportunities. The success of our operations partly depends on the continuation and effective implementation of these public programs.
Logistical challenges could disrupt supply chains and limit our market reach.
The collection, transport, and distribution of organic materials and finished compost products require efficient logistics coordination. Challenges such as rising fuel costs, trucking shortages, weather disruptions, and regulatory constraints on vehicle access can hinder material flows, increase costs, or delay delivery. Because many of our products are bulky and have a limited shelf life, our profitability depends on cost-effective and reliable transportation and logistics systems.
Our implementation of the Microtec UTM 1200 Turbo Mill system to expand our organics processing capabilities is subject to significant execution, financing, and operational risks.
We are in the process of implementing the Microtec UTM 1200 Turbo Mill system at our Myakka City facility as a Phase 1 enhancement to our existing organics processing operations. The implementation is subject to a number of risks, including: the availability of sufficient capital to fund the installation and commissioning of the equipment; delays in equipment delivery, site preparation, or regulatory approval; the risk that the system does not perform at projected throughput or quality specifications upon installation; the risk that integration with our existing processing operations is more complex or costly than anticipated; and the risk that market conditions for engineered soil or mulch products do not support the incremental output the system is designed to generate. We have no prior operating history with the UTM 1200 system and cannot provide assurance that it will generate the anticipated processing improvements or cost savings. If the implementation is delayed, underperforms, or requires additional capital beyond our current resources, our financial condition, results of operations, and business prospects could be materially and adversely affected.
We may not realize the anticipated strategic growth plans and anticipated benefits of the acquisition of Resource Group.
While we anticipate that operations of our compost business will provide certain strategic benefits to our Company that would not otherwise be realized, there is no assurance that there will be any financial or strategic advantages. Specifically, we believe the acquisition will provide certain strategic benefit, such as market entry into the engineered soils sector, expansion of our customer base, and operational synergies. However, the acquisition of Resource Group and entry into these markets may not have the value and commercial potential that we envision and we may not realize any return on investment, which may cause us to lose momentum in our broader growth strategy. The market price of our Common Stock may decline as a result of the acquisition if we do not achieve the perceived benefits of the acquisition as rapidly or to the extent anticipated by us or investors, financial analysts, or industry analysts. There can be no assurance that these anticipated benefits of the acquisition will materialize or that if they materialize will result in increased stockholder value or revenue stream to our company. Failure to successfully integrate the operations of Resource Group with our own could have a material adverse effect on our business, results of operations, and future growth prospects.
Our stockholders experienced dilution as a result of the acquisition of Resource Group, and they may not realize a benefit from the acquisition commensurate with the ownership dilution they experienced in connection therewith.
In connection with our acquisition of Resource Group, we paid to the members of Resource Group consideration including the RG Closing Shares and the RG Convertible Note, which is convertible into shares of restricted Common Stock. The issuance of the Closing Shares had, and the issuance of shares upon conversion of the RG Convertible Note will have, the effect of diluting the ownership interests of our existing stockholders. If we are unable to realize the full strategic and financial benefits currently anticipated from the acquisition of Resource Group, our stockholders will may experience substantial dilution of their ownership interests in our company without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent we are able to realize only part of the strategic and financial benefits currently anticipated from the acquisition.
In order to realize the intended benefits of our acquisition of Resource Group, we continue to devote significant resources to Resource Group’s business, and we may be unable to successfully integrate the business, and we may be unable to successfully integrate the businesses with our current management and structure.
Our failure to successfully complete the integration of Resource Group could have an adverse effect on our prospects, business activities, cash flow, financial condition, results of operations and stock price. Integration challenges may include the following:
assimilating Resource Group’s technology and retaining personnel;
estimating the capital, personnel and equipment required for Resource Group based on the historical experience of management with the businesses they are familiar with; and
minimizing potential adverse effects on existing business relationships.
Risks Related To Our Logistics Business
Interest rates may affect our profit.
Our vehicles are often financed by lenders. If interest rates meaningfully rise, we may not be able to pass off the increase to our customers by increasing prices we charge and therefore our profit and cash flow may suffer.
We may be dependent on a limited number of customers, and the loss of any significant customer could adversely affect our revenues and results of operations.
Our biomass recycling and logistics businesses currently serve a limited set of customers, including municipal entities, construction contractors, and landscaping companies operating primarily in Florida. Although we have not yet experienced significant customer attrition since completing our acquisition of Resource Group in June 2025, we cannot guarantee that our customer relationships will continue or that existing customers will continue to engage us on terms acceptable to us. The loss of one or more significant customers, or a reduction in the volume of services they require, could have a material adverse effect on our revenues, operating results, and cash flows. We have not yet established the diversified customer base necessary to reduce our dependence on any individual customer or customer segment.
Decreased customer demand for transportation services due to adverse economic conditions, competition or other factors have and could in the future adversely impact our business and operating results.
The transportation industry is highly cyclical and highly susceptible to trends in economic activity. Weakness or uncertainty in economic conditions in the U.S could adversely impact our business and operating results. Our business relies on the strength of our customers’ businesses and the level of confidence our customers have about current and future economic conditions and trends. A portion of our vehicles transport goods commercially for third parties in the general merchandise and consumer products goods industries, so the demand for our products and services is tied directly to the production and sale of goods by our customers, and more generally, the health of the U.S. economy and overall levels of competition in the transportation and logistics industry. As such, our volumes are largely dependent on consumer spending and retail sales and our results may be more susceptible to trends in unemployment and retail sales than carriers that do not have this concentration. Because of this, our business may begin to slow before market slowdowns, at the point of customer uncertainty, and may recover later than market recoveries, as our customers may continue to feel uncertain about future market conditions. If uncertainty and lack of customer confidence around macroeconomic and transportation industry conditions increase, our future growth prospects, business and results of operations could be materially adversely affected.
Economic and capital markets conditions may adversely affect our customers and their ability to remain solvent. Our customers’ financial difficulties can negatively impact our business and operating results and financial condition. Generally, we do not have contractual relationships with our customers that guarantee any minimum volumes, and our customer relationships may not continue as presently in effect.
In addition, any commercial driver shortages may negatively impact our business as our customers may be unable to secure adequate transportation capacity for their goods.
We face risks related to vehicle costs and availability.
Vehicle costs typically represent our single largest logistic expense and can vary from year to year based on the prices that we are able to purchase new vehicles and dispose of our used vehicles. The costs of our vehicles may be adversely impacted by the relative strength of the new and used vehicle markets, particularly the market for one- to two-year old used vehicles, or potentially by the insolvency or bankruptcy of a dealer from whom we purchase vehicles or a truck manufacturer from whom the dealers purchase vehicles. A reduction in residual values for vehicles could cause us to sustain a substantial loss on the ultimate sale of such vehicles or require us to depreciate those vehicles at a more accelerated rate than previously anticipated while we own them.
In addition, many of our vehicles are purchased pursuant to loans that are collateralized by the vehicles. If we are unable to meet our collateral requirements under such facilities, the outstanding principal amount due may be required to be repaid earlier than anticipated. If that were to occur, the holders of our loans may have the ability to foreclose on the collateralized vehicles.
We have a limited number of dealers from whom we source our vehicles and the limited dealers source their vehicles from a limited number of manufacturers .
While we source our vehicle purchases from a wide range of auto manufacturers, we are exposed to risk to the extent that any auto manufacturer significantly curtails production, increases the cost of vehicles or declines to sell vehicles to us on terms or at prices consistent with past practice. Should any of these risks occur, we may be unable to obtain a sufficient number of vehicles to operate our business without significantly increasing our fleet costs or reducing our volumes.
We obtain our trucks from a limited number of dealers.
We purchase and/or lease our vehicles from a limited number of dealers that purchase the vehicles directly from a limited number of manufacturers. Our vehicles can be negatively affected by issues that our dealers or the manufacturers may face within their own supply chain. Also, it is possible that our suppliers may face financial difficulties or organizational changes which could negatively impact their ability to accept future orders or fulfill existing orders. The cost of acquiring new trucks could increase materially and negatively affect our ability to rotate new equipment into the fleet. Although we believe that we could contract with alternative manufacturers for our trucks, we cannot guarantee or predict how long that would take. In addition, termination of our existing relationship with these suppliers could have a material adverse effect on our business, financial condition or results of operations for an indefinite period of time.
Difficulty in obtaining materials, equipment, goods and services from suppliers could adversely affect our business.
We and our owner-operators are dependent upon suppliers for trucks, equipment parts, and related materials. Supply disruptions or cost increases from truck and equipment manufacturers could adversely affect our ability to maintain our fleet and fulfill logistics commitments. If we and our owner-operators fail to maintain favorable relationships with such suppliers, or if such suppliers are unable to provide the products and materials we or our owner-operators need or undergo financial hardship, we and our owner-operators could experience difficulty in obtaining needed goods and services because of production interruptions, limited material availability or other reasons, or we and our owner-operators may not be able to obtain favorable pricing or other terms. As a result, our business and operations could be adversely affected.
We face risks related to safety recalls affecting our vehicles.
Our vehicles may be subject to safety recalls by their manufacturers, which could have an adverse impact on our business when we remove recalled vehicles from our operating fleet. We cannot control nor predict the number of vehicles that will be subject to manufacturer recalls in the future. Recalls often require us to retrieve vehicles from customers and/or hold vehicles until we can arrange for the repairs described in the recalls to be completed. As such, recalls can increase our costs, negatively impact our revenues and/or reduce our vehicle utilization. If a large number of vehicles were to be the subject of one or more recalls, or if needed replacement parts were not in adequate supply, we may be unable to utilize recalled vehicles for a significant period of time. We could also face liability claims related to vehicles subject to a safety recall. Depending on the nature and severity of the recall, it could create customer service problems, reduce the residual value of the vehicles involved, harm our general reputation and/or have an adverse impact on our financial condition or results of operations.
We face risks related to liability and insurance.
Our operations expose us to several forms of liability, including claims for bodily injury, death, and property damage related to the operation of our vehicles and equipment, as well as workers’ compensation and other employment-related claims by our employees. We may become exposed to uninsured liability at levels in excess of our historical levels. In addition, liabilities related to existing or future claims may exceed the level of our reserves and/or our insurance, which could adversely impact our financial condition and results of operations. Should we be subject to an adverse ruling, or experience other significant liability for which we did not plan and were not adequately insured, our results of operations, financial position or cash flows could be negatively impacted. Furthermore, the cost of vehicle insurance has significantly increased recently, and insurance with unaffiliated insurers may not continue to be available to us on economically reasonable terms or at all. If interest rates continue to rise, we may not be able to pass of such increase to our customers by increasing prices, which in turn would negatively impact our operating results and financial condition. Additionally, increases in insurance costs may result in an increase in the prices charged by the third-party owner-operators that we engage to perform certain of our logistic services, which could further negatively impact our operating results and financial condition.
Our industry is highly competitive, which subjects us to competitive pressures pertaining to pricing, capacity and service.
The logistics business is highly competitive for customers. Competition affects our ability to succeed in the markets we currently serve and new markets that we may enter in the future. We compete with several larger more established companies that have greater financial, marketing and other resources than we do and provide services on a national and even international basis. Some of our competitors may have greater access to equipment, a larger fleet, a wider range of services, a wider geographic reach, brand recognition, preferential dedicated customer contracts, greater capital resources or other competitive advantages. Competition in our industry is based primarily on brand name, price and services performance.
Numerous competitive factors could impair our ability to maintain or improve our profitability. These factors include the following:
The rates charged by us and our competitors for delivery of goods tend to be stagnant and not vary based on changes in the economy. This may make it difficult for us to increase rates during periods when we experience increased expenses. Additionally, it may limit our ability to maintain or expand our business.
Since some of our customers also operate their own private trucking fleets, they may decide to transport more of their own freight.
The continuing trend toward consolidation in the trucking industry may result more large trucking and logistics companies with greater financial resources and other competitive advantages, with which we may have difficulty competing.
Higher fuel prices and higher fuel surcharges to our customers may cause some of our customers to consider freight transportation alternatives, including rail transportation.
Advancements in technology may necessitate that we increase investments in order to remain competitive, and our customers may not be willing to accept higher service or transportation rates to cover the cost of these investments.
We rely on third-party owner-operators to complete some of our logistics services, which could result in a labor shortage, and we currently expect to continue to rely on third parties to services us and certain of our customers.
We rely on, and currently expect to continue to rely on, third-party owner-operators to perform certain of our logistics services and to transport certain of our compost materials. To the extent that the current third-party owner-operators we work with or those that we engage in the future are unable to meet our requirements in a timely and cost-effective manner, we may not be able to source alternative contractors to timely perform our services. Additionally, such third-party owner-operators are not on fixed contracts, and may elect to cease performance of services to us and our customers at any time and for any reason. Should such third-party owner-operators elect not to continue to provide services to us, we may experience delays in our ability to provide our services and meet contractual deadlines. Any such impacts or delays could adversely affect our sales, cash flows and financial condition and our business may be adversely affected.
If we fail to recruit or retain capable drivers or other qualified employees or contractors, we may be unable to maintain our service quality.
We depend on the skills and continued service of capable drivers and other qualified employees and contractors for the provision of certain of our logistics and transportation services. We must be able to attract, develop and retain skillful and qualified workforce. If we are unable to hire, properly train or retain qualified employees or contractors, we could experience decreased service quality, higher labor costs, reduced revenues, regulatory noncompliance, customer losses and diminution of our company culture. Our ability to control labor costs has in the past been, and is expected to continue to be, subject to numerous factors, including labor-related contractual obligations, turnover, training costs, regulatory changes, market pressures, inflation, unemployment levels and healthcare and other benefit costs. Our inability to retain experienced and motivated employees and contractors may materially adversely affect us.
Fuel costs, transportation constraints, and material price volatility may reduce our operating margins.
Our bulk materials logistics and hauling operations rely on a fleet of trucks and external transportation vendors. We require significant quantities of fuel for our vehicles and are exposed to the risks associated with variations in the market price for petroleum products, including gasoline. Rising fuel prices, driver shortages, or new regulatory mandates such as emissions limits or hours-of-service rules can increase logistics costs. Fuel prices have recently increased significantly as a result of the ongoing conflict in the Middle East, and recent military operations by the U.S. and Israel in Iran could lead to even more significant spikes in fuel prices, which has and may continue to negatively impact our business. Moreover, we could experience a disruption in fuel supplies as a result of weather-related events, natural disasters, political disruptions or wars involving oil-producing countries, economic sanctions imposed against oil-producing countries or specific industry participants, changes in governmental policy concerning fuel production, transportation, taxes, or marketing, changes in refining capacity, environmental concerns, cyberattacks, public and investor sentiment, or other factors beyond our control, which could have a material adverse effect on us. Additionally, inflationary pressures or supply chain disruptions may impact the availability and cost of key materials such as aggregate, compost, or structural fill, adversely affecting profitability.
Damage to our reputation or brands may negatively impact our business.
Our reputation and brand are integral to the success of our business. Maintenance of our reputation and brands depends on many factors, including the quality of our products and services and the trust we maintain with our customers. Negative claims or publicity regarding us or our operations, offerings or practices, among many other things, may damage our brands or reputation, even if such claims are untrue. Damage to our reputation or brands could adversely impact our revenue and profitability.
Any failure to adapt to changes in the logistics and transportation industry, provide a high-quality experience for our customers, adopt new technologies, capitalize on cost saving initiatives or meet customer needs could substantially harm our reputation and competitiveness and could adversely impact our financial condition or results of operations.
We operate in a highly regulated industry and changes in existing regulations or violations of existing or future regulations could have a material adverse effect on our operations and profitability.
Our logistics business is subject to regulation by various federal and state entities. As such, the U.S. Department of Transportation and various state and federal agencies exercise broad powers over our motor carrier operations and safety procedures. We are required to obtain vehicle registrations from the U.S. Department of Transportation for each of our vehicles, all of which are subject to annual inspections. The failure to comply with these laws and regulations may adversely affect our ability operate our vehicles. Compliance with changing regulations could substantially increase our costs. In addition, the Federal government may institute some regulation that limits carbon emissions by setting a maximum amount of carbon individual vehicles can emit without penalty, thus requiring us to replace noncompliant vehicles or to modify non-compliant vehicles. This would likely affect everyone who uses fossil fuels and would disproportionately affect users in the highway transportation industries. While there are too many variables at this time to assess the impact of the various proposed federal and state regulations that could affect carbon emissions, many experts believe these proposed rules could significantly affect the way companies operate in their businesses.
The seasonal pattern generally experienced in the trucking industry may affect our periodic results during traditionally slower shipping periods and winter months.
In the trucking industry, revenue generally follows a seasonal pattern that may affect our operating results. Our operations may experience seasonal variability driven by construction activity, weather patterns, and the demand cycles of our municipal and commercial customers. After the December holiday season and during the remaining winter months, our freight volumes are typically lower because some customers reduce shipment levels. Our operating expenses have historically been higher in the winter months because of cold temperatures and other adverse winter weather conditions which can result in increased cold weather-related maintenance costs and increased insurance and claims costs. Revenue can also be affected by adverse weather conditions, holidays and the number of business days during a given period because revenue is directly related to the available working days of shippers. From time to time, we may also suffer short-term impacts from severe weather and similar events, such as, hurricanes, blizzards, ice storms, floods, fires, and explosions that could harm our results of operations or make our results of operations more volatile.
We face risks related to our reliance on communications networks and centralized information systems.
We rely heavily on the satisfactory performance and availability of our information systems, websites and network infrastructure to attract and retain customers, process service transactions, manage our fleet of vehicles, account for our activities and otherwise conduct our business. Our information systems are largely Internet-based, including our point-of-sale reservation system, payment processing and telephone systems. While our reliance on this technology lowers our cost of providing service and expands our abilities to better serve customers, it exposes us to various risks including natural and man-made disasters, terrorist attacks and cyber-attacks. We have put into place extensive security protocols, backup systems and alternative procedures to mitigate these risks. However, disruptions or breaches, detected or undetected by us, for any period of time in any portion of these systems could adversely affect our results of operations and financial condition and inflict reputational damage. Such a failure or interruption, could cause a loss of reservations, interfere with our fleet management, slow rental and sales processes, create negative publicity that damages our reputation or otherwise adversely impacts our ability to manage our business effectively. We may experience system interruptions or disruptions for a variety of reasons, including from network failures, power outages, cyber-attacks, employee errors, software errors, an unusually high volume of visitors attempting to access our systems, or other events such as fire, explosions, earthquakes, storms, floods, epidemics, strikes, acts of war, civil unrest or terrorist acts. Because we are dependent in part on independent third parties for the implementation and maintenance of certain aspects of our systems and because some of the causes of system interruptions may be outside of our control, we may not be able to remedy such interruptions in a timely manner, or at all.
Risks Related To Our Real Estate Business
Our property portfolio has a high concentration of properties located in certain states.
To date, our properties are located in Georgia, Texas and Oklahoma. Certain of our properties are located in areas that may experience catastrophic weather and other natural events from time to time, including hurricanes or other severe weather, flooding fires, snow or ice storms, windstorms or earthquakes. These adverse weather and natural events could cause substantial damages or losses to our properties which could exceed our insurance coverage. In the event of a loss in excess of insured limits, we could lose our capital invested in the affected property, as well as anticipated future revenue from that property. We could also continue to be obligated to repay any mortgage indebtedness or other obligations related to the property. Any such loss could materially and adversely affect our business and our financial condition and results of operations.
To the extent that significant changes in the climate occur, we may experience extreme weather and changes in precipitation and temperature and rising sea levels, all of which may result in physical damage to or a decrease in demand for properties located in these areas or affected by these conditions. Should the impact of climate change be material in nature, including destruction of our properties, or occur for lengthy periods of time, our financial condition or results of operations may be adversely affected. In addition, changes in federal and state legislation and regulation on climate change could result in increased capital expenditures to improve the energy efficiency of our existing properties or to protect them from the consequence of climate change.
Our insurance coverage on our properties may be inadequate to cover any losses we may incur and our insurance costs may increase.
We maintain insurance on our properties. However, there are certain types of losses, generally of a catastrophic nature, such as floods or acts of war or terrorism that may be uninsurable or not economical to insure. Further, insurance companies often increase premiums, require higher deductibles, reduce limits, restrict coverage, and refuse to insure certain types of risks, which may result in increased costs or adversely affect our business. We use our discretion when determining amounts, coverage limits and deductibles, for insurance, based on retaining an acceptable level of risk at a reasonable cost. This may result in insurance coverage that, in the event of a substantial loss, would not be sufficient to pay the full current market value or current replacement cost of our lost investment. In addition, we may become liable for injuries and accidents at our properties that are underinsured. A significant uninsured loss or increase in insurance costs could materially and adversely affect our business, liquidity, financial condition and results of operations.
Our operating results may be negatively affected by potential development and construction delays and resultant increased costs and risks.
We hold certain legacy real estate properties that are subject to regulatory and market uncertainties, environmental concerns of governmental entities or community groups and our contractor’s or partner’s ability to build in conformity with plans, specifications, budgeted costs, and timetables. Performance also may be affected or delayed by conditions beyond our control. We may incur additional risks when we make periodic progress payments or other advances to builders before they complete construction. If a builder or development partner fails to perform, we may resort to legal action to rescind the purchase or the construction contract or to compel performance, but there can be no assurance any legal action would be successful. These and other factors can result in increased costs of a project or loss of our investment. In addition, we will be subject to normal lease-up risks relating to newly constructed projects. We also must rely on rental income and expense projections and estimates of the fair market value of property upon completion of construction when agreeing upon a price at the time we acquire the property. If our projections are inaccurate, we may pay too much for a property, and our return on our investment could suffer.
Discovery of previously undetected environmentally hazardous conditions may adversely affect our business.
We are subject to various federal, state and local laws and regulations that (a) regulate certain activities and operations that may have environmental or health and safety effects, such as the management, generation, release or disposal of regulated materials, substances or wastes, (b) impose liability for the costs of cleaning up, and damages to natural resources from, past spills, waste disposals on and off-site, or other releases of hazardous materials or regulated substances, and (c) regulate workplace safety. Compliance with these laws and regulations could increase our operational costs. Violation of these laws may subject us to significant fines, penalties or disposal costs, which could negatively impact our results of operations, financial position and cash flows. Under various federal, state and local environmental laws, a current or previous owner or operator of currently or formerly owned, leased or operated real property may be liable for the cost of removal or remediation of hazardous or toxic substances on, under or in such property. The costs of removal or remediation could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Accordingly, we may incur significant costs to defend against claims of liability, to comply with environmental regulatory requirements, to remediate any contaminated property, or to pay personal injury claims.
Moreover, environmental laws also may impose liens on property or other restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us or our lessees from operating such properties. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to incur material expenditures. Future laws, ordinances or regulations or the discovery of currently unknown conditions or non-compliances may impose material liability under environmental laws.
The business, results of operations, cash flows and financial condition of our real estate segment are affected by the performance of the real estate industry.
The U.S. real estate industry is highly cyclical and is affected by global, national and local economic conditions, general employment and income levels, availability of financing, interest rates, and consumer confidence and spending. Other factors impacting real estate businesses include over-building, changes in traffic patterns, changes in demographic conditions, changes in tenant and buyer preferences and changes in government requirements, including tax law changes. These factors are outside of our control and may have a material adverse effect on our business, profits and the timing and amounts of our cash flows.
Adverse changes in general and local economic conditions may reduce the value of or demand for our legacy real estate holdings, which could have a material adverse effect on our ability to monetize these assets
Our business can be substantially affected by adverse changes in general economic or business conditions that are outside of our control, including changes in short-term and long-term interest rates; employment levels and job and personal income growth; housing demand from population growth, household formation and other demographic changes, among other factors; availability and pricing of mortgage financing for homebuyers; consumer confidence generally and the confidence of potential homebuyers in particular; consumer spending; financial system and credit market stability; private party and government mortgage loan programs (including changes in FHA, USDA, VA, Fannie Mae and Freddie Mac conforming mortgage loan limits, credit risk/mortgage loan insurance premiums and/or other fees, down payment requirements and underwriting standards), and federal and state regulation, oversight and legal action regarding lending, appraisal, foreclosure and short sale practices; federal and state personal income tax rates and provisions, including provisions for the deduction of mortgage loan interest payments, real estate taxes and other expenses; supply of and prices for available new or resale multifamily units; interest of financial institutions or other businesses in purchases; and real estate taxes. Adverse changes in these conditions may affect our business nationally or may be more prevalent or concentrated in particular submarkets in which we operate. Inclement weather, natural disasters (such as earthquakes, hurricanes, tornadoes, floods, prolonged periods of precipitation, droughts, and fires), other calamities and other environmental conditions can delay the delivery of our units and/or increase our costs. Civil unrest or acts of terrorism can also have a negative effect on our business. If the housing industry experiences a significant or sustained downturn, it would materially adversely affect our business and results of operations in future years. The potential difficulties described above can cause demand and prices for our units to fall or cause us to take longer and incur more costs to develop the land and build our units. We may not be able to recover these increased costs by raising prices because of market conditions.
Fluctuations in real estate values may require us to write-down the book value of our real estate assets.
Real estate values are subject to significant variability and fluctuations. As a result, we may be required to write down the book value of our legacy real estate assets in accordance with generally accepted accounting principles in the United States of America (“GAAP”), and some of those write-downs could be material. Any material write-downs of assets could have a material adverse effect on our business, prospects, liquidity, financial condition, and results of operations. In addition, valuations of real estate properties do not necessarily represent the price at which a willing buyer would purchase such property; therefore, there can be no assurance that we would realize the values underlying estimated valuations of our properties if we were to sell such properties.
We may be required to take write-downs or write-offs, restructuring, and impairment or other charges that could have a significant negative effect on our financial condition, results of operations, and our stock price, which could cause you to lose some or all of your investment.
Factors outside of our business and outside of our control may arise. As a result of these factors, we may be forced to write down or write off assets, restructure operations, or incur impairment or other charges that could result in losses. Further, unexpected risks may arise, and previously known risks may materialize in a manner not consistent with our risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. Accordingly, our securities could suffer a reduction in value.
Inflation could adversely affect our business and financial results.
Inflation could adversely affect our business and financial results by increasing the costs of raw materials, fuel, labor, and equipment needed to operate our business. If inflationary pressures reduce customer spending, relative to demand, we may be unable to offset any such increases in costs with corresponding higher sales prices for our units or buildings. Inflation may also accompany higher interest rates, which could adversely impact potential customers’ ability to obtain financing on favorable terms, thereby further decreasing demand. If we are unable to raise the prices of our units or buildings to offset the increasing costs of our operations, our margins could decrease. Furthermore, if we need to lower the price of our units to meet demand, the value of our land inventory may decrease. Inflation may also raise our costs of capital and decrease our purchasing power, making it more difficult to maintain sufficient funds to operate our business.
We could be impacted by our investments through joint ventures, which involve risks not present in investments in which we are the sole owner.
We have in the past funded real estate projects through the use of joint ventures and retain residual interests in certain joint venture entities. Joint ventures involve risks including, but not limited to, the possibility that the other joint venture partners may possess the ability to take or force action contrary to our interests or withhold consent contrary to our requests, have business goals which are or become inconsistent with ours, or default on their financial obligations to the joint venture, which may require us to fulfill the joint venture’s financial obligations as a legal or practical matter. We and our joint venture partners may each have the right to initiate a buy-sell arrangement, which could cause us to sell our interest, or acquire a joint venture partner’s interest, at a time when we otherwise would not have entered into such a transaction. In addition, a sale or transfer by us to a third party of our interests in the joint venture may be subject to consent rights or rights of first refusal in favor of our partners which would restrict our ability to dispose of our interest in the joint venture. Each joint venture agreement is individually negotiated, and our ability to operate, finance, or dispose of a joint venture project in our sole discretion is limited to varying degrees depending on the terms of the applicable joint venture agreement.
Risks associated with our legacy real estate holdings could adversely affect our business or financial results
Risks inherent in holding legacy real estate assets are substantial. The value of our remaining real estate interests may decline due to changes in market conditions, regulatory constraints, or the inability to transact on favorable terms. As a result, we may buy and develop land parcels on which housing units cannot be profitably built and sold. In certain circumstances, a grant of entitlements or development agreement with respect to a particular parcel of land may include restrictions on the transfer of such entitlements to a buyer of such land, which could negatively impact the price of such entitled land by restricting our ability to sell it for its full entitled value. In addition, inventory carrying costs can be significant and can result in reduced margins or losses in a poorly performing community or market. The time and investment required for development may adversely impact our business. In the event of significant changes in economic or market conditions, we may have to sell units or buildings at significantly lower margins or at a loss, if we are able to sell them at all. Additionally, deteriorating market conditions could cause us to record significant inventory impairment charges. The recording of a significant inventory impairment could negatively affect our reported earnings per share and negatively impact the market perception of our business.
We may not be able to sell our real property assets when we desire.
Investments in real property are relatively illiquid compared to other investments. Accordingly, we may not be able to sell real property assets when we desire or at prices acceptable to us. This could substantially reduce the funds available for satisfying our obligations, including any debt obligations.
Access to financing sources may not be available on favorable terms, or at all, which could adversely affect our ability to maximize our returns.
Our access to third-party sources of financing will depend, in part, on:
general market conditions;
the market’s perception of our growth potential;
the market’s perception of the value of our legacy real estate assets;
our current debt levels;
our current and expected future earnings;
our cash flow; and
the market price per share of our Common Stock.
The global credit and equity markets and the overall economy can be extremely volatile, which could have a number of adverse effects on our operations and capital requirements. For the past decade, the domestic financial markets have experienced a high degree of volatility, uncertainty and, during certain periods, tightening of liquidity in both the high yield debt and equity capital markets, resulting in certain periods where new capital has been both more difficult and more expensive to access. If we are unable to access the credit markets, we could be required to defer or eliminate important business strategies and growth opportunities in the future. In addition, if there is volatility and weakness in the capital and credit markets, potential lenders may be unwilling or unable to provide us with financing that is attractive to us or may increase collateral requirements or may charge us prohibitively high fees in order to obtain financing. Consequently, our ability to access the credit market in order to attract financing on reasonable terms may be adversely affected. Investment returns on our assets and our ability to make acquisitions could be adversely affected by our inability to secure additional financing on reasonable terms, if at all. Depending on market conditions at the relevant time, we may have to rely more heavily on additional equity financings or on less efficient forms of debt financing that require a larger portion of our cash flow from operations, thereby reducing funds available for our operations, future business opportunities and other purposes. We may not have access to such equity or debt capital on favorable terms at the desired times, or at all.
In addition, under a securities purchase agreement we entered into on October 16, 2025, with institutional investors in connection with the sale of 360,000 shares of our Series B Non-Voting Convertible Preferred Stock, we are subject to certain restrictive covenants that may make it difficult for us to procure additional financing.
General Business Risk Factors
New lines of business or new products and services may subject us to additional risks.
From time to time, we may implement or acquire new lines of business, such as we have in the past. There are risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed or are evolving. In developing and marketing new lines of business and new products and services, we may invest significant time and resources. In addition, new business ventures may require different strategic management competencies and risk considerations compared to those of our existing management team. External factors, such as regulatory compliance obligations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have an adverse effect on our business, results of operations, and financial condition.
Our acquisition of Resource Group may not result in the strategic benefits that we anticipated.
Our acquisition of Resource Group was intended to provide certain strategic benefits that we believe would enable us to bring value to our stockholders. The market price of our Common Stock may not reflect the value of these benefits. The market price of our Common Stock however may decline if we do not achieve the perceived benefits of the acquisitions as rapidly or to the extent anticipated by us or investors, financial analysts, or industry analysts. There can be no assurance that these anticipated benefits of the acquisitions will materialize or that if they materialize will result in increased stockholder value or revenue stream to the combined company.
Legislative, regulatory, accounting or tax rules, and any changes to them or actions brought to enforce them, could adversely affect us.
We are subject to a wide range of legislative, regulatory, accounting and tax rules. The costs and efforts of compliance with these laws, or of defending against actions brought to enforce them, could adversely affect us. In addition, if there are changes to the laws, regulations or administrative decisions and actions that affect us, we may have to incur significant expenses in order to comply, or we may have to restrict or change our operations.
We have invested in real property assets and continue to hold legacy real estate interests, which are subject to laws and regulations relating to the protection of the environment and human health and safety. These laws and regulations generally govern wastewater discharges, noise levels, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials and the remediation of contamination associated with disposals. Environmental laws and regulations may impose joint and several liabilities on tenants, owners or operators for the costs to investigate and remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal. This liability could be substantial. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, could adversely affect our ability to sell, rent or pledge an affected property as collateral for future borrowings. We intend to take commercially reasonable steps when we can to protect ourselves from the risks of environmental law liability; however, we may not obtain independent third-party environmental assessments for every property we acquire. In addition, any such assessments that we do obtain may not reveal all environmental liabilities, or whether a prior owner of a property created a material environmental condition not known to us. In addition, there are various local, state and federal fire, health, safety and similar regulations with which we may be required to comply, and that may subject us to liability in the form of fines or damages. In all events, the existing condition of land when we buy it, operations in the vicinity of our properties or activities of unrelated third parties could all affect our properties in ways that lead to costs being imposed on us.
Any material expenditures, fines, damages or forced changes to our business or strategy resulting from any of the above could adversely affect our financial condition and results of operations.
If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”) as a result of our ownership of minority interests in limited liability companies, applicable restrictions could make it impractical for us to continue our business as contemplated and could have an adverse effect on our business.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if: (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act as a result of our ownership of minority interests in NB Owners and JDI-Cumberland Inlet LLC and our plans to potentially make other minority investments, and we intend to conduct our operations so that we will not be deemed an investment company.
However, if we were to be deemed an investment company, we would be required to register as an investment company under the 1940 Act and incur significant registration and compliance costs. Additionally, the 1940 Act requires that a number of structural safeguards, such as an independent board of directors and a separate investment adviser whose contract must be approved by a majority of the company’s stockholders, be put in place within such companies. The 1940 Act also imposes significant disclosure and reporting requirements beyond those found in the Securities Act and the Exchange Act. Likewise, the 1940 Act contains its own anti-fraud provisions and private remedies, and it strictly limits investments made by one investment company in another to prevent pyramiding of investment companies, leading to consolidated investment companies acting in the interest of other investment companies rather than in the interest of securities holders. The labeling of the Company as an investment company could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business and prospects. Compliance with the 1940 Act is prohibitively expensive for small companies, in our estimation, and even if it meant divestiture of assets, we would intend to avoid being classified as an investment company.
Our quarterly results may fluctuate.
We could experience fluctuations in our quarterly operating results due to a number of factors, including variations in the returns on our current and future investments, the interest rates payable on any outstanding debt, the level of our expenses, the levels and timing of the recognition of our realized and unrealized gains and losses, the seasonal nature of travel if the community is a vacation destination, the degree to which we encounter competition in our markets and other business, market and general economic conditions. Consequently, our results of operations for any current or historical period should not be relied upon as being indicative of performance in any future period.
The outbreak of any highly infectious or contagious disease, could materially and adversely impact our performance, financial condition, results of operations and cash flows.
The COVID-19 pandemic severely impacted global economic activity during 2020 and 2021 and caused significant volatility and negative pressure in financial markets. The outbreak of any highly infectious or contagious diseases could have material and adverse effects on our performance, financial condition, results of operations and cash flows due to, among other factors:
a complete or partial closure of, or other operational issues at, one or more of our properties resulting from government actions;
difficulty accessing equity and debt capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets
difficulty obtaining capital necessary to fund business operations;
delays in our operations or supply chains may adversely impact our ability to process materials and generate revenues, including:
operational shutdowns mandated by local, state or federal government authorities;
delays by applicable governmental authorities in providing the necessary permits or operational authorizations;
reductions in workforce due to health or safety requirements;
illness or workforce unavailability necessitating a partial or full operational shutdown; and
supply chain disruptions for materials or equipment sourced from regions experiencing operational or shipping delays.
The extent to which a future pandemic impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence.
Changes in general economic conditions, geopolitical conditions, domestic and foreign trade policies, monetary policies and other factors beyond our control may adversely impact our business and operating results.
The uncertain financial markets, disruptions in supply chains, mobility restraints, and changing priorities as well as volatile asset values also affect our business operations and our ability to enter into collaborations and joint ventures. A number of other economic and geopolitical factors both in the U.S. and abroad, could ultimately have material adverse effects on our business, financial condition, results of operations or cash flows, including the following:
effects of significant changes in economic, monetary and fiscal policies in the U.S. and abroad including currency fluctuations, inflationary pressures and significant income tax changes;
the war in the Middle East;
supply chain disruptions;
a global or regional economic slowdown;
changes in government policies and regulations affecting the Company;
postponement of spending, in response to tighter credit, financial market volatility and other factors; and
rapid material escalation of the cost of regulatory compliance and litigation.
We are increasingly dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks.
Significant disruptions to our information technology systems or breaches of information security could adversely affect our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information, and it is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. The size and complexity of our information technology systems, and those of our third-party vendors with whom we contract, make such systems potentially vulnerable to service interruptions and security breaches from inadvertent or intentional actions by our employees, partners or vendors, from attacks by malicious third parties, or from intentional or accidental physical damage to our systems infrastructure maintained by us or by third parties. Maintaining the secrecy of this confidential, proprietary, or trade secret information is important to our competitive business position. While we have taken steps to protect such information and invested in information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent wrongful use or disclosure of confidential information that could adversely affect our business operations or result in the loss, dissemination, or misuse of critical or sensitive information. A breach of our security measures or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, fraud, trickery or other forms of deception, or for any other reason, could enable others to produce competing products, use our proprietary technology or information, or adversely affect our business or financial condition. Further, any such interruption, security breach, loss or disclosure of confidential information, could result in financial, legal, business, and reputational harm to us and could have a material adverse effect on our business, financial position, results of operations or cash flow.
Risks Related to Our Common Stock
Our failure to meet the continued listing requirements of the Nasdaq Capital Market could result in a delisting of our Common Stock.
Our shares of Common Stock are currently listed on the Nasdaq Capital Market. If we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements, minimum bid price requirement or the minimum stockholder’s equity requirement, The Nasdaq Stock Market LLC may take steps to delist our Common Stock. Any delisting would likely have a negative effect on the price of our Common Stock and would impair stockholders’ ability to sell or purchase their Common Stock when they wish to do so.
On January 26, 2026, we received written notice from the Listing Qualifications Department of Nasdaq notifying us that for the preceding 30 consecutive business days (December 5, 2025 through January 20, 2026), our Common Stock did not maintain a minimum closing bid price of $1.00 per share as required by Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). The notice had no immediate effect on the listing or trading of our Common Stock, which continues to trade on the Nasdaq Capital Market under the symbol “RENX.” In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a compliance period of 180 calendar days, or until July 27, 2026, to regain compliance. Compliance may be achieved if the closing bid price of our Common Stock is at or above $1.00 for a minimum of ten consecutive business days at any time during the compliance period; however, Nasdaq may require the closing bid price to equal or exceed $1.00 for more than ten consecutive business days before determining compliance. If we do not achieve compliance by July 27, 2026, we may be eligible for an additional compliance period, provided we meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and notify Nasdaq in writing of our intention to cure the deficiency during the second compliance period. We intend to actively monitor the bid price of our Common Stock and will consider available options to regain compliance, including effecting a reverse stock split, if necessary, to maintain our Nasdaq listing.
In addition, Nasdaq Listing Rule 5810(c)(3)(A)(iii) mandates immediate, accelerated delisting procedures for any company whose closing bid price remains at or below $0.10 for ten consecutive trading days. On March 24,2026 the closing price of our common stock was below $0.10
On March 26, 2026, we effected a 1-for-20 reverse stock split of our then-outstanding Common Stock. Nasdaq Listing Rule 5810(c)(3)(A)(iv) states that any listed company that fails to meet the minimum bid price requirement and has effected a reverse stock split over the prior one-year period, or has effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, will not be eligible for an automatic 180-day grace compliance period and the Nasdaq Listing Qualifications Department is obligated to immediately issue a delisting determination if it should fail to meet any continued listing requirements. Therefore, if we were to fail to meet any continued listing requirements we would immediately be issued a delisting determination. Further, the Nasdaq rule provides that a company will not be considered to have regained compliance with the minimum bid price requirement if the company takes an action to achieve compliance (such as a reverse split) and that action results in the Company’s security falling below the numeric threshold for another listing requirement.
In order to regain compliance with the Minimum Bid Price Requirement, the closing bid price of our Common Stock must be $1.00 per share or greater for a minimum period of 10 consecutive days (which may be subject to extension by Nasdaq, in their discretion) after completion of the reverse stock split. There can be no assurance that we will be able to regain compliance with the Minimum Bid Price Requirement within the applicable compliance period or at all.
Additionally, Nasdaq has recently proposed a new rule change to (i) adopt Listing Rules 5450(a)(3) and 5550(a)(6) to require issuers listed on the Nasdaq Global and Capital Markets, respectively, to maintain a minimum Market Value of Listed Securities (as defined in Nasdaq Listing Rule 5005(a)(23)) of at least $5 million for a period of 30 consecutive business days, and (ii) amend Rule5810 to suspend trading and immediately delist from Nasdaq securities of issuers that do not satisfy the proposed new requirements, and Rule 5815 to set forth the procedures for requesting a hearing before a Hearings Panel and the scope of the Panel’s discretion (collectively, the “Proposed $5 Million MVLS Rule”). As of the date of the filing of this Annual Report the market value of our listed securities is less than $5 million. If the SEC approves the Proposed $5 Million MVSL Rule, the market value of our listed securities does not meet the $5.0 million requirement as of the date it goes into effect, our securities will be subject to delisting.
If a delisting were to occur, our Common Stock would be subject to rules that impose additional sales practice requirements on broker-dealers who sell our securities. The additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from effecting transactions in our Common Stock. This would adversely affect the ability of investors to trade our Common Stock and would adversely affect the value of our Common Stock. Delisting from Nasdaq would cause us to pursue eligibility for trading of our Common Stock on other markets or exchanges, or on an over-the-counter market. In such case, our stockholders’ ability to trade or obtain quotations of the market value of our Common Stock would be severely limited because of lower trading volumes and transaction delays. These factors could contribute to lower prices and larger spreads in the bid and ask prices of these securities. There can be no assurance that our Common Stock, if delisted from the Nasdaq, would be listed on a national securities exchange, a national quotation service or the over-the-counter markets. Delisting from the Nasdaq could also result in negative publicity, adversely affect the market liquidity of our Common Stock, decrease securities analysts’ coverage of us or diminish investor, supplier and employee confidence. In addition, our stock could become a “penny stock,” which would make trading of our Common Stock more difficult.
If Nasdaq delists our securities from trading on its exchange at some future date, we could face significant material adverse consequences, including:
a limited availability of market quotations for our securities;
reduced liquidity with respect to our securities;
a determination that our Common Stock is a “penny stock” which will require brokers trading in our ordinary shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our ordinary shares;
a limited amount of news and analyst coverage for our company; and
a decreased ability to issue additional securities or obtain additional financing in the future.
As a result of being a public company, we are obligated to develop and maintain proper and effective internal control over financial reporting in order to comply with Section 404 of the Sarbanes-Oxley Act. We may not complete our analysis of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in us and, as a result, the value of our Common Stock.
As a result of becoming a public company we are subject to SEC reporting and other regulatory requirements. We have incurred and will continue to incur expenses and diversion of our management’s time in its efforts to comply with Section 404 of the Sarbanes-Oxley Act regarding internal controls over financial reporting. Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent testing by our independent registered public accounting firm when, and if, required, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retrospective changes to our financial statements or identify other areas for further attention or improvement. If we are unable to assert that our internal controls over financial reporting are effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our Common Stock to decline, and we may be subject to investigation or sanctions by the SEC. We identified a material weakness in our internal control over financial reporting and determined that our disclosure controls and procedures were ineffective as of June 30, 2024 and continue to be ineffective as of December 31, 2024.
We incur significant costs as a result of operating as a public company and our management devotes substantial time to new compliance initiatives.
As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company. We are subject to the reporting requirements of the Exchange Act, the other rules and regulations of the SEC, and the rules and regulations of Nasdaq. Compliance with the various reporting and other requirements applicable to public companies requires considerable time and attention of management. For example, the Sarbanes-Oxley Act and the rules of the SEC and national securities exchanges have imposed various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls. Our management and other personnel are devoting and will continue to need to devote a substantial amount of time to these compliance initiatives. These rules and regulations will continue to increase our legal and financial compliance costs and will make some activities more time-consuming and costly.
We currently do not intend to pay dividends on our Common Stock. Consequently, our stockholders’ ability to achieve a return on their investment will depend on appreciation in the price of our Common Stock.
We do not expect to pay cash dividends on our Common Stock. Any future dividend payments are within the absolute discretion of our Board of Directors and will depend on, among other things, our results of operations, working capital requirements, capital expenditure requirements, financial condition, level of indebtedness, contractual restrictions with respect to payment of dividends, business opportunities, anticipated cash needs, provisions of applicable law and other factors that our Board of Directors may deem relevant.
We cannot be certain that an active trading market for our Common Stock will develop or be sustained and our stock price may fluctuate significantly.
We cannot guarantee that we can sustain an active trading market for our Common Stock, nor can we predict the prices at which shares of our Common Stock may trade. Until the market has fully evaluated our business as a standalone entity, the prices at which shares of our Common Stock trade may fluctuate more significantly than might otherwise be typical, even with other market conditions, including general volatility, held constant. The market price of our Common Stock may fluctuate significantly due to a number of factors, some of which may be beyond our control, including:
actual or anticipated fluctuations in our operating results;
changes in earnings estimated by securities analysts or our ability to meet those estimates;
the operating and stock price performance of comparable companies;
changes to the regulatory and legal environment under which we operate; and
domestic and worldwide economic conditions.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our securities will depend in part on the research and reports that securities or industry analysts publish about us or our business. If only a limited number of securities or industry analysts commence coverage of our Company, the trading price for our securities would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who covers us downgrades our stock or publishes unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our Company or fails to publish reports on us regularly, demand for our securities could decrease, which might cause our stock price and trading volume to decline.
We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and we are taking advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and are taking advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, 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.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company, which is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.
We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the first sale of our Common Stock pursuant to an effective registration statement under the Securities Act, (b) in which we have total annual revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which generally means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of any fiscal year for so long as either (1) the market value of our shares of Common Stock held by non-affiliates did not equal or exceed $250 million as of the prior June 30, or (2) our annual revenues did not equal or exceed $100 million during such completed fiscal year and the market value of our shares of Common Stock held by non-affiliates did not equal or exceed $700 million as of the prior December 31.
Because we are subject to the above listed reduced reporting requirements, investors may not be able to compare us to other companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
Your percentage ownership in us may be diluted by future issuances.
We currently have 3,046,081 shares of Common Stock issuable upon conversion or exercise of existing securities. We also expect that significant additional capital will be needed in the future to continue our planned operations. To the extent these existing securities are converted into or exercised for shares of Common Stock or we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. Pursuant to the Company’s 2023 Incentive Compensation Plan (our “2023 Plan”), our management may grant equity awards to our employees, directors and consultants. We may sell Common Stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time, any of which may result in material dilution to our existing stockholders. New investors could also be issued securities with rights superior to those of our existing stockholders. Such future equity issuances will have a dilutive effect on the number of shares of our Common Stock outstanding, and therefore on our earnings per share, which could adversely affect the market price of our Common Stock. In addition, if we issue additional convertible debentures and the debentures are converted into shares of Common Stock, stockholders will experience additional dilution.
We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our Common Stock, which could depress the price of our Common Stock.
Our amended and restated certificate of incorporation authorizes us to issue one or more series of preferred stock. Our Board of Directors has the authority to determine the preferences, limitations and relative rights of the shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. Our preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our Common Stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our Common Stock at a premium to the market price, and materially adversely affect the market price and the voting and other rights of the holders of our Common Stock.
Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our management.
Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our Common Stock, thereby depressing the market price of our Common Stock. In addition, because our Board of Directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our management by making it more difficult for stockholders to replace members of our Board of Directors. Among other things, these provisions provide:
our Board of Directors is divided into three classes, one class of which is elected each year by our stockholders with the directors in each class to serve for a three-year term;
the authorized number of directors can be changed only by resolution of our Board of Directors;
directors may be removed by stockholders only for cause;
our amended and restated bylaws may be amended or repealed by our Board of Directors or by the affirmative vote of sixty-six and two-thirds percent (66 2/3%) of our stockholders;
stockholders may not call special meetings of the stockholders or fill vacancies on the Board of Directors;
our Board of Directors will be authorized to issue, without stockholder approval, preferred stock, the rights of which will be determined at the discretion of the Board of Directors and that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that our Board of Directors does not approve;
our stockholders do not have cumulative voting rights, and therefore our stockholders holding a majority of the shares of Common Stock outstanding will be able to elect all of our directors; and
our stockholders must comply with advance notice provisions to bring business before or nominate directors for election at a stockholder meeting.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for certain types of state actions that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated certificate of incorporation provides that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the exclusive forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (iii) any action arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or bylaws (as either may be amended from time to time), or (iv) any action asserting a claim governed by the internal affairs doctrine. The exclusive forum provision does not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act 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 creates 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.
These exclusive-forum provisions 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, employees, control persons, underwriters, or agents, which may discourage lawsuits against us and our directors, employees, control persons, underwriters, or agents. Additionally, a court could determine that the exclusive forum provision is unenforceable, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. If a court were to find these provisions of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, or results of operations.
Even though the Reverse Stock Split increased the market price of our Common Stock, there can be no assurance that our increased stock price will remain at a price that will be sufficient in order to meet any continued requirements and policies of the Nasdaq or that our Common Stock will remain listed on the Nasdaq.
There can be no assurance that the increased stock price resulting from the Reverse Stock Split will be maintained in order to allow us to continue to meet the requirements and policies of the Nasdaq or that our Common Stock will remain listed on the Nasdaq.
The Reverse Stock Split may decrease the liquidity of the shares of our common stock .
The liquidity of the shares of our Common Stock may be affected adversely by the Reverse Stock Split given the reduced number of shares that are outstanding as a result of the Reverse Stock Split, especially if the market price of our Common Stock does not increase as a result of the Reverse Stock Split. In addition, the Reverse Stock Split may have increased the number of stockholders who own odd lots (less than 100 shares) of our Common Stock and such stockholders may experience an increase in the cost of selling their shares of common stock and greater difficulty effecting such sales.
Following the Reverse Stock Split, the resulting market price of our Common Stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our Common Stock may not improve .
Although we believe that a higher market price of our Common Stock may help generate greater or broader investor interest, there can be no assurance that the Reverse Stock Split will result in a share price that will attract new investors, including institutional investors. In addition, there can be no assurance that the market price of our Common Stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our Common Stock may not necessarily improve.
