# NEXTNRG, INC. (NXXT) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from NEXTNRG, INC.'s 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1817004/000149315223008161/form10-k.htm
Accession: 0001493152-23-008161
Filing date: 2023-03-20
Report date: 2022-12-31
Extracted from a later financial-section MD&A body after the formal Item 7 span was a short reference.
Confidence: high

Company profile: /company/NXXT/
All MD&A years: /company/NXXT/mda/
Previous year: /company/NXXT/mda/fy2021/ (FY 2021)
Next year: /company/NXXT/mda/fy2023/ (FY 2023)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The
following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition,
liquidity and cash flows of our Company as of and for the periods presented below. The following discussion and analysis of our financial
condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and
related notes included in this Annual Report on Form 10-K and the audited financial statements and notes thereto as of and for the year
ended December 31, 2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations,
both of which are contained in our Registration Statement on Form S-1 filed with the Securities and Exchange Commission, or SEC, on June
1, 2021, as amended, and declared effective on September 14, 2021. Unless the context requires otherwise, references in this Annual Report
on Form 10-K to “we,” “us,” and “our” refer to Ezfill Holdings, Inc.

20

Forward-Looking
Statements

The
information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities
Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act,
which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited
to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and
plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,”
“intends,” “may,” “plans,” “projects,” “will,” “would” and similar
expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying
words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should
not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions
and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties
that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation,
the risks set forth in our filings with the SEC. The forward-looking statements are applicable only as of the date on which they are
made, and we do not assume any obligation to update any forward-looking statements.

Overview

We
were incorporated under the laws of Delaware in March 2019. We are in the business of operating mobile fueling trucks and are headquartered
in Miami, Florida. EzFill provides its customers the ability to have fuel delivered to their vehicles (cars, boats, trucks) without leaving
their home or office and to construction sites, generators, and reserve tanks.

Our
mobile fueling solution gives our fleet, consumer, and other customers the ability to fuel their vehicles with the touch of an app or
regularly scheduled service, and without the inconvenience of going to the gas station.

Critical
Accounting Policies and Estimates

Our
discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared
in accordance with generally accepted accounting principles in the U.S., or GAAP. We have identified certain accounting policies as critical
to understanding our financial condition and results of our operations. For a detailed discussion on the application of these and other
accounting policies, see the notes to our financial statements included in this Annual Report on Form 10-K.

Results
of Operations

The
following table sets forth our results of operations for the year ended December 31, 2022, and 2021:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2022","","","2021"],["Revenues","","$","15,044,721","","","$","7,233,957"],["Cost of sales","","","15,218,234","","","","7,027,274"],["Operating expenses","","","12,648,629","","","","8,102,934"],["Impairment of goodwill, other intangibles and fixed assets","","","2,894,516","","","","-"],["Depreciation and amortization","","","1,769,621","","","","872,834"],["Operating loss","","","(17,486,279",")","","","(8,769,085",")"],["Other income (expense)","","","(19,486",")","","","(614,312",")"],["Net loss","","$","(17,505,765",")","","$","(9,383,397",")"]]
[[/GREPCENT_TABLE]]

Non-GAAP
Financial Measures

Adjusted
EBITDA is a non-GAAP financial measure which we use in our financial performance analyses. This measure should not be considered a
substitute for GAAP-basis measures, nor should it be viewed as a substitute for operating results determined in accordance with
GAAP. We believe that the presentation of Adjusted EBITDA, a non-GAAP financial measure that excludes the impact of net interest
expense, taxes, depreciation, amortization, impairment of goodwill, other intangibles and fixed assets, and stock compensation
expense, provides useful supplemental information that is essential to a proper understanding of our financial results. Non-GAAP
measures are not formally defined by GAAP, and other entities may use calculation methods that differ from ours for the purposes of
calculating Adjusted EBITDA. As a complement to GAAP financial measures, we believe that Adjusted EBITDA assists investors who
follow the practice of some investment analysts who adjust GAAP financial measures to exclude items that may obscure underlying
performance and distort comparability.

21

The
following is a reconciliation of net loss to the non-GAAP financial measure referred to as Adjusted EBITDA for the year ended December
31, 2022, and 2021:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2022","","","2021"],["Net loss","","$","(17,505,765",")","","$","(9,383,397",")"],["Interest expense, net","","","19,486","","","","768,985"],["Depreciation and amortization","","","1,769,621","","","","872,834"],["Impairment of goodwill, other intangibles and fixed assets","","","2,894,516","","","","-"],["Stock compensation","","","1,412,283","","","","1,896,074"],["Adjusted EBITDA","","$","(11,409,859",")","","$","(5,845,504",")"],["Gallons delivered","","","3,614,844","","","","2,308,764"]]
[[/GREPCENT_TABLE]]

Year
ended December 31, 2022 compared to the Year ended December 31, 2021

Revenues

We
generated revenues of $15,044,721 for the year ended December 31, 2022, compared to $7,233,957 for the year ended December 31, 2021,
an increase of $7,810,764 or 108%. This increase is due to a 57% increase in gallons delivered as well as an increase in the average
price per gallon.

Cost
of sales was $15,218,234 for the year ended December 31, 2022, resulting in a gross profit of $(173,513), compared to $206,683 for the
prior year. The $8,190,960 or 117% increase in cost of sales is due to the increase in sales and an increase in labor costs primarily
related to the expansion to new markets.

Operating
Expenses

We
incurred operating expenses of $12,648,629 during the year ended December 31, 2022, as compared to $8,102,934 during the prior year,
an increase of $4,545,695 or 56%. This net increase consisted of a decrease of $483,791 in stock compensation expense and an increase
of $5,029,486 in other operating expenses. The increase was primarily due to increases in payroll, sales and marketing, insurance, technology,
and public company expenses.

Depreciation
and Amortization

Amortization
increased in the current year as a result of the acquisition of a fueling business. Depreciation increased in the current year as a result
of purchases of vehicles and delivery equipment.

Impairment
of Goodwill, Other Intangibles and Fixed Assets

During
the year ended December 31, 2022, the Company recorded an impairment loss of $1,987,500 related to a license of technology for which
the Company has proposed termination of the agreement and which is not expected to generate any revenue in 2023. The Company recorded
impairment of $258,114 related to materials purchased for construction of delivery vehicles to reduce the carrying value to the expected
realizable value. Goodwill is considered impaired, and the Company recognized an impairment loss of $166,838, or the remaining balance
of goodwill, during the year ended December 31, 2022. This loss was primarily due to the fall in the Company’s stock price and
the decrease of the Company’s market capitalization as well as past operating performance. As a consequence, management forecasts
were revised, and additional risk factors were applied. The fair value of the intangibles was estimated using a combination of market
comparables (level 1 inputs) and expected present value of future cash flows (level 3 inputs) and as a result impairment was recorded
for a total of $482,064.

Other
Income (Expense)

Interest
expense decreased in the current year due to the early repayment in September 2021 of pre-IPO debt.

Net
Losses

We
sustained a net loss of $17,505,765 for the year ended December 31, 2022,
as compared to $9,383,397 for the prior year, an increase of $8,122,368 or 87% as a result of the above.

22

Liquidity
and Capital Resources

Cash
Flow Activities

As
of December 31, 2022, we had an accumulated deficit of $(34,845,161). We have incurred net losses since inception and have funded operations
primarily through sales of our common stock and issuance of notes payable, including to related parties. As of December 31, 2022, we
had $4,186,875 in cash and investments, as compared to December 31, 2021, when we had $16,924,146 in cash and investments.

Operating
Activities

Net
cash used in operating activities was $(11,599,581) for the year ended December 31, 2022, which was made up primarily by the net loss
and partially offset by stock compensation of $1,412,283 and depreciation and amortization of $1,769,621 and impairment loss of $2,894,516.
Net cash used in operating activities was $(6,306,761) during the prior year, which was
made up primarily by the net loss and partially offset by an increase in stock-based compensation of $1,896,074, warrants and shares
to lenders of $248,011, and depreciation and amortization of $872,834.

Investing
Activities

During
the year ended December 31, 2022, and 2021, we used $3,258,417 and $1,998,151, respectively, for the acquisition of fixed assets,
primarily delivery trucks. Investments matured during 2022 for total proceeds of $1,151,186. We used $321,250 for the acquisition of
a fueling business in 2022. We invested $3,367,953 in debt securities in 2021.

Financing
Activities

We
generated $2,533,589 of cash flows from financing activities during the year ended December 31, 2022, including $3,191,308 from new debt
borrowings, less $657,719 for the repayment of debt. All of the pre-acquisition debt was repaid following our IPO. In 2021, we generated
$24,370,464 of cash flows from financing activities, including $28,750,000 less related expense of $(3,500,426) from the Initial Public
Offering, $2,990,572 from new debt borrowings and $115,000 from sale of shares, less $3,984,682 for the repayment of debt. All of the
pre-acquisition debt was repaid following our IPO.

Liquidity
and Sources of Capital

From
inception to December 31, 2022, we have funded our activities through capital contributions from issuances of notes payable and the sale
of securities pursuant to the exemption provided by Regulation D, by sale of securities to accredited investors and a public offering.
We have also financed truck purchases from manufacturer loans and from our bank line of credit.

Although our financial statements for the year ended December 31, 2022
were prepared under the assumption that we would continue our operations as a going concern, the report of our independent registered
public accounting firm that accompanies our financial statements for the year ended December 31, 2022 contains a going concern qualification
in which said firm expressed substantial doubt about our ability to continue as a going concern, based on the financial statements at
that time. The
Company has sustained a net loss since inception and does not have sufficient revenues and income to fully fund the operations. As a
result, the Company has relied on loans from stockholders and others as well as stock sales to fund its activities to date. For the year
ended December 31, 2022, the Company had a net loss of $17,505,765. At December 31, 2022, the Company had an accumulated deficit of $34,845,161.
We anticipate that we will continue to generate operating losses and use cash in operations through the foreseeable future.

Since
inception, the Company’s operations have primarily been funded through proceeds received in equity and debt financings. In September
2021, the Company completed its Initial Public Offering and raised $25,250,000 in net proceeds after deducting the underwriting discount
and offering expenses. The Company anticipates that it will need to raise additional capital by March 31, 2023, in order to continue to
fund its operations. There is no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all.
There is also no assurance that the amount of funds the Company might raise will enable the Company to complete its initiatives or attain
profitable operations. The Company’s operating needs include the planned costs to operate its business, including amounts required
to fund working capital and capital expenditures. The Company’s future capital requirements and the adequacy of its available funds
will depend on many factors, including the Company’s ability to successfully expand to new markets, competition, and the need to
enter into collaborations with other companies or acquire other companies to enhance or complement its product and service offerings.
There can be no assurances that, in the event that we require additional financing, such financing will be available on terms which are
favorable to us, or at all. If we are unable to raise additional funding to meet our working capital needs in the future, we will be
forced to delay or reduce, limit or cease our operations.