Note 8 – Stockholders’ Deficit

Change in Authorized Shares

On June 14, 2024, the Company’s Board of Directors approved an increase in authorized common stock from 50,000,000 to 500,000,000 shares. This increase was made to:

As of June 30, 2025, the Company had four classes of stock, detailed as follows:

Preferred Stock

The Company’s undesignated preferred stock provides flexibility for future corporate financing and strategic transactions.

The Board of Directors has the authority to issue preferred stock in one or more series and determine the rights, privileges, and restrictions of each series without further stockholder approval.

Convertible Preferred Stock – Series A

On August 16, 2024, the Company designated and issued Series A convertible preferred stock as part of a debt-to-equity conversion.

Convertible Preferred Stock – Series B

On October 1, 2024, the Company designated and issued Series B convertible preferred stock as part of a structured financing transaction.

Common Stock

*In connection with the common control merger, any shares issued to Next Holding, an entity under common control, are excluded from the total shares outstanding. This is because, under U.S. GAAP, a company cannot recognize an investment in itself. Accordingly, these shares are treated as constructively retired or held by the Company as treasury stock equivalent and are not considered outstanding for earnings per share or equity reporting purposes.

Under ASC 810-10-45-1 and ASC 505-10-45-2, equity interests held by a parent, subsidiary, or an entity under common control in the reporting entity must be eliminated in consolidation. Similarly, shares held by entities consolidated into or controlled by the Company are treated as not outstanding, since they represent an indirect investment in the Company’s own equity.

Securities and Incentive Plans

The Company maintains stock-based compensation plans under which stock options, restricted stock, and other equity awards are granted to employees, directors, and consultants.

Equity Transactions for the Six Months Ended June 30, 2025

Stock Issued for Cash and Warrants – Public Offering

On February 18, 2025, the Company sold 5,000,000 shares of common stock for gross proceeds of $15,000,000 ($3/share). In connection with this offering, the Company paid direct offering costs of $1,538,914, resulting in net proceeds of $13,461,086.

The proceeds from the offering are expected to be used for:

Additionally, the Company granted the underwriter the option to purchase up to 750,000 additional over-allotment shares of common stock at $3/share, for a period of 45 days (through March 3, 2025). In connection with this option, the Company issued an additional 75,378 shares of common stock for gross proceeds of $226,134 ($3/share). In connection with this offering, the Company paid direct offering costs of $18,091, resulting in net proceeds of $208,043.

The underwriter was also issued 250,000 warrants for services rendered in connection with the offering, which will be accounted for as a direct offering cost. These warrants are exercisable at $3.75/share. These warrants are exercisable beginning 6 months after the grant date and for an additional 4.5 years through February 13, 2030.

Stock Issued for Services

The Company issued 7,336,821 shares of common stock to consultants for services rendered, having a fair value of $21,326,731 ($2.57 - $3.90/share), based upon the quoted closing trading price.

Additionally, the Company issued 1,889,002 shares of common stock to consultants for prepaid services, having a fair value of $5,623,425 ($2.91 - $3.21/share), based upon the quoted closing trading price.

Stock Issued as Loan Extension Fee

In connection with the extension of loan #5, the Company was required to pay a fee of $150,000 in common stock. The Company issued 41,437 shares of common stock ($3.62/share) and recorded additional interest expense.

In connection with the extension of loan #12, the Company was required to pay a fee of 116,000 shares of common stock with a fair value of $347,960 ($2.91 - $3.31/share) based upon the quoted closing trading price.

Stock Issued for Conversion of Accounts Payable

The Company issued 22,013 shares with a fair value of $68,681 ($3.12/share) to a vendor to settle accounts payable of $40,000, resulting in a loss on settlement of liabilities of $28,681.

Stock Issued for Conversion of Notes Payable

The Company issued 256,667 shares of common stock to convert the remaining balance of $770,000 on loan #17 at a price per share of $3.00 or fair value of $770,000.

The Company issued 550,000 shares of common stock to convert the flat-rate interest owed of $1,350,000 on loans #30 and 31 at a price per share of $3.00, or fair value of $1,350,000.

Series B Convertible Preferred Stock – Distribution – Related Party

On February 13, 2025, immediately prior to the consummation of the common control merger, the Company effectuated a non-cash distribution of 1,400,000 shares of Series B convertible preferred stock to its Chief Executive Officer, a related party. The transaction was executed in fulfillment of a previously established arrangement between the CEO and NextNRG LLC, a wholly owned subsidiary of the Company and former holder of the Series B convertible preferred stock. Under this arrangement, the CEO had advanced personal funds to NextNRG LLC to facilitate the original acquisition of the shares on behalf of the Company.

As the transfer settled an internal capital funding obligation and involved no exchange of cash or services at the time of distribution, the transaction was accounted for as a capital contribution by a related party in accordance with ASC 505-10, Equity – Overall, and ASC 850-10, Related Party Disclosures. No gain or loss was recognized, and the Series B shares were recorded at par value, with the offset credited to additional paid-in capital.

The CEO meets the definition of a related party under ASC 850-10-20, which includes executive officers and entities under their control. Furthermore, in accordance with SAB Topic 5.G and Regulation S-X Rule 4-08(k), the Company has disclosed this transaction due to the material nature of the capital stock transfer and its occurrence with a related party.

This distribution did not impact the determination of net income (loss) available to common stockholders and was excluded from the calculation of earnings per share in accordance with ASC 260-10-45-59, as the issuance represented a capital transaction rather than an income or expense-generating event.

Series A and B Convertible Preferred Stock – Preferred Stock Dividends Payable in Common Stock

In accordance with the terms of the Company’s Series A convertible preferred stock and the Series B convertible preferred stock, the Company is required to accrue dividends on a quarterly basis. Similar to the Series A and Series B convertible preferred stock, dividends are accrued using a fixed conversion price. There are no other provisions that could result in a variable number of shares required for settlement in the future.

Additionally, the Company has considered relevant accounting guidance, and has determined that there are no provisions related to its dividends that would require derivative liability treatment.

At June 30, 2025 and December 31, 2024, the Company had accrued dividends totaling $173,438 and $258,271, respectively. In 2025, the Company issued 93,576 shares of common stock to settle the outstanding dividends due and another 62,839 in newly-accrued dividends.

The following is a summary of the Company’s dividends:

Schedule of Dividends Payable

The following represents the Company’s Series A and B convertible preferred stock quantity of shares due at June 30, 2025 and December 31, 2024:

Schedule of Series A and B Convertible Preferred Stock Dividends Payable

The following represents the Company’s Series A and B convertible preferred stock valuation due at June 30, 2025 and December 31, 2024:

Equity Transactions for the Year Ended December 31, 2024 and the Six Months Ended June 30, 2025

Vesting of Board of Director Common Stock Grants – Related Parties

The Company issued 88,336 shares of common stock (par value of $9) in connection with the vesting of shares previously granted in 2023 to various board members. The issuance of these shares had no net effect of stockholders’ deficit as the share issuance was reflected at par value. The Company recorded $251,334 of expense in 2024, related to the vesting of these shares in 2024.

The Company issued 136,484 shares of common stock to various board members for services rendered in 2024, having a fair value of $520,000 ($3.81/share), based upon the quoted closing trading price.

Total share-based payments to board members in 2024 were $771,334.

Also, see Note 7 for the expense recorded in 2024 of $34,666 related to the vesting of shares for the Company’s Chief Technology Officer.

Total share-based payments (including vesting of prior period awards) with board members and officers for the year ended December 31, 2024 totaled $806,000.

Stock Issued for Services

The Company issued 212,730 shares of common stock to consultants for services rendered, having a fair value of $725,640 ($0.0001 - $3.52/share), based upon the quoted closing trading price.

Stock Issued to Settle Accounts Payable

The Company issued 2,703 shares of common stock to a vendor for services rendered, having a fair value of $10,000 ($3.70/share), based upon the quoted closing price.

Series A Convertible Preferred Stock Issued in Debt Conversion

On August 16, 2024, the Company converted all outstanding principal ($2,420,000) and accrued interest ($0) into 363,000 shares of Series A convertible preferred stock at a $10/share stated value. At the time of conversion, the lender executed a 150% penalty interest feature. As a result, and just prior to conversion, the Company increased its interest expense and related debt by $1,210,000 for a total of $3,630,000 of debt that was converted. As a result of this debt conversion, the balance due to this lender was $0 as of June 30, 2025 and December 31, 2024.

See Note 5 regarding debt conversion and related loss on debt extinguishment.

Restricted Stock and Related Vesting

A summary of the Company’s non-vested shares (due to service time-based restrictions) as of June 30, 2025 and December 31, 2024, is presented below:

Schedule of Company Nonvested Shares

The Company has issued various equity grants to directors, officers, consultants and employees. These grants typically contain a vesting period of one to three years and require services to be performed in order for the shares to vest.

The Company determines the fair value of the equity grant on the issuance date based upon the quoted closing trading price. These amounts are then recognized as compensation expense over the requisite service period and are recorded as a component of general and administrative expenses in the accompanying unaudited consolidated statements of operations.

The Company recognizes forfeitures of restricted shares as they occur rather than estimating a forfeiture rate. Any unvested share-based compensation is reversed on the date of forfeiture, which is typically due to service termination.

At June 30, 2025, unrecognized stock compensation expense related to restricted stock was $1,869,890, which will be recognized over a weighted-average period of one 1 year.

During the six months ended June 30, 2025, and 2024, the Company recognized compensation expense of $981,211 and $251,333, respectively, related to the vesting of these shares.

Warrants

Warrant activity for the three months ended June 30, 2025 and December 31, 2024 are summarized as follows:

Schedule of Stock Warrant Activity