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. 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 Business Generally
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. We 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 on
the demand for the recycling and composting services we intend to provide upon the acquisition of Resource Group, the demand for our AI
technology, the availability of additional land parcels, the performance of our currently held properties, competition, the ability to
obtain building permits, 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 are entering into a new line of business
which may not be successful.
Upon the closing of the
acquisition of Resource Group we will be entering into a new line of business- transforming targeted organic green waste materials into
engineered, environmentally friendly soil and mulch products. Our current management team has no experience in this new market. There
can be no assurance that there will be demand for our services in this market. 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 minimal revenue and have incurred
significant net losses in each year since inception. For the year ended December 31, 2024 we incurred a net loss of $8,908,475 as compared
to a net loss of $4,200,541 for year ended December 31, 2023. We expect to incur increasing losses in the future when we commence development
of the properties we own. 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 was historically provided by
SG Holdings. These and other factors raise substantial doubt about our ability to continue as a going concern. If we 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.
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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 develop any of our properties or that we will have access to additional development opportunities
or that we will generate revenue from our AI technology or new composting business in which we intend to engage. 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 development plans.
During the year
ended December 31, 2024, our operating activities used net cash of approximately $2.6 million and as of December 31, 2024, our cash was
$296,202. We have experienced significant losses since inception and have a significant accumulated deficit as of December 31, 2024 totaling
$16 million. We expect to incur additional operating losses in the future and therefore expect our cumulative losses to increase. We do
not derive substantial revenue from the properties we own or have an interest in. We expect to potentially generate revenue through our
strategy of strategically monetizing the land parcels and joint venture partnerships by selling them in the next years. We do not expect
to generate revenue from our AI for years. The payoff of the St. Mary’s note is subject to conditions and there can be no assurance
that the sale will be consummated or if consummated that the borrowers will fulfill their obligations under the note .We expect our expenses
to increase if and when we are able to close the acquisition of Resource Group.
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. Although our agreement with the holder of our debentures
provides for the issuance of additional debentures, there are conditions to be met in order for us to be able to issue additional debentures
and there can be no assurance that we will be able to satisfy the conditions. Our equity line also requires that certain conditions be
met before we can use the equity line and there can be no assurance that such conditions will be met. If we fail to raise additional funds
on acceptable terms, we may be unable to complete planned development work.
If we default
on payments or other covenants pursuant to the debentures that we issued in August 2024 and October 2024, the lender could foreclose on
our assets.
The debentures that we
issued in August 2024 and October 2024 are secured by a lien on our assets. If we should fail to pay the amounts owed under the debentures
when due or fail to comply with any other covenants or obligations thereunder, the lender could foreclose on our assets.
We do not
anticipate generating substantial revenue from our development activities for many years.
We have not yet developed
any of the properties that we have acquired. We do not expect to derive significant revenue from the sale of the properties we develop
for several years.
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The long-term
sustainability of our real estate development operations as well as future growth in this sector depends in part upon our ability to acquire
land parcels suitable for residential projects at reasonable prices.
The long-term sustainability of our real estate
development operations, as well as future growth in this sector, depends in large part on the price at which we are able to obtain suitable
land parcels for development or homebuilding operations. Our ability to acquire land parcels for various residential projects may be adversely
affected by changes in the general availability of land parcels, the willingness of land sellers to sell land parcels at reasonable prices,
competition for available land parcels, availability of financing to acquire land parcels, zoning, regulations that limit housing density,
the ability to obtain building permits, environmental requirements and other market conditions and regulatory requirements. If suitable
lots or land at reasonable prices become less available, the number of units we may be able to build and sell could be reduced, and the
cost of land could be increased substantially, which could adversely impact us. As competition for suitable land increases, the cost of
undeveloped lots and the cost of developing owned land could also rise and the availability of suitable land at acceptable prices may
decline, which could adversely impact us. The availability of suitable land assets could also affect the success of our land acquisition
strategy, which may impact our ability to maintain or increase the number of our active communities, as well as to sustain and grow our
revenues and margins, and achieve or maintain profitability. Additionally, developing undeveloped land is capital intensive and time consuming
and we may develop land based upon forecasts and assumptions that prove to be inaccurate, resulting in projects that are not economically
viable.
We operate
in a highly competitive market for investment opportunities, and we may be unable to identify and complete acquisitions of real property
assets.
The housing industry is highly competitive, and
we face competition from many sources, including from other housing communities both in the immediate vicinity and the geographic market
where our properties are and will be located. Furthermore, housing communities we invest in compete, or will compete, with numerous housing
alternatives in attracting residents, including owner occupied single and multifamily homes available to rent or purchase. Increased competition
may prevent us from acquiring attractive land parcels or make such acquisitions more expensive, hinder our market share expansion, or
lead to pricing pressures that may adversely impact our margins and revenues. Competitors may independently develop land and construct
housing units that are superior or substantially similar to our products and because they are or may be significantly larger, have a longer
operating history, and have greater resources or lower cost of capital than us, may be able to compete more effectively in one or more
of the markets in which we operate or plan to operate.
We will also compete with public and private funds,
commercial and investment banks, commercial financing companies and public and private REITs to make certain of the investments that we
plan to make. Many of such competitors are substantially larger and have considerably greater financial, technical and marketing resources
than us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, allowing them to pay higher
consideration, consider a wider variety of investments and establish more effective relationships than us.
These competitive conditions could adversely affect
our ability to make investments. Moreover, our ability to close transactions will be subject to our ability to access financing within
stipulated contractual time frames, and there is no assurance that we will have access to such financing on terms that are favorable to
us, if at all.
Our compost
business and AI platforms will be subject to competition
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 artificial intelligence
and prop-tech software markets are highly competitive and rapidly evolving. We face competition from a range of companies, including major
technology firms offering enterprise-grade AI platforms, as well as niche startups developing specialized tools for conversational AI,
customer automation, and real estate technology many of whom have greater financial resources than we do.
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.
In addition, Resource Group has only performed
services in the State of Florida and its business will be subject to catastrophic weather and other natural events from time to time.
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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.
There can
be no assurance that the properties in our development pipeline will be completed in accordance with the anticipated timing or cost.
The development of the projects in our pipeline
is subject to numerous risks, many of which are outside of our control, including:
● inability to obtain entitlements;
● inability to obtain financing on acceptable terms;
● default by any of the contractors we engage to construct our projects;
● site accidents; and
We can provide no assurances that we will complete
any of the projects in our development pipeline on the anticipated schedule or within the budget, or that, once completed, these properties
will achieve the results that we expect. If the development of these projects is not completed in accordance with our anticipated timing
or cost, or the properties fail to achieve the financial results we expect, it could have a material adverse effect on our business, financial
condition, results of operations and cash flows and ability to repay our debt, including project-related debt.
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 have acquired properties upon which we will
construct improvements. In connection with our development activities, we are subject to uncertainties associated with re-zoning for development,
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.
We rely on
third-party suppliers and long supply chains, and if we fail to identify and develop relationships with a sufficient number of qualified
suppliers, or if there is a significant interruption in our supply chains, our ability to timely and efficiently access raw materials
that meet our standards for quality could be adversely affected.
Our ability to identify and develop relationships
with qualified suppliers who can satisfy our standards for quality and our need to access products and supplies in a timely and efficient
manner will be a significant challenge. We may be required to replace a supplier if their products do not meet our quality or safety standards.
In addition, our suppliers could discontinue selling products at any time for reasons that may or may not be in our control or the suppliers’
control. Our operating results and inventory levels could suffer if we are unable to promptly replace a supplier who is unwilling or unable
to satisfy our requirements with a supplier providing similar products. Our suppliers’ ability to deliver products may also be affected
by financing constraints caused by credit market conditions, which could negatively impact our revenue and costs, at least until alternate
sources of supply are arranged.
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The construction
of manufacturing facilities involves significant risks.
We have limited experience constructing manufacturing
facilities and doing so is a complex and lengthy undertaking that requires sophisticated, multi-disciplinary planning and precise execution.
The construction of manufacturing facilities is subject to a number of risks. In particular, the construction costs may materially exceed
budgeted amounts, which could adversely affect our results of operations and financial condition. For example, we may suffer construction
delays or cost overruns as a result of a variety of factors, such as labor and material shortages, defects in materials and workmanship,
adverse weather conditions, transportation constraints, construction change orders, site changes, labor issues and other unforeseen difficulties,
any of which could delay or prevent the completion of our planned facilities. While our goal is to negotiate contracts with engineering,
procurement and construction firms that minimize risk, any delays or cost overruns we encounter may result in the renegotiation of our
construction contracts, which could increase our costs.
In addition, the construction of manufacturing
facilities may be subject to the receipt of approvals and permits from various regulatory agencies. Such agencies may not approve the
projects in a timely manner or may impose restrictions or conditions on a production facility that could potentially prevent construction
from proceeding, lengthen its expected completion schedule and/or increase its anticipated cost. If construction costs are higher than
we anticipate, we may be unable to achieve our expected investment return, which could adversely affect our business and results of operations.
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.
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, including those outside of the real estate development industry such as the business to be acquired from Resource
Holdings. 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.
The acquisitions
of Majestic World Holdings, MyVonia, and Resource Group (the “Acquired Businesses”) may not result in the strategic benefits
that we anticipated prior to consummating such Acquisitions.
The acquisitions of the
Acquired Businesses are expected to provide certain strategic benefits to all parties that would not be realized if such acquisitions
were not completed. Specifically, we believe the Acquired Businesses should provide certain strategic benefits which would enable us to
bring value to our stockholders. The market price of our common stock however may decline as a result of the acquisitions 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.
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We may be
unable to successfully integrate the Acquired Businesses with our current management and structure.
Our failure to successfully complete the integration
of Acquired Businesses 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 the Acquired Businesses’ technology and retaining personnel;
● minimizing potential adverse effects on existing business relationships.
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, and expect to continue to invest,
in real property assets 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 Norman Berry II Owners LLC
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.
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Our business,
results of operations, cash flows and financial condition are greatly 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.
The real
estate industry is cyclical and adverse changes in general and local economic conditions could reduce the demand for housing and, as a
result, could have a material adverse effect on us.
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.
The housing and land development industries are
subject to significant variability and fluctuations in real estate values. As a result, we may be required to write-down the book value
of our 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 land, raw materials and labor needed to operate our business. If our markets have an
oversupply of housing, 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.
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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 and may continue to fund development projects
through the use of joint ventures. 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 land and lot inventories could adversely affect our business or financial results.
Risks inherent in controlling, purchasing, holding,
and developing land are substantial. The risks inherent in purchasing and developing land parcels increase as consumer demand for housing
decreases and the holding period increases. 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.
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.
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;
● our current debt levels;
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● 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 order for us to access capital from the sale
of the debentures or shares pursuant to our equity line of credit we need to meet certain conditions and we may not be able to meet the
conditions.
If we were
to default in our obligation to repay the loan we received from BCV S&G DevCorp, which loan is secured by 100,000 Treasury Shares,
it could disrupt or adversely affect our business and our stock price could decline.
To date, we have received $1,750,000 as a secured
loan from BCV S&G DevCorp, a Luxembourg-based specialized investment fund, and have entered into a loan agreement with BCV S&G
DevCorp to receive up to $3,000,000 as a secured loan. The loan matures on December 1, 2025 and is secured by 100,000 Treasury Shares.
If we were to default in our obligation to repay the loan when due it could disrupt or adversely affect our business and our stock price
could decline if the lender were to seek to sell the pledged shares.
The outbreak
of any highly infectious or contagious diseases, such as COVID-19, could materially and adversely impact our performance, financial condition,
results of operations and cash flows.
Throughout 2021 and to date, the COVID-19 pandemic
has severely impacted global economic activity 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:
● difficulty obtaining capital necessary to fund business operations;
● construction moratoriums by local, state or federal government authorities;
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The extent to which COVID-19 or 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:
● the war in the Middle East;
● supply chain disruptions;
● a global or regional economic slowdown;
● changes in government policies and regulations affecting the Company;
● rapid material escalation of the cost of regulatory compliance and litigation.
In connection
with the Separation we agreed to indemnify SG Holdings for certain liabilities. If we are required to pay under these indemnities to SG
Holdings, our financial results could be negatively impacted. In addition, the SG Holdings indemnities may not be sufficient to hold us
harmless from the full amount of liabilities for which SG Holdings will be allocated responsibility, and SG Holdings may not be able to
satisfy its indemnification obligations in the future.
Pursuant to the separation and distribution agreement
and certain other agreements between SG Holdings and us, each party agreed to indemnify the other for certain liabilities. Third parties
could also seek to hold us responsible for any of the liabilities that SG Holdings has agreed to retain. Any amounts we are required to
pay pursuant to these indemnification obligations and other liabilities could require us to divert cash that would otherwise have been
used in furtherance of our operating business. Further, the indemnities from SG Holdings for our benefit may not be sufficient to protect
us against the full amount of such liabilities, and SG Holdings may not be able to fully satisfy its indemnification obligations.
Moreover, even if we ultimately succeed in recovering
from SG Holdings any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves. Each of these
risks could negatively affect our business, results of operations and financial condition.
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 especially the business of MWH, including the Xene Platform,
and MyVonia. 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.
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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 April 16, 2024, we received a letter from
the Listing Qualifications Department of Nasdaq stating that we were not in compliance with Nasdaq Listing Rule 5550(b)(1) (the “Rule”)
because our stockholders’ equity of $1,887,777 as of December 31, 2023, as reported in our Annual Report on Form 10-K filed
with the SEC on April 1, 2024, was below the minimum requirement of $2,500,000. Pursuant to Nasdaq’s Listing Rules, we had
45 calendar days (until May 31, 2024), to submit a plan to evidence compliance with the Rule (a “Compliance Plan”). We
submitted a Compliance Plan within the required time. On July 22, 2024, we received a letter from Nasdaq stating that based on the Quarterly
Report on Form 10-Q that we filed with the Securities and Exchange Commission for the period ended March 31, 2024, and our submission
to the Staff, dated May 29, 2024, it determined that we were in compliance with Nasdaq Listing Rule 5550(b)(1). The letter further stated
that if we fail to evidence compliance with Nasdaq Listing Rule 5550(b)(1) upon filing our next periodic report we may be subject to delisting.
On August 26, 2024, we received a letter from
Nasdaq stating that the Company was not in compliance with the Rule because the stockholders’ equity of the Company of $2,018,263
as of June 30, 2024, as reported in the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 14, 2024, was below
the minimum requirement of $2,500,000.
Pursuant to Nasdaq’s Listing Rules, we had
45 calendar days (until October 10, 2024), to submit a Compliance Plan. We submitted a Compliance Plan within the required time, which
was accepted; however, there can be no assurance that the Compliance Plan will be fully implemented. We were granted an extension of up
to 180 calendar days until October 10, 2024, to evidence compliance with the Rule. In the event the Compliance Plan is not accepted by
Nasdaq, or in the event the Compliance Plan is accepted but we fail to evidence compliance within the extension period, we will have the
right to a hearing before Nasdaq’s Hearing Panel. The hearing request would stay any suspension or delisting action pending the
conclusion of the hearing process and the expiration of any additional extension period granted by the panel following the hearing.
On October 22, 2024, we received a notice from
the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market LLC notifying the Company that the Staff had
determined that for 10 consecutive business days, from October 8, 2024 to October 21, 2024, the closing bid price of our common stock
had been at $1.00 per share or greater. Accordingly, the Staff had determined that we regained compliance with Nasdaq Listing Rule 5550(a)(2)
and indicated that the matter is now closed.
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 limited amount of news and analyst coverage for our company; and
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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. In the future, we may 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 weakness in our internal controls as of December 31, 2024. 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. Since June 30, 2024 we have identified weaknesses in internal controls.
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.
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,