Management's Discussion and Analysis of Financial Condition and Results of Operations
Prospective investors should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this annual report. Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Statements and Industry Data." This discussion should be read in conjunction with our audited consolidated financial statements and the notes thereto included elsewhere in this report.
The discussion in this section has been impacted by the restatement described in the Explanatory Note at the beginning of this Comprehensive Form 10-K and in Note 2 and Note 3 of the consolidated financial statements of this Comprehensive Form 10-K. Certain of the financial and other information provided in this Management's Discussion and Analysis of our Financial Condition and Results of Operations has been updated to reflect the restatement adjustments.
Business Overview
We operate primarily in the United States residential real estate market. Our agent-centric commission model enables our sales agents to obtain higher net commissions than they would otherwise receive from many of our competitors in our local markets. Moreover, we believe that our proprietary technology, training, and the support we provide to our agents at a minimal cost to them is one of the best offered in the industry. We are currently in the process of developing and deploying our own proprietary technology which will further decrease our overall expenses as we eliminate the need for outside technology services.
A significant driver of our past growth, and we believe, our future growth is our ability to create revenue by requiring our agents and our franchisees' agents to use business services that we provide. For example, all agents new to our Company are required to have a "coach" and to attend multi-day training sessions to learn the Company's philosophy, technology, and business practices. Concurrently, the agent works with his or her coach in obtaining listings, working with consumers, and closing transactions. All these activities are run through our La Rosa Coaching, LLC, our subsidiary which teaches advanced techniques for team building, personal growth, and business development, which we believe will enhance our revenue at a nominal increase in cost to us. In addition, unlike other residential real estate brokerages, we encourage our sales agents to pursue commercial real estate transactions and require them to utilize the services of our commercial real estate company, La Rosa CRE, LLC.
Our agent centric methodology, our advanced technology, and ancillary services, such as property management, will enable us to organically grow our agent base with virtually no incremental cost. In environments with increasing mortgage rates and declining sales transactions, we believe our model is more attractive to real estate agents, who retain more of their commission proceeds compared to traditional brokerage models. In fact, we have organically increased our agent count by just over 31 percent from December 31, 2022 to December 31, 2025.
In order to continue to provide cutting edge technology and provide best-in-class coaching and education, we periodically review our pricing structure, including increasing our agent annual fees and monthly fees, the fixed transaction fee, technology and accounting fees, and property management fees. We maintain a competitive pricing structure within the industry while simultaneously providing the necessary tools, education and perpetual innovation.
To maximize the utility of our technological infrastructure, we anticipate acquiring additional brokerage firms that will increase our agent count. We also expect to acquire other complementary businesses, such as title and insurance agencies and a mortgage brokerage. We continue to evaluate opportunities to drive our near-term and long-term growth.
On October 12, 2023, we consummated our initial public offering (the "IPO"). Since then, we acquired majority ownership of the following franchisees of the Company: Nona Legacy Powered By La Rosa Realty, Inc. (formerly, La Rosa Realty Lake Nona Inc.), Horeb Kissimmee Realty, LLC, La Rosa Realty Georgia LLC, La Rosa Realty California, and La Rosa Realty Success LLC and 100% ownership of the following franchisees of the Company: La Rosa Realty Orlando, LLC, La Rosa Realty Premier, LLC, La Rosa CW Properties, LLC, La Rosa Realty North Florida LLC, La Rosa Realty Winter Garden LLC, BF Prime LLC, FPG Title Group, LLC (formerly, Nona Title Agency LLC), La Rosa Realty Lakeland LLC (DBA La Rosa Realty Prestige), La Rosa Realty Beaches LLC, and Baxpi Holdings LLC. In December 2023, we also formed our majority owned subsidiary La Rosa Realty Texas LLC. In December 2024, we opened our first office and wholly owned subsidiary in North Carolina, La Rosa Realty NC LLC. In January 2025, we formed LR Luxury, LLC, engaged mostly in the residential real estate brokerage business. In April 2025, we formed LR Agent Advance, LLC, offering a commission advancement program exclusively for La Rosa agents. In 2025, we also formed LR Realty Spain, S.L., our wholly owned subsidiary in Spain.
During the fiscal year ended December 31, 2025, in an effort to simplify our corporate structure, we dissolved Baxpi Holdings LLC, which was non-operational, La Rosa Realty NC LLC, which was not profitable, and La Rosa Realty Success LLC, agents of which were moved to La Rosa CW Properties LLC. In February 2026, we also sold our majority interests in Horeb Kissimmee Realty, LLC to the minority member of that entity.
Description of Our Revenues
Our financial results are primarily driven by the total number of sales agents in our Company, the number of sales agents closing residential real estate transactions, the number of sales agents utilizing our coaching services, the number of agents who work with our franchisees, and the number of properties under management. We grew our agent count by 18 percent from 2,581 as of December 31, 2024 to 3,050 as of December 31, 2025.
The majority of our revenue is derived from a stable set of fees paid by our brokers, franchisees, and consumers. We have multiple revenue streams, with the majority of our revenue derived from commissions paid by consumers who transact business with our franchisees' agents, royalties paid by our franchisees, dues and technology fees paid by our sales agents, our franchisees, and our franchisees' agents. Our major revenue streams come from such sources as: (i) residential real estate brokerage revenue, (ii) revenue from our property management services, (iii) franchise royalty fees, (iv) fees from the sale or renewal of franchises and other franchise revenue, (v) coaching, training and assistance fees, (vi) brokerage revenue generated transactionally on commercial real estate, (vii) fees generated from title services revenue and insurance and (viii) fees from our events and forums.
The majority of our revenue is derived from fees and dues based on the number of agents working under the La Rosa Realty brand. Due to the low fixed cost structure of both our Company and franchise models, the addition of new sales agents generally requires little incremental investment in capital or infrastructure. Accordingly, the number of commission producing sales agents in our Company and our franchisees is the most important factor affecting our results of operations and the addition of new agents can favorably impact our revenue and our earnings before interest, taxes, depreciation and amortization ("EBITDA"). Historically, the number of agents in the residential real estate industry has been highly correlated with overall home sale transaction activity. We believe that the number of agents and those that produce commissions in our network is the primary statistic that drives our revenue. Another major factor is the cyclicality of the real estate industry that has peaks and valleys depending on macroeconomic conditions that we cannot control. And finally, our revenues fluctuate based on the changes in the aggregate fee revenue per sales agent as a significant portion of our revenue is tied to various fees that are ultimately tied to the number of agents, including annual dues, continuing franchise fees, and certain transaction or service-based fees. Our revenue per agent also increases in other ways including when transaction sides and transaction sizes increase since a portion of our revenue comes from fees tied to the number and size of real estate transactions closed by our agents.
While the Company was not named as a defendant in any of the recent class action lawsuits alleging antitrust violations, it is possible that it could be a litigant at some point in the future. Several of these lawsuits have been settled (see "Risk Factors - Adverse outcomes in litigation and regulatory actions against the NAR, other real estate brokerage companies and agents in our industry could adversely impact our financial results). These settlements can result in changes in the way real estate brokers are compensated for their services. Most notably, home sellers will no longer be required to pay buyer agent commissions which will result in lower buyer agent compensation. We cannot predict the full breadth of the outcome of these lawsuits but believe that they will result in a significant adverse effect on our financial condition and results of operations for the foreseeable future.
Key Factors Affecting our Performance
As a result of a number of factors, our historical results of operations may not be comparable to our results of operations in future periods, and our results of operations may not be directly comparable from period to period. Set forth below is a brief discussion of the key factors impacting our results of operations.
Seasonality
Our business is affected by the seasons and weather. The spring and summer seasons, when school is out, have typically resulted in higher sales volumes compared to fall and winter seasons. With the slowdown in the later months, we have experienced slower listing activity, fewer transaction closings and lower revenues and have seen more agent turnover as well. Bad weather or natural disasters also negatively impact listings and sales which reduces our operating income, net income, operating margins and cash flow. While this pattern is fairly predictable, there can be no assurance that it will continue. Moreover, with the impact of climate change, we expect more business disruptions in the coming years, many of which could be unpredictable and extreme.
Our revenues and operating margins will fluctuate in successive quarters due to a wide variety of factors, including seasonality, weather, health exigencies, holidays, national or international emergencies, the school year calendar's impact on timing of family relocations, and changes in mortgage interest rates. This fluctuation may make it difficult to compare or analyze our financial performance effectively across successive quarters.
Inflation and Market Interest Rates
The benchmark 30-year fixed conforming mortgage rate rose to a peak of about 8% during the second half of 2023, according to Freddie Mac data. That interest rate then retreated to between 6.08% and 7.22% during 2024 and between 6.15% to 7.04% during 2025. Consequently, housing demand remained soft, prices are rising, consumer sentiment has weakened, and home sales are declining. The U.S. Federal Reserve continues to take action intended to address inflation. The Federal Reserve Board maintained the federal funds rate at 533 basis points from August of 2023 through mid-September 2024, when it was reduced to 483 basis points. In February 2026, the federal funds rate was 364 basis points. The fluctuations impact interest rates, which significantly contribute to mortgage rate adjustments. In February 2026, the existing home sales market decreased 1.2% compared to February 2025 according to the NAR. This decline had an adverse impact on consumer demand for our services, as consumers weighed the financial implications of selling or purchasing a home. Continuing poor housing market conditions would adversely affect our operating performance and results of operations.
Recent Legal Challenges to Sales Agents' Commission Structure
Recent developments in the real estate industry have seen increased scrutiny and legal challenges related to the structure of real estate agent commissions. Legal actions and regulatory inquiries have been initiated to examine the fairness, transparency, and potential anticompetitive practices associated with the traditional commission model. Courts and regulatory bodies may be increasingly focused on ensuring transparency in commission structures, potentially leading to reforms that impact the earnings and business models of real estate professionals. Changes in legislation or legal precedents could impact the standard practices of commission-sharing between listing agents and buyer's agents and may adversely affect our business model and revenues.
On October 31, 2023, in the matter of Burnett v. National Association of Realtors (U.S. District Court for the Western District of Missouri), a federal jury found the NAR and certain other remaining brokerage defendants liable for $1.8 billion in damages on claims that these companies conspired to artificially inflate brokerage commissions, which is in violation of federal antitrust law (the "Burnett Ruling"). The verdict was appealed on October 31, 2023. Additionally, certain other brokerage defendants settled with the plaintiffs, including both monetary and non-monetary settlement terms. That same day, the NAR, EXP World Holdings, Inc., Compass, Inc., Redfin Corporation, Weichert Realtors, United Real Estate, Howard Hann Real Estate Services, Douglas Elliman, Inc., The Keyes Company, Illustrated Properties, LLC, Baird & Warner, Inc., Real Estate One, Inc., and others were named as defendants in Gibson v. National Association of Realtors (U.S. District Court for the Western District of Missouri), alleging a similar fact pattern and antitrust violations. On or about March 15, 2024, NAR agreed to settle the Burnett Ruling, along with a sister litigation, by agreeing to pay $418 million over approximately four years, and changing certain of its rules surrounding agent commissions. On November 26, 2024, the NAR Settlement was granted over objections, The final approval order is currently being appealed. If the NAR Settlement is sustained on appeal, it is expected to resolve claims against the NAR and certain companies related to this matter. The terms of the NAR Settlement provide that NAR has agreed to put in place a new rule prohibiting offers of compensation on the MLS, as well as adopt new rules requiring written agreements between buyers and buyers' agents.
On March 22, 2024, real estate brokerage company Compass Inc. ("Compass") announced that it will pay $57.5 million as part of a proposed settlement to resolve lawsuits over real estate commissions and agreed to change its business practices to ensure clients can more easily understand how brokers and agents are compensated for their services. Compass's motion for final approval of the settlement agreement was granted on October 31, 2024 and the settlement agreement is now effective. The final approval ruling was appealed by certain class members that objected to the settlement and is now pending before the United States Circuit Court of Appeals for the Eighth Circuit. In the same litigation, the court granted final approval of multiple additional settlements, including (i) an $8.62 million settlement on June 25, 2025 involving The Keyes Company, Illustrated Properties, LLC, Baird & Warner, Inc., Real Estate One, Inc., and other defendants, and (ii) a $42 million settlement on February 5, 2026 involving William Raveis Real Estate Inc., Hanna Holdings Inc., Windermere Real Estate Services Company Inc., Exit Realty Corp. International, Exit Realty Corp. USA, and William L. Lyon & Associates Inc.
These settlements may result in changes in the way real estate brokers are compensated for their services. Most notably, home sellers may no longer be required to pay buyer agent commissions which would result in lower buyer agent compensation. We cannot predict the full breadth of the outcome of these lawsuits but believe that they may result in a significant adverse effect on our financial condition and results of operations for the foreseeable future.
The Company will continue to monitor ongoing and similar antitrust litigation against our competitors. However, the litigation and its ramifications could cause unforeseen turmoil in our industry, the impacts of which could have a negative effect on us as an industry participant.
Recent Accounting Pronouncements
See Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" of the Notes to the consolidated financial statements in Part II, Item 8 of this Comprehensive Form 10-K.
Results of Operations
Revenue
| Year Ended December 31, | Change | |||||||||||||||
| 2025 |
2024 (restated) | $ | % | |||||||||||||
| Real Estate Brokerage Services (Residential) | $ | 66,547,103 | $ | 57,024,911 | $ | 9,522,192 | 17 | % | ||||||||
| Franchising Services | 129,702 | 329,069 | (199,367 | ) | -61 | % | ||||||||||
| Coaching Services | 443,863 | 568,516 | (124,653 | ) | -22 | % | ||||||||||
| Property Management (1) | 395,291 | 348,721 | 46,570 | 13 | % | |||||||||||
| Real Estate Brokerage Services (Commercial) | 694,133 | 327,912 | 366,221 | 112 | % | |||||||||||
| Title Settlement and Insurance | 297,714 | 83,010 | 214,704 | 259 | % | |||||||||||
| Total Revenue | $ | 68,507,806 | $ | 58,682,139 | $ | 9,825,667 | 17 | % | ||||||||
| (1) | Management identified that certain property management fee revenue for the year ended December 31, 2024 had been incorrectly recorded on a gross basis. Revenue should have been presented on a net basis reflecting only the fee retained by LRPM. See Note 2 Restatement of Previously Issued Consolidated Financial Statements. |
Real Estate Brokerage Services (Residential)
Residential real estate services revenue increased $9.5 million, or 17%, in the year ended December 31, 2025 against the comparable prior year period. The increase was primarily related to $9.8 million of revenue due to a full year of income from the seven acquisitions completed in fiscal year 2024.
Franchising Services
Franchising services revenue decreased $199 thousand, or 61%, in the year ended December 31, 2025 against the comparable prior year period. The decrease is primarily attributable to the six franchise acquisitions during fiscal year 2024, which no longer contribute to franchising royalty fees. Our remaining franchisees saw a slight increase in revenue due to market conditions in our residential services stabilizing in 2024, which partially offset the decline in franchising royalty fee revenue. Franchising royalties would be expected to decline as the acquisition of additional franchises continues.
Coaching Services
Coaching services revenue declined by $125 thousand, or 22%, in the year ended December 31, 2025 against the comparable prior year period. This is attributable to a shift in focus by management in the agent plans to focus on agent count growth that does not require coaching. This was done in anticipation of boosting transaction volume.
Property Management
Property management revenue increased $47 thousand, or 13%, in the year ended December 31, 2025 against the comparable prior year period primarily due to increases in application fees despite a reduction in total properties managed.
Real Estate Brokerage Services (Commercial)
Residential real estate services revenue increased $366 thousand, or 112%, in the year ended December 31, 2025 against the comparable prior year period. The increase was driven mostly organically due to a change in the segments management.
Title Settlement and Insurance
Revenues increased $215 thousand, or 259%, in the year ended December 31, 2025 against the comparable prior year period. The increase is due to reporting full year of revenue for the first time since this segment was acquired in August of 2024.
Gross Proft and Gross Margin
| Year Ended December 31, | Change | |||||||||||||||
| 2025 | 2024 | $ | % | |||||||||||||
| Real Estate Brokerage Services (Residential) | $ | 6,264,127 | $ | 5,340,029 | $ | 924,098 | 17 | % | ||||||||
| Gross Margin | 9.4 | % | 9.4 | % | 0.0 | % | ||||||||||
| Franchising Services | $ | (210,700 | ) | $ | (159,067 | ) | $ | (51,633 | ) | 32 | % | |||||
| Gross Margin | -162.4 | % | -48.3 | % | -114.1 | % | ||||||||||
| Coaching Services | $ | 175,781 | $ | 258,228 | $ | (82,447 | ) | -32 | % | |||||||
| Gross Margin | 39.6 | % | 45.4 | % | -5.8 | % | ||||||||||
| Property Management | $ | 318,316 | $ | 341,206 | $ | (22,890 | ) | -7 | % | |||||||
| Gross Margin | 80.5 | % | 3.1 | % | 77.5 | % | ||||||||||
| Real Estate Brokerage Services (Commercial) | $ | 123,151 | $ | 89,873 | $ | 33,278 | 37 | % | ||||||||
| Gross Margin | 17.7 | % | 27.4 | % | -9.7 | % | ||||||||||
| Title Settlement and Insurance | $ | 297,714 | $ | 83,010 | $ | 214,704 | 259 | % | ||||||||
| Gross Margin | 100.0 | % | 100.0 | % | 0.0 | % | ||||||||||
| Total Gross Profit | $ | 6,968,389 | $ | 5,953,279 | $ | 1,015,110 | 17 | % | ||||||||
| Total Gross Margin | 10.2 | % | 8.6 | % | 1.6 | % | ||||||||||
Real Estate Brokerage Services (Residential)
The percentage of gross margin remained the same year over year. Gross margin related to residential real estate brokerage services increased $924 thousand, or 17%, in the year ended December 31, 2025 against the comparable prior year period. The increase was driven in part by an increase in revenue of $9.5 million and a related cost of revenue increase of $8.6 million primarily from the seven acquisitions completed during fiscal year 2024. Therefore, gross margin remained relatively constant year-over-year.
Franchising Services
The percentage of gross margin declined by 114.1%. Gross margin related to franchising services declined by $52 thousand. The decline is attributable to the acquisitions of the seven acquisitions in 2024 related to franchises. As a result, this decreased the franchising revenues and costs though not necessarily proportionally due to changes in aspects of cost of sales.
Coaching Services
The percentage of gross margin declined by 5.8%. Gross margin related to coaching services declined by $82 thousand, primarily due to a change in operations which do not require the coaching services for certain plans, to expediate onboarding, therefore this resulted in the overall reduction of coaching revenues and cost of sales throughout 2025 as compared to 2024.
Property Management
The percentage of gross margin declined by 77.5%. Gross margin related to property management services declined by $23 thousand the year ended December 31, 2025 against the comparable prior year period. The increase in property management costs is related to fixed costs of sales that did not change while the number of properties under management declined.
Real Estate Brokerage Services (Commercial)
The percentage of gross margin declined year over year. Gross margin related to commercial real estate brokerage services increased $33 thousand, or 37%, in the year ended December 31, 2025, against the comparable prior year period. The change was driven in part by an increase in revenue of $366 thousand and a related cost of revenue increase of $333 thousand primarily from organic growth.
Title Settlement and Insurance
The percentage of gross margin increased by 259%. Gross margin related to title settlement and insurance increased by $215 thousand for the year ended December 31, 2025 against the comparable prior year period due to a full year of activity as this segment was acquired in August of 2024.
Selling, General and Administrative Expense
| Year Ended December 31, | Change | |||||||||||||||
| 2025 | 2024 | $ | % | |||||||||||||
| Sales and Marketing | $ | 1,542,680 | $ | 1,007,077 | $ | 535,603 | 53 | % | ||||||||
| Payroll and benefits | 6,087,560 | 4,339,402 | 1,748,158 | 40 | % | |||||||||||
| Rent and other | 1,542,322 | 1,070,708 | 471,614 | 44 | % | |||||||||||
| Professional fees | 3,231,891 | 1,594,262 | 1,637,629 | 103 | % | |||||||||||
| Office | 287,674 | 384,218 | (96,544 | ) | -25 | % | ||||||||||
| Technology | 710,319 | 372,010 | 338,309 | 91 | % | |||||||||||
| Insurance, training and other | 559,329 | 614,145 | (54,816 | ) | -9 | % | ||||||||||
| Public company costs | 761,838 | 1,231,872 | (470,034 | ) | -38 | % | ||||||||||
| Amortization and depreciation | 689,039 | 1,018,934 | (329,895 | ) | -32 | % | ||||||||||
| Total SG&A Expenses | $ | 15,412,652 | $ | 11,632,628 | $ | 3,780,024 | 32 | % | ||||||||
Selling, general and administrative costs increased $3.8 million, or 32%, in the year ended December 31, 2025 against the comparable prior year period. Sales and marketing costs increased as the Company worked to expand and grow the business.
Payroll and benefits increased $1.7 million or 40%, in the year ended December 31, 2025 against the comparable prior year period primarily due to benefits offered and headcount increases and certain one-time bonuses paid to our executives.
Rent and occupancy increased $472 thousand or 44% in the year ended December 31, 2025 against the comparable prior year period due to the seven acquisitions in 2024.
Professional fees increased $1.6 million, or 103%, in the year ended December 31, 2025 against the comparable prior year period. This increase was primarily due to professional and legal fees incurred related to financing transactions entered into in 2025.
Office and technology costs increased by $242 thousand, or 66%, in the year ended December 31, 2025 against the comparable prior year period. This is primarily due to one-time costs related to upgrading our accounting and internally developed customer resource applications.
Insurance, training and other costs decreased $54 thousand, or 9%, in the year ended December 31, 2025 against the comparable prior year period. This is due to new favorable contracts and using alternative less costly providers for trainings.
Public company costs decreased $470 thousand in the year ended December 31, 2025 against the comparable prior year period. This is due to a reduction in cost related to investor relations and cost related to acquisition activity.
Additionally, as part of total operating cost the Company recognized in December 31, 2025 and 2024, there were impairments of intangible and goodwill for $6,911,134 and $787,438, respectively, due to triggering conditions.
Stock-based compensation
We incurred stock-based compensation of $5.0 million in 2025 based mostly upon restricted stock units granted to consultants ($1.8), agents and employees ($0.5 million) and option grants and restricted Common Stock awards to our CEO pursuant to the terms of his employment agreement and 2022 Plan ($2.7 million).
We incurred stock-based compensation of $4.7 million in 2024 based upon restricted stock units granted to agents and employees ($0.8 million), consultants who provided various services to the company ($1.4 million), an option grant to our CEO pursuant to the terms of his employment agreement ($2.1 million) and an option grant to our COO pursuant to her employment agreement ($400,000).
Other Income (Expense), Net
Other expense, net for the year ended December 31, 2025 was $10.1 million compared to other expense, net of $3.2 million for the comparable prior year. The 2025 expense was mostly due to $15.4 million in expenses related to our convertible debt and associated warrants, partially off-set by a $4.0 million gain on the extinguishment of debt and a $0.9 million change in the fair value of derivative liabilities.
Liquidity and Capital Resources
On December 31, 2025 and 2024 we had cash of $3.1 million and $1.4 million, respectively, on hand.
On February 4, 2025, the Company and an institutional investor entered into the securities purchase agreement, pursuant to which the Company issued to the 2025 Investor: (i) the Initial Note in the original principal amount of $5,500,000 maturing on February 4, 2027; and (ii) sixteen (16) Incremental Warrants, each to purchase additional Notes in an original principal amount up to $2,500,000 at an exercise price of $2,256,250, in substantially the same form as the Initial Note. The purchase price paid by the 2025 Investor under the agreement for the Initial Note and Incremental Warrants was $4,963,750, of which $910,250, $496,191 and $148,724 were used to assume or extinguish other debt for net proceeds of $3,408,585. Remaining funds from the offering were used by the Company to pay-off certain indebtedness of the Company, pay certain outstanding fees and expenses (including expenses of the offering, and fees payable to the placement agent and advisors), acquisitions and general corporate purposes. Of the proceeds from the offering, $354,450 was paid to satisfy, in full, the remaining balance of the standard merchant cash advance agreements with Cedar Advance, LLC, $340,421 was paid to satisfy, in full, the remaining balance of the standard merchant cash advance agreement with Arin Funding, LLC and $910,250 was paid to satisfy, in full, the remaining balance of the senior secured promissory notes with an accredited investor. On June 18, 2025, the Company and 2025 Investor entered into the Exchange Agreement, pursuant to which (among other things) the 2025 Investor surrendered and exchanged all of its Incremental Warrants in exchange for 6,000 shares of the Series B Preferred Stock. The 2025 Investor fully converted the Initial Note, and the Company issued the 2025 Investor 8,215 in 2025 and 750 shares in the first quarter of 2026 for an aggregate of 8,965 shares of Common Stock upon such conversion. See Note 8 - Borrowings to the accompanying consolidated financial statements for further disclosure.
In addition to the debt pay downs during the year ended December 31, 2025, the Company eliminated all warrants tied to the investor senior secured promissory notes outstanding as of December 31,2024. Two of the three warrants were exercised on a cashless basis, with the third warrant being bought back by the Company in the amount of $379,083, fully eliminating these unfavorable ratchet warrants.
During the year ended December 31, 2025, the Company received proceeds from the sale of 3,871 shares of Common Stock pursuant to its sales agreement with AGP ("ATM Agreement") of $7,496,361. The Company paid the sales agent compensation with respect to sale of such shares in the amount of $105,885.
During the year ended December 31, 2025, the Company sold 500 shares of Common Stock pursuant to the Facility for aggregate proceeds of $111,902.
The Company is subject to the risks and challenges associated with companies at a similar stage of development. These include dependence on key individuals, successful development and marketing of its offerings, and competition with larger companies with greater financial, technical, and marketing resources. Furthermore, during the period required to achieve substantially higher revenue in order to become profitable, the Company will require additional funds that might not be readily available or might not be on terms that are acceptable to the Company. Until such time that the Company fully implements its growth strategy, it expects to continue to generate operating losses in the foreseeable future, mostly due to corporate overhead and costs of being a public company. As such, the Company anticipates that its existing working capital, including cash on hand, and cash generated from operations will not be sufficient to meet projected operating expenses for the foreseeable future through at least twelve months from the issuance of the consolidated financial statements. The Company will be required to raise additional capital to service its promissory notes, to repay the principal balance of each of the notes, and to fund ongoing operations.
We have incurred recurring net losses, and our operations have not provided net positive cash flows. In view of these matters, there is substantial doubt about our ability to continue as a going concern. We plan on continuing to expand via acquisition, which will help achieve future profitability, and we have plans to raise capital from outside investors, as we have done in the past, to fund operating losses and to provide capital for further business acquisitions. We cannot provide any assurance that we can successfully raise the capital needed on favorable terms, if at all.
Summary of Cash Flows
| For the year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net Cash Used in Operating Activities | $ | (7,528,859 | ) | $ | (2,997,307 | ) | ||
| Net Cash Used by Investing Activities | $ | - | $ | (68,625 | ) | |||
| Net Cash Provided by Financing Activities | $ | 8,852,524 | $ | 4,202,713 | ||||
Cash Flows Used in Operating Activities
For the year ended December 31, 2025, net cash used in operating activities was $7.5 million, which was primarily attributable to the net loss of $26.5 million, excluding stock-based compensation and changes in operating assets and liabilities. Non-cash provided primarily included: Loss on issuance of senior secured convertible note and warrants, change on fair value of convertible note and warrants, gain on settlement of incremental warrants, amortization and depreciation and debt discount, change in fair value of derivatives, impairment of goodwill and non-cash lease and other expenses totaling $19.0 million.
For the year ended December 31, 2024, net cash used in operating activities was $3.0 million, which was primarily attributable to the net loss of $8.2 million, excluding stock-based compensation and changes in operating assets and liabilities. Non-cash provided primarily included: amortization and depreciation and debt discount, change in fair value of derivatives, impairment of goodwill, loss on extinguishment of debt and non-cash lease and other expenses totaling $3.6 million.
Cash Flows Used in Investing Activities
For the year ended December 31, 2025, there was no cash impact from investing activities.
For the year ended December 31, 2024, net cash used in investing activities was $69 thousand. This was the result of the purchase of property and equipment and cash acquired through acquisitions.
Cash Flows Provided by Financing Activities
For the year ended December 31, 2025, net cash provided by financing activities was $8.9 million. This was driven by cash flows from debt and equity financing that provided $11.0 million in proceeds. These proceeds were offset by $2.2 million of payments and advances on debt and other financing instruments,
For the year ended December 31, 2024, net cash provided by financing activities was $4.2 million. This was driven by cash flows from debt and equity financing that provided $6.6 million in proceeds. These proceeds were offset by $2.4 of payments and advances on debt and other financing instruments,
Off-Balance Sheet Arrangements
On December 31, 2025, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities. We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Estimates
A critical accounting estimate is one that is both important to the portrayal of a company's financial condition and results of operations and requires management's most difficult, subjective or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Use of Estimates. The preparation of financial statements in accordance with generally accepted accounting principles in the U.S. requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The financial statements in this report include estimates based on currently available information and our judgment as to the outcome of future conditions and circumstances. Changes in the status of certain facts or circumstances could result in material changes to the estimates used in the preparation of the financial statements and actual results could differ from the estimates and assumptions. The Company's significant estimates in these financial statements are listed below:
Revenue Recognition
The Company records revenue based upon the consideration specified in the client arrangement, and revenue is recognized when the performance obligations in the client arrangement are satisfied. A performance obligation is a contractual promise to transfer a distinct good or service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.
Goodwill and Intangible Assets
Goodwill is tested for impairment at least annually in the fourth quarter of our fiscal year. We first perform a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying amount, and, if so, we then quantitatively compare the fair value of our reporting units to their carrying amount. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not impaired. If the carrying amount of a reporting unit exceeds its fair value, we then record an impairment loss equal to the difference, up to the carrying value of goodwill. The carrying values of identifiable intangible assets are reviewed for recoverability on a quarterly basis. The facts and circumstances considered include the recoverability of the cost of other intangible assets from future undiscounted cash flows to be derived from the use of the asset or asset group. It is not possible for us to predict the likelihood of any possible future impairments or, if such an impairment were to occur, the magnitude of any impairment. Intangible assets are subject to amortization over the expected period of economic benefit to us. We evaluate whether events or circumstances have occurred that warrant a revision to the remaining useful lives of intangible assets. In cases where a revision is deemed appropriate, the remaining carrying amounts of the intangible assets are amortized over the revised remaining useful life.
Business Combinations
The allocation of the purchase price for acquisitions requires use of accounting estimates and judgments to allocate the purchase price to the identifiable tangible and intangible assets acquired, including franchise agreements, agent relationships, existing real estate listings, and non-compete agreements and liabilities assumed based on their respective fair values. The estimates we make include expected cash flows, expected cost savings, and the appropriate weighted average cost of capital. We complete these assessments as soon as practical after the acquisition closing dates. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.
Stock-Based Compensation
We use the fair value method of accounting for our stock options and restricted stock units ("RSUs") granted to employees, contractors and consultants to measure the cost of services received in exchange for the stock-based awards. The fair value of stock option awards with only service conditions is estimated on the grant date using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires inputs such as the risk-free interest rate, expected term and expected volatility. These inputs are subjective and generally require significant judgment. The fair value of RSUs is measured on the grant date based on the prior day closing fair market value of our Common Stock. The resulting cost is recognized over the period during which an employee is required to provide service in exchange for the awards, usually the vesting period. Stock-based compensation expense is recognized on a straight-line basis, net of actual forfeitures in the period.
As we accumulate additional employee stock-based awards data over time and as we incorporate market data related to our Common Stock, we may calculate significantly different volatilities and expected lives, which could materially impact the valuation of our stock-based awards and the stock-based compensation expense that we will recognize in future periods.
Income Taxes
We are subject to taxes in the United States. Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We make these estimates and judgments about our future taxable income that are based on assumptions that are consistent with our future plans. Tax laws, regulations and administrative practices may be subject to change due to economic or political conditions including fundamental changes to the tax laws. As of December 31, 2025, we had recorded a full valuation allowance on our net U.S. deferred tax assets because we expect that it is more likely than not that our U.S. deferred tax assets will not be realized. Should the actual amounts differ from our estimates, the amount of our valuation allowance could be materially impacted.