UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from _____to_____
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | ||
| (Address of principal executive offices) | (Zip Code) |
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(Former name, former address and formal fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class: | Trading Symbol(s) | Name of each exchange on which registered: | ||
| The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | ||
| Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 27, 2025, the registrant had
TABLE OF CONTENTS
i
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
La Rosa Holdings Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
| March 31, 2025 | December 31, 2024 | |||||||
| (unaudited) | (audited) | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net of allowance for credit losses of $ | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Noncurrent assets: | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use asset, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other long-term assets | ||||||||
| Total noncurrent assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders' Equity (Deficit) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Contract liabilities | ||||||||
| Line of credit | ||||||||
| Derivative liability | ||||||||
| Advances on future receipts | — | |||||||
| Accrued acquisition cash consideration | ||||||||
| Notes payable, current | ||||||||
| Lease liability, current | ||||||||
| Total current liabilities | ||||||||
| Noncurrent liabilities: | ||||||||
| Note payable, net of current | ||||||||
| Security deposits and escrow payable | ||||||||
| Lease liability, noncurrent | ||||||||
| Other liabilities | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 6) | ||||||||
| Stockholders' equity (deficit): | ||||||||
| Preferred stock - $ | ||||||||
| Common stock - $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity (deficit) – La Rosa Holdings Corp. shareholders | ( | ) | ||||||
| Noncontrolling interest in subsidiaries | ||||||||
| Total stockholders' equity (deficit) | ( | ) | ||||||
| Total liabilities and stockholders' equity (deficit) | $ | $ | ||||||
See notes to the consolidated financial statements.
1
La Rosa Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited)
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Stock-based compensation — general and administrative | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Loss on extinguishment of debt | ( | ) | ||||||
| Amortization of debt discount | ( | ) | ( | ) | ||||
| Change in fair value of derivative liability | ( | ) | ||||||
| Loss on issuance of senior secured convertible note and warrants | ( | ) | ||||||
| Change in fair value of convertible note and warrants | ||||||||
| Other (expense) income, net | ( | ) | ||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||
| Benefit from income taxes | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Less: Net income (loss) attributable to noncontrolling interests in subsidiaries | ( | ) | ||||||
| Net loss after noncontrolling interest in subsidiaries | ( | ) | ( | ) | ||||
| Less: Deemed dividend | ||||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | ||
| Loss per share of common stock attributable to common stockholders | ||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares used in computing net loss per share of common stock attributable to common stockholders | ||||||||
| Basic and diluted | ||||||||
See notes to the consolidated financial statements.
2
La Rosa Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
(unaudited)
| Additional | Noncontrolling | |||||||||||||||||||||||||||||||
| Three Months Ended | Preferred Stock Series X | Common Stock | Paid-In | Accumulated | Interest In | Total | ||||||||||||||||||||||||||
| March 31, 2024 | Shares | Par Value | Shares | Par Value | Capital | Deficit | Subsidiaries | Equity | ||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Issuance of common stock for acquisitions | ||||||||||||||||||||||||||||||||
| Equity awards issued with debt issuance | ||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||
| Issuance of common stock for equity awards, net of shares withheld for taxes | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
3
| Preferred Stock Series X | Common Stock | Additional | Total Stockholders' | Noncontrolling | Total | |||||||||||||||||||||||||||||||
| Three
Months Ended March 31, 2025 | Shares | Par Value | Shares | Par Value | Paid-In Capital | Accumulated Deficit | Equity (Deficit) | Interest
In Subsidiaries | Equity (Deficit) | |||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock for consulting work | ||||||||||||||||||||||||||||||||||||
| Equity awards issued with debt issuance | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||
| Proceeds from new investors and S-3 | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock for stock-based compensation equity awards, net of shares withheld for taxes | ||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||
See notes to the consolidated financial statements.
4
La Rosa Holdings Corp. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | ||||||||
| Loss on issuance of senior secured convertible note and warrants | ||||||||
| Change in fair value of convertible note and warrants | ( | ) | ||||||
| Amortization and depreciation | ||||||||
| Amortization of right-of-use assets | ||||||||
| Change in fair value of derivatives | ( | ) | ||||||
| Amortization of debt discount and financing fees | ||||||||
| Loss on extinguishment of debt | ||||||||
| Non-cash interest expense | ( | ) | ||||||
| Provision for credit losses | ||||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses & other | ( | ) | ( | ) | ||||
| Contract liabilities | ||||||||
| Security deposits and escrow payable | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Cash acquired through acquisition of businesses | ||||||||
| Net Cash Provided by Investing Activities | ||||||||
| Cash Flows from Financing Activities: | ||||||||
| Borrowings on bank line of credit | ||||||||
| Payments on bank line of credit | ( | ) | ||||||
| Proceeds from notes payable | ||||||||
| Payments deferred debt issuance costs | ( | ) | ( | ) | ||||
| Payments on notes payable | ( | ) | ( | ) | ||||
| Payments on advances on future receipts | ( | ) | ( | ) | ||||
| Payments on post-acquisition consideration | ( | ) | ( | ) | ||||
| Repurchase of derivative instruments issued | ( | ) | ||||||
| Proceeds from issuance of common stock | ||||||||
| Withholding tax paid on behalf of employees on stock-based awards | ( | ) | ||||||
| Net Cash Provided by Financing Activities | ||||||||
| Net Increase in Cash and Restricted Cash | ||||||||
| Cash and Restricted Cash at Beginning of Period | ||||||||
| Cash and Restricted Cash at End of Period | $ | $ | ||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash Paid During the Period for: | ||||||||
| Interest | $ | $ | ||||||
| Taxes | $ | $ | ||||||
| Non-Cash Activities: | ||||||||
| Issuance of | $ | $ | ||||||
| $ | $ | |||||||
| Office leases acquired under operating lease obligations | $ | $ | ||||||
| Issuance of | $ | $ | ||||||
| Issuance of | $ | $ | ||||||
| Convertible debt and related party debt exchanged for | $ | $ | ||||||
| Increase in accounts payable related to deferred offering costs | $ | $ | ||||||
| Issuance of | $ | $ | ||||||
| Derivative liability embedded in debt instruments | $ | $ | ||||||
| Reconciliation of Cash and Restricted Cash | ||||||||
| Cash | $ | $ | ||||||
| Restricted Cash | ||||||||
| Cash and Restricted Cash | $ | $ | ||||||
See notes to the consolidated financial statements.
5
La Rosa Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
Note 1 — Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X and do not include all the information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The Company has made estimates and judgements affecting the amounts reported in the Company’s condensed consolidated financial statements and the accompanying notes. The actual results experienced by the Company may differ materially from the Company’s estimates. The condensed consolidated financial information is unaudited and reflects all normal adjustments that are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented, which contemplate continuation of the Company as a going concern and realization of assets and satisfaction of liabilities in the normal course of business and do not include any adjustments that might result from the outcome of any uncertainties related to the Company’s going concern assessment. The carrying amounts of assets and liabilities presented in the unaudited condensed consolidated financial statements do not necessarily purport to represent realizable or settlement values.
The unaudited condensed consolidated financial statements include the financial statements of the Company, all entities that are wholly-owned by the Company, and all entities in which the Company has a controlling financial interest. All intercompany transactions and balances have been eliminated. Business combinations consummated during the reporting period are reflected in the Company’s results effective from the date of acquisition through the end of the reporting period.
Results of the three-month period ended March 31, 2025 are not necessarily indicative of the results to be expected for the full year ending December 31, 2025. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the Company as of and for the year ended December 31, 2024, included in the Company’s Annual Report on Form 10-K. The condensed consolidated balance sheet as of December 31, 2024 was derived from the Company’s audited financial statements referred to above.
Accounts Receivable and Allowance for Credit Losses
The Company’s trade accounts receivable consist of balances due
from agents, tenants, franchisees, and commissions for closings and are presented on the consolidated balance sheets net of the allowance
for credit losses. Management determines the allowance for expected credit losses based upon historical experiences as well as current
conditions that affect the collectability of the reported amount and regularly evaluates individual customer receivables and considering
financial condition, credit history, current economic conditions and other relevant factors, in setting specific reserves for certain
accounts. Receivables are written off once they are deemed uncollectible, which may arise when the debtor is deemed unable to pay the
amounts owed to the Company. The allowance for credit losses was $
The activity for the allowance for credit losses during the three months ended March 31, 2025 and 2024 is set forth in the table below:
| Balance at | Deductions | Balance at | ||||||||||||||
| Beginning of | Charged to | from the | End of | |||||||||||||
| Period | Expenses | Allowance | Period | |||||||||||||
| Three Months ended March 31, 2025 Allowance for Credit Losses | $ | $ | $ | $ | ||||||||||||
| Three Months ended March 31, 2024 Allowance for Credit Losses | $ | $ | $ | ( | ) | $ | ||||||||||
Liquidity – Going Concern and Management’s Plans
On March 31, 2025, the Company had a cash balance of $
On
6
La Rosa Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
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 through at least the next twelve months from the issuance of these condensed consolidated financial statements. The Company will be required to raise additional capital to service its debt and to fund ongoing operations.
The Company has incurred recurring net losses, and the Company’s operations have not provided net positive cash flows. In view of these matters, there is substantial doubt about the Company’s ability to continue as a going concern. The Company plans on continuing to expand via acquisitions, which will help achieve future profitability. Additionally, the Company has plans to raise capital from outside investors, as it has done in the past, to fund operating losses and to provide capital for further business acquisitions. There can be no assurance the Company can successfully raise the capital needed.
Fair Value Option of Accounting
The Company has elected the option under Accounting Standards Codification 825-10, Financial Instruments (“ASC 825”), to measure its short-term convertible note payable issued during the quarter at fair value. The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. When the fair value option is elected for an instrument, unrealized gains and losses for such instrument are reported in earnings at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. The Company also elected to measure the incremental warrants included in the transaction under ASC 825.
Recently Adopted Accounting Standards
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU, No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities, including those with a single reportable segment, to: (i) provide disclosures of significant segment expenses and other segment items if they are regularly provided to the chief operating decision maker, or the CODM, and included in each reported measure of segment profit or loss; (ii) provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by Accounting Standards Codification 280, Segment Reporting, in interim periods; and (iii) disclose the CODM’s title and position, as well as an explanation of how the CODM uses the reported measures and other disclosures. ASU No. 2023-07 does not change how a public entity identifies its operating segments, aggregates those operating segments or applies the quantitative thresholds to determine its reportable segments. The Company adopted ASU No. 2023-07 effective December 31, 2024.
Recently Issued Accounting Standards Not Yet Adopted
In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. The amendments in this Update require an entity involved in an acquisition transaction effected primarily by exchanging equity interests when the legal acquiree is a VIE that meets the definition of a business to consider the factors in paragraphs 805-10-55-12 through 55-15 to determine which entity is the accounting acquirer. The amendments in this Update are effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements. A Variable Interest Entity (VIE) is a legal entity in which an investor holds a controlling interest that is not based on majority voting rights.
In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)- Clarifying the Effective Date. The amendment in this Update amends the effective date of Update 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements.
Note 2 — Business Combinations
The Company completed a number of acquisitions in the first quarter of 2024. The results of businesses acquired in a business combination are included in the Company’s condensed consolidated financial statements from the date of acquisition. The Company allocates the purchase price, which is the sum of the consideration provided and may consist of cash, equity, or a combination of the two, to the identifiable assets and liabilities of the acquired business at their acquisition date fair values. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates, and selection of comparable companies.
7
La Rosa Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
To date, the assets acquired and liabilities assumed in the Company’s business combinations have primarily consisted of goodwill and finite-lived intangible assets, consisting primarily of franchise agreements, agent relationships, real estate listings, non-compete agreements, and right-of-use assets. The estimated fair values and useful lives of identifiable intangible assets are based on many factors, including estimates and assumptions of future operating performance and cash flows of the acquired business, the nature of the business acquired, and the specific characteristics of the identified intangible assets. The estimates and assumptions used to determine the fair values and useful lives of identified intangible assets could change due to numerous factors, including market conditions, technological developments, economic conditions and competition. In connection with the determination of fair values, the Company engages independent appraisal firms to assist with the valuation of intangible assets acquired and certain assumed obligations.
Transaction costs associated with business combinations are expensed as incurred.
During the first quarter of 2024, the Company
acquired majority ownership of the following franchisees of the Company: La Rosa Realty Georgia LLC (“Georgia”) and La Rosa
Realty California (“California”), and
The following table summarizes the purchase consideration and the purchase price allocation to the estimated fair values of the identifiable assets acquired and liabilities assumed for the three acquisitions.
| Winter Garden | Georgia | California | Total | |||||||||||||
| Acquired ownership | % | % | % | |||||||||||||
| Acquisition date | ||||||||||||||||
| Common stock issued | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Equity consideration — purchase price | $ | $ | $ | $ | ||||||||||||
| Noncontrolling interest | ||||||||||||||||
| Acquisition date fair value | $ | $ | $ | $ | ||||||||||||
| Purchase price allocation | $ | $ | $ | $ | ||||||||||||
| Less fair value of net assets acquired: | ||||||||||||||||
| Cash | ||||||||||||||||
| Working capital (less cash) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Intangible assets | ||||||||||||||||
| Long-term assets | ||||||||||||||||
| Long-term liabilities | ( | ) | ( | ) | ( | ) | ||||||||||
| Net assets acquired | ||||||||||||||||
| Goodwill | $ | $ | $ | $ | ||||||||||||
Goodwill generated from the acquisition was primarily attributable to expected synergies from future growth and strategic advantages provided through expansion and was not expected to be deductible for income tax purposes.
During the year ended December 31, 2024, after an impairment
evaluation, the Company recognized an impairment charge of $
The classes of intangible identifiable assets acquired and the estimated useful life of each class is presented in the table below for the three acquisitions:
| Winter Garden | Georgia | California | Total | |||||||||||||
| (unaudited) | ||||||||||||||||
| Franchise agreement (10 to 11 years) | $ | $ | $ | $ | ||||||||||||
| Agent relationships (8 to 11 years) | ||||||||||||||||
| Real estate listings (1 year) | ||||||||||||||||
| Non-compete agreements (4 years) | ||||||||||||||||
| Total identifiable intangible assets acquired | $ | $ | $ | $ | ||||||||||||
8
La Rosa Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
The amounts of revenue, cost of revenue, gross profit, and loss from operations before income taxes of the three acquisitions included in the Company’s condensed consolidated statement of operations from the date of the acquisition for the three-month period ended March 31, 2024 was as follows:
| Three Months Ended | ||||
| March 31, 2024 | ||||
| Revenue | $ | |||
| Cost of revenue | $ | |||
| Gross profit | $ | |||
| Loss before provision for income taxes | $ | ( | ) | |
The following unaudited pro forma financial information presents the combined operating results of the Company, Winter Garden, Georgia, California, Lakeland, Success, BF Prime, Nona Title, Beaches and Baxpi, as if each acquisition had occurred as of January 1, 2024. The unaudited pro forma financial information includes the accounting effects of the business combinations, including adjustments to the amortization of intangible assets. The unaudited pro forma information does not necessarily reflect the actual results that would have been achieved, nor is it necessarily indicative of the Company’s future consolidated results.
The unaudited pro forma financial information is presented in the table below for the three-month periods ended March 31, 2024:
| March 31, 2024 | ||||
| Revenue | $ | |||
| Cost of revenue | ||||
| Gross profit | $ | |||
| Loss before provision for income taxes | $ | ( | ) | |
| Loss per share of common stock attributable to common stockholders, basic and diluted | $ | ( | ) | |
| Weighted average shares used in computing net loss per share of common stock attributable to common stockholders | ||||
Note 3 — Goodwill and Intangible Assets
Goodwill
The gross carrying amount of goodwill as of both March 31, 2025 and
December 31, 2024 was $
Intangible Assets
Intangible assets consist of franchise agreements, agent relationships, real estate listings, and non-compete agreements, and are initially recorded at fair value. Long-lived intangible assets are amortized over their estimated useful lives in a method reflecting the pattern in which the economic benefits are consumed or amortized on a straight-line basis if such pattern cannot be reliably determined. The Company continues to assess potential triggering events related to the value of its intangible assets and concluded that there was no impairment during the three months ended March 31, 2025.
9
La Rosa Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
The components of purchased intangible assets were as follows:
| Weighted Average | ||||||||||||||
| Remaining | March 31, 2025 | |||||||||||||
| Amortization | Gross | |||||||||||||
| Period (in years) | Carrying Amount | Accumulated Amortization | Net Amount | |||||||||||
| Franchise agreement | ||||||||||||||
| Agent relationships | ||||||||||||||
| Real estate listings | ||||||||||||||
| Non-compete agreements | ||||||||||||||
| Total | $ | $ | $ | |||||||||||
| Weighted Average | ||||||||||||||
| Remaining | December 31, 2024 | |||||||||||||
| Amortization | Gross | |||||||||||||
| Period (in years) | Carrying Amount | Accumulated Amortization | Net Amount | |||||||||||
| Franchise agreement | ||||||||||||||
| Agent relationships | ||||||||||||||
| Real estate listings | ||||||||||||||
| Non-compete agreements | ||||||||||||||
| Total | $ | $ | $ | |||||||||||
For the three months ended March 31, 2025 and 2024, amortization expense
was $
| March 31, 2025 | ||||
| 2025 - remainder of the year | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
Note 4 — Fair Value Measurements and Other Liabilities
Fair Value Measurements
Fair value is the price that would be received for an asset or the amount paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company classified certain liabilities based on the following fair value hierarchy:
| ● | Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities; |
| ● | Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and |
| ● | Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. |
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company has evaluated the estimated fair value of financial instruments using available market information and valuations as provided by third-party sources. The use of different market assumptions or estimation methodologies could have a significant effect on the estimated fair value amounts.
The carrying amounts of financial instruments, including cash, accounts receivable, accounts payable, and accrued expenses reflected in the condensed consolidated financial statements approximate fair value due to their short-term maturities.
10
La Rosa Holdings Corp.
and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
The Company determined that on March 31, 2025 and December 31, 2024, certain instruments qualified as derivative liabilities and were recorded at fair value on the date of issuance and re-measured at fair value each reporting period with the change reported in earnings.
On
The purchase price paid by the Investor under the SPA for the Convertible
Note and Incremental Warrants was $
As a result of applying the fair value option, direct costs and fees related to the Convertible Note were expensed as incurred and were not deferred.
The following table provides the fair value and contractual principal balance outstanding on the Convertible Note and the Incremental Warrants accounted for under the fair value option as of February 4, 2025 and March 31, 2025:
| As of | As of | |||||||
| February 4, 2025 | March 31, 2025 | |||||||
| Convertible Note fair value | $ | $ | ||||||
| Convertible Note, contractual principal outstanding | $ | $ | ||||||
| Incremental Warrants | $ | $ | ||||||
The fair value of the Convertible Note was calculated using a fair value analysis considering the following factors and assumptions:
| February 4, 2025(1) | March 31, 2025(1) | |||||||
| Stock Price | $ | $ | ||||||
| Conversion Price | $ | $ | ||||||
| Alternate Conversion Price | $ | $ | ||||||
| Alternate Conversion Amount | % | % | ||||||
| Redemption Premium | % | % | ||||||
| Interest Rate | % | % | ||||||
| (1) |
The fair value of the Incremental Warrants were calculated using the Monte Carlo simulation with the following factors, assumptions and methodologies:
| February 4, 2025(1) | March 31, 2025(1) | |||||||
| Face Value | $ | $ | ||||||
| Exercise Price | $ | $ | ||||||
| Stock Price | $ | $ | ||||||
| Exercise Threshold | ||||||||
| Valuation per Incremental Warrant upon exercise | $ | $ | ||||||
| Discount Rate | % | % | ||||||
| Risk Free Rate | % | % | ||||||
| Annualized Volatility | % | % | ||||||
| Forecast horizon (years) | ||||||||
| (1) |
11
La Rosa Holdings Corp.
and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
A summary of the Company’s liabilities measured at fair value on a recurring basis is as follows:
| As of December 31, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities | ||||||||||||||||
| Derivative liabilities | $ | $ | $ | $ | ||||||||||||
At December 31, 2024, the estimated fair value of the derivative
liability tied to the three vested warrants held by an institutional investor and remeasured on a recurring basis amounted to $
| As of March 31, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities | ||||||||||||||||
| Derivative liabilities | $ | $ | $ | $ | ||||||||||||
| Convertible note | $ | $ | $ | $ | ||||||||||||
At March 31, 2025, warrants held by an institutional
investor were eliminated through exercising and a redemption and cancellation agreement for $
The following table provides a summary of changes in fair value associated with the Level 3 liabilities for the three-month periods ended March 31, 2025 and 2024:
| Balance – January 1, 2025 | $ | |||
| Issuance of Convertible Note | ||||
| Change in fair value of Convertible Note | ( | ) | ||
| Balance – March 31, 2025 | $ |
| 2025 | 2024 | |||||||
| Balance – January 1, | $ | $ | ||||||
| Issuance of derivative liability | ||||||||
| Cash paid to settle derivative liability | ( | ) | ||||||
| Issuance of cashless shares for exercising warrants | ( | ) | ||||||
| Extinguishment of derivative liability | ( | ) | ||||||
| Change in fair market value - extinguished warrants | ( | ) | ||||||
| Change in fair market value - new warrants | ( | ) | ||||||
| Balance – March 31, | $ | $ | ||||||
The fair value of the derivative liability related to the three eliminated
Warrants, was computed using the Black-Scholes model both when issued and on the balance sheet date. To determine the fair value, the
Company incorporated transaction details such as the price of the Company’s common stock, contractual terms, maturity, and risk-free
rates, as well as assumptions about future financings, volatility, probability of contingencies, and holder behavior.
| December 31, | ||||
| 2024 | ||||
| Weighted average fair value | $ | |||
| Dividend yield | ||||
| Expected volatility factor | % | |||
| Risk-free interest rate | % | |||
| Expected life (in years) | ||||
Contract Liabilities and Performance Obligations
Contract liabilities consist of unsatisfied performance
obligations related to annual dues received at the start of the calendar year. As of March 31, 2025, the Company has approximately $
12
La Rosa Holdings Corp.
and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
Note 5 — Borrowings
Line of Credit
The Company has a line of credit with Regions Bank that allows for
advances up to $
Security Purchase Agreement
On February 4, 2025, the Company and an Investor
entered into the SPA, pursuant to which the Company issued to the Investor on such date: (i) a Senior Secured Convertible Note in the
original principal amount of $
The Initial Note accrues interest at a rate of
In connection with the closing of the Senior Secured
Convertible Note, the Company entered into a Registration Rights Agreement dated February 4, 2025, obligating the Company to file and
maintain the effectiveness of one or more registration statements with the SEC covering the resale of the shares of common stock issuable
upon conversion of the Notes and related instruments. The Company was required to file an initial registration statement with the SEC
within 30 calendar days of the closing date and have it declared effective within 90 calendar days (or 120 days if subject to full SEC
review). Failure to meet filing or effectiveness deadlines, maintain effectiveness, or satisfy Rule 144 information requirements may trigger
cash penalties equal to
The Notes may be prepaid by the Company, in whole
or in part, at its option with at least 30 calendar days’ notice to the holder, provided no Event of Default has occurred and is
continuing. Voluntary prepayments are subject to a redemption premium equal to
Certain mandatory redemptions, including those triggered by
Events of Default, Bankruptcy Events, or Change of Control transactions, are contractually deemed voluntary prepayments and are also subject
to the
Other redemptions, such as those triggered by subsequent placements
or asset sales, are payable at
Cash Advance Agreements
On February 5, 2025, the Company paid off their Standard Merchant Cash
Advance Agreement (the “Cash Advance”) with Cedar Advance LLC (“Cedar”) in the amount of $
Notes Payable-Senior Secured Promissory Notes
During the three months ended March 31, 2025, the Company repaid in full all outstanding senior secured promissory notes issued in 2024 to an accredited investor. On February 5, 2025, in connection with the execution of the SPA, the Company paid the remaining principal and accrued interest on the third and final outstanding note, thereby fully extinguishing the Company’s debt obligations to the investor under the 2024 note issuances.
In addition, the accredited investor elected to convert an aggregate
principal and interest amount of $
On January 8, 2025, the Company and the accredited investor entered into that certain Waiver, waiving the Event of Default (as defined) under these senior secured promissory notes. The waiver included, among other provisions, waiving the rights to all default penalties, default interest, the acceleration of any amounts and waiving the restriction for the Company to enter into a variable rate transaction, of which the consummation could be considered an event of default, provided the proceeds from such financing are used to repay, in full, the notes described above.
13
La Rosa Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
On January 22, 2025, the Company and the Holder
signed an amendment No. 1 to the Waiver. Pursuant to the Amendment, the Company shall pay
The interest expense incurred for the senior secured promissory
note was $
Notes Payable-Promissory Note
On September 27, 2024, the Company entered into a promissory note payable
whereby the Company borrowed $
Acquisition Settlement Agreement
In October 2024, the Company entered into an acquisition
settlement agreement with the former owner of an acquired business. Under the terms of the agreement, the Company agreed to pay $
Economic Injury Disaster Loans
During 2024, the Company acquired franchises that
had outstanding Economic Injury Disaster Loans (the “EIDL Loans”) in the aggregate of $
Future maturities of EIDL term debt as of March 31, 2025, were as follows:
| March 31, | ||||
| Economic Injury Disaster Loans-Future Maturities | 2025 | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ | |||
Total Notes Payable as of March 31, 2025 and December 31, 2024 were as follows:
| March 31, | December 31, | |||||||
| Notes Payable | 2025 | 2024 | ||||||
| Senior secured promissory note (SSPN) #1 | $ | $ | ||||||
| Senior secured promissory note #2 | ||||||||
| Senior secured promissory note #3 | ||||||||
| Senior secured promissory note #4 | ||||||||
| Promissory note payable | ||||||||
| Economic injury disaster loans (EIDL) | ||||||||
| Acquisition Settlement Agreement | ||||||||
| Total | $ | $ | ||||||
| Current portion: | ||||||||
| Less: current portion-SSPNs | ( | ) | ( | ) | ||||
| Less: current portion-Promissory note payable | ( | ) | ||||||
| Less: current portion-EIDL | ( | ) | ( | ) | ||||
| Acquisition Settlement Agreement | ( | ) | ( | ) | ||||
| Notes payable, net of current | $ | $ | ||||||
14
La Rosa Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
Note 6 — Commitments and Contingencies
Leases
The Company has operating leases for office space
in several states. Lease terms are negotiated on an individual basis. Generally, the leases have initial terms ranging from
The Company leases its corporate office from an entity controlled by the Company’s CEO. In addition, some of the entities acquired lease their offices from their former owners, who now hold a minority interest in those entities.
During January 2025, the Company entered into
a new lease for office space in Orlando, FL. The Orlando lease requires monthly payments of $
Lease costs expense for the three months ended
March 31, 2025 and 2024 were $
Supplemental cash flow information related to leases is as follows:
| Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | $ | ||||||
| Right-of-use assets obtained in exchange for lease liabilities | $ | $ | ||||||
Supplemental balance sheet information related to leases is as follows:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Assets: | ||||||||
| Right-of-use assets | $ | $ | ||||||
| Liabilities: | ||||||||
| Lease liability, current | ||||||||
| Lease liability, noncurrent | ||||||||
| $ | $ | |||||||
The Company’s leases do not provide a readily
determinable implicit discount rate. The Company estimates its incremental borrowing rate as the discount rate based on the information
available at lease commencement. The weighted average discount rate is
15
La Rosa Holdings Corp.
and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
Future maturities on lease liabilities as of March 31, 2025, are as follows:
| March 31, | ||||
| 2025 | ||||
| 2025– remainder of year | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 and thereafter | ||||
| Total minimum lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of lease obligations | ||||
| Less: current portion | ( | ) | ||
| Long-term portion of lease obligations | $ | |||
There were no leases with residual value guarantees.
Legal Proceedings
From time to time the Company is involved in litigation, claims, and other proceedings arising in the ordinary course of business. Such litigation and other proceedings may include, but are not limited to, actions relating to employment law and misclassification, intellectual property, commercial or contractual claims, brokerage or real estate disputes, or other consumer protection statutes, ordinary-course brokerage disputes like the failure to disclose property defects, commission disputes, and vicarious liability based upon conduct of individuals or entities outside of the Company’s control, including agents and third-party contractor agents. Litigation and other disputes are inherently unpredictable and subject to substantial uncertainties and unfavorable resolutions could occur.
On February 13, 2023, Mr. Mark Gracy, who served
as our Chief Operating Officer from November 18, 2021 to November 15, 2022, filed a civil lawsuit in the Circuit Court of Osceola County,
Florida, seeking a jury trial and claiming that the Company breached his employment agreement by reducing his salary and failing to pay
him his full severance payments and is looking for payment of his alleged severance of $
16
La Rosa Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
On January 3, 2024, Ms. Sarah Palmer filed a putative national class action complaint against La Rosa Realty, LLC in the United States District Court, Middle District of Florida, Orlando Division. Ms. Palmer alleges that she received two (2) brief pre-recorded calls one week apart to her cell phone from La Rosa Realty, LLC presenting her an employment opportunity as a real estate agent. Ms. Palmer seeks an undisclosed amount of monetary damages from La Rosa Realty, LLC for the alleged would-be injurious, isolated and opportunistic employment gestures to her through a purported nationwide class action. Ms. Palmer claims that the defendant violated her privacy, annoyed and harassed her, constituted a nuisance, and occupied her telephone line. On March 12, 2024, La Rosa Realty, LLC filed a motion to dismiss the case with prejudice. The action settled at mediation and was recently dismissed without prejudice pending completion of the settlement terms.
On March 5, 2025, Joshua Epstein (“Plaintiff”) filed an action in Osceola County, Florida Circuit Court alleging claims for Breach of Contract, Promissory Estoppel, Conversion, Unjust Enrichment, Breach of Good Faith and Fair Dealings, Fraud in the Inducement, and to recover alleged unpaid compensation from the Defendant, La Rosa Holdings Corp., (“Defendant”). The Defendant strongly opposed and denied these claims. The action is similar to the Gracy matter and Defendant will be filing a dispositive motion seeking judgment against the Plaintiff.
The Company believes that the above claims are without merit, and it will vigorously defend against such claims. Moreover, these claims, in the aggregate, would not have a material adverse effect on the Company’s financial condition, business, or results of operations, should the Company’s defense not be successful in whole or in part. Except as stated herein, there is no other action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers, threatened against or affecting our Company or our officers or directors in their capacities as such.
Note 7 — Equity Warrants
Warrants are issued to consultants as compensation
or as part of certain capital raises which entitle the holder to purchase shares of the Company’s common stock at a fixed price.
As of March 31, 2025, the Company’s stock price was $
During the quarter ended March 31, 2025, the Company settled all vested
and outstanding warrants previously held by the accredited investor holding the three senior secured notes payable from 2024. Two of the
three warrants were exercised on a cashless basis for a total of
Warrants issued to two investors who loaned money
to the Company, Emmis Capital II, LLC and the Company’s CEO, Joseph La Rosa, on November 14, 2022 and December 2, 2022, respectively,
included full ratchet antidilutive protections. The original warrants each covered
At March 31, 2025, warrants outstanding that have vested and are expected to vest are as follows:
| Weighted | ||||||||||||||||
| Average | ||||||||||||||||
| Weighted | Remaining | |||||||||||||||
| Average | Contractual | Aggregate | ||||||||||||||
| Number of | Exercise | Life | Intrinsic | |||||||||||||
| Shares | Price | (in years) | Value | |||||||||||||
| Vested | $ | $ | ||||||||||||||
| Expected to vest | ||||||||||||||||
| Total | $ | $ | ||||||||||||||
17
La Rosa Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
Additional information with respect to warrant activity:
| Weighted | ||||||||
| Average | ||||||||
| Number of | Exercise | |||||||
| Shares | Price | |||||||
| Balance — December 31, 2024 | $ | |||||||
| Granted/ Increase to existing warrants | ||||||||
| Exercised | ( | ) | ||||||
| Expired or forfeited | ( | ) | ||||||
| Balance — March 31, 2025 | $ | |||||||
As of March 31, 2025 and December 31, 2024, there was no unrecognized expense related to warrants.
The valuation methodology used to determine the fair value of the warrants was the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the warrant.
Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of the award. The Company’s estimated volatility is an average of the historical volatility of peer entities over the shorter of i) the period equal to the expected life of the award or ii) the period over which the peer company was publicly traded. The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price.
The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the award at the grant date.
The weighted average fair value of warrants granted for the period ended March 31, 2025 and December 31, 2024 and the assumptions used in the Black-Scholes model are set forth in the table below.
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Weighted average fair value | $ | $ | ||||||
| Dividend yield | ||||||||
| Expected volatility factor | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected life (in years) | ||||||||
18
La Rosa Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
Note 8 — Stockholders’ Equity
Common Stock Issuances
On January 17, 2025, the Company issued
On February 5, 2025, the Company issued the CEO an aggregate of
On February 20, 2025, the Company issued shares pursuant a consulting
agreement entered into on January 1, 2025 in which the Company agreed to issue
On February 20 and 24, 2025, the Company entered into marketing agreements
pursuant to which the Company agreed to issue
On March 10, 2025, the Company issued
On March 10, 2025, the Company entered into a marketing agreement pursuant
to which the Company agreed to issue
For the three months ended March 31, 2025, the holder of our Senior
Secured promissory notes converted
For the three months ended March 31, 2025, the Company utilized their
ATM and sold a total of
For the three months ended March 31, 2025, the Company issued
Stock Option Awards
For the three-month periods ended March 31, 2025 and 2024, the Company
recorded stock-based compensation for employees and directors awards of $
At March 31, 2025, options outstanding that have vested and are expected to vest are as follows:
| Weighted | ||||||||||||||||
| Average | ||||||||||||||||
| Weighted | Remaining | |||||||||||||||
| Average | Contractual | Aggregate | ||||||||||||||
| Number of | Exercise | Life | Intrinsic | |||||||||||||
| Shares | Price | (in years) | Value | |||||||||||||
| Vested | $ | $ | ||||||||||||||
| Expected to vest | ||||||||||||||||
| Total | $ | $ | ||||||||||||||
19
La Rosa Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
Additional information with respect to stock option activity:
| Weighted | ||||||||
| Average | ||||||||
| Number of | Exercise | |||||||
| Shares | Price | |||||||
| Balance — December 31, 2024 | $ | |||||||
| Granted | ||||||||
| Expired or forfeited | ||||||||
| Balance — March 31, 2025 | $ | |||||||
During the three months ended, the Company issued an aggregate of
The weighted average fair value of stock options granted in the quarters ended March 31, 2025 and 2024 and the assumptions used in the Black-Scholes model are set forth in the table below.
| March 31, | March 31, | |||||||
| 2025 | 2024 | |||||||
| Weighted average fair value | $ | $ | ||||||
| Dividend yield | ||||||||
| Expected volatility factor | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected life (in years) | ||||||||
As of March 31, 2025, unrecognized compensation
expense related to stock option awards totaled $
Restricted Stock Units
| Weighted | ||||||||
| Average | ||||||||
| Number of | Exercise | |||||||
| Shares | Price | |||||||
| Balance — December 31, 2024 | $ | |||||||
| Granted | ||||||||
| Vested or forfeited | ( | ) | ||||||
| Balance — March 31, 2025 | $ | |||||||
On February 1, 2025, a Restricted Stock Unit (“RSU”) covering
During the three-month period ending March 31, 2025, the Company issued
For the three-month periods ending March 31, 2025
and 2024, the Company recorded $
Note 9 — Earnings Per Share
Basic loss per share of common stock attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share of common stock attributable to common stockholders is computed by giving effect to all potential shares of common stock, including those related to the Company’s outstanding warrants, options and RSUs, to the extent dilutive. For all periods presented, these potential shares were excluded from the calculation of diluted loss per share because their inclusion would be anti-dilutive. As a result, diluted loss per common share is the same as basic loss per common share for all periods presented.
20
La Rosa Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
The following table sets forth common stock equivalents that have been excluded from the computation of dilutive weighted average shares outstanding as their inclusion would have been antidilutive:
| As of | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Warrants | ||||||||
| Options | ||||||||
| Restricted stock units | ||||||||
| Future equity shares | ||||||||
| Total | ||||||||
Note 10 — Segments
The Company’s business is organized into
| 1) | Real Estate Brokerage Services (Residential) |
| 2) | Franchising Services |
| 3) | Coaching Services |
| 4) | Property Management |
| 5) | Real Estate Brokerage Services (Commercial) |
| 6) | Title Settlement and Insurance |
The reporting segments follow the same accounting
policies used in the preparation of the Company’s condensed consolidated financial statements.
| 2025 | 2024 | |||||||
| Revenue by segment | ||||||||
| Real Estate Brokerage Services (Residential) | $ | $ | ||||||
| Franchising Services | ||||||||
| Coaching Services | ||||||||
| Property Management | ||||||||
| Real Estate Brokerage Services (Commercial) | ||||||||
| Title Settlement and Insurance | ||||||||
| $ | $ | |||||||
| Cost of goods sold by segment | ||||||||
| Real Estate Brokerage Services (Residential) | $ | $ | ||||||
| Franchising Services | ||||||||
| Coaching Services | ||||||||
| Property Management | ||||||||
| Real Estate Brokerage Services (Commercial) | ||||||||
| Title Settlement and Insurance | ||||||||
| $ | $ | |||||||
| Gross profit (loss) by segment | ||||||||
| Real Estate Brokerage Services (Residential) | $ | $ | ||||||
| Franchising Services | - | |||||||
| Coaching Services | ||||||||
| Property Management | ||||||||
| Real Estate Brokerage Services (Commercial) | ||||||||
| Title Settlement and Insurance | ||||||||
| $ | $ | |||||||
| G&A by segment | ||||||||
| Real Estate Brokerage Services (Residential) | $ | $ | ||||||
| Franchising Services | ||||||||
| Coaching Services | ||||||||
| Property Management | ||||||||
| Real Estate Brokerage Services (Commercial) | ||||||||
| Title Settlement and Insurance | ||||||||
| $ | $ | |||||||
In addition to the expenses from these segments, corporate expenses
were $
21
La Rosa Holdings Corp. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
The following table disaggregates the Company’s revenue based on the type of sale or service and the timing of satisfaction of performance obligations for the three months ended March 31, 2025 and 2024, respectively.
| 2025 | 2024 | |||||||
| Performance obligations satisfied at a point in time | $ | $ | ||||||
| Performance obligations satisfied over time | ||||||||
| Revenue | $ | $ | ||||||
Note 11 — Subsequent Events
Share Repurchase Program
On April 23, 2025, the Company’s Board of
Directors approved a new Share Repurchase Program, which authorizes the Company to purchase up to an aggregate of $
Executive Equity Awards
On April 21, 2025, the Company issued the CEO
an aggregate of
Equity Issuances
On April 16, 2025, the Company utilized their
ATM and sold a total of
Subsequent to March 31, 2025, the Company issued an additional
Other Subsequent Events
On May 23, 2025, the Company and the holder of the existing Initial Note and Incremental Warrants entered into a waiver agreement pursuant to which, effective as of May 20, 2025, through May 30, 2025, the holder waived all rights to default-related penalties, default interest, and acceleration of any amounts due under the Initial Note, as well as any other rights arising from an event of default under the Purchase Agreement, the Initial Note, the Incremental Warrants, and the related transaction documents, specifically with respect to the Company’s untimely filing of its Quarterly Report on Form 10-Q. In addition, the holder waived the requirement under the related Registration Rights Agreement to register for resale the shares of common stock issuable upon conversion of the Notes (other than the Initial Note) in the initial registration statement filed by the Company with the SEC on February 14, 2025.
22
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis are intended to help investors understand our business, financial condition, results of operations, liquidity, and capital resources. You should read this discussion together with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. As discussed in the section titled “Cautionary Statement Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which include information relating to future events, future financial performance, financial projections, strategies, expectations, competitive environment and regulation. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar expressions, as well as statements in the future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events and are subject to significant risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:
| ● | our expectations regarding consumer trends in residential real estate transactions; |
| ● | our expectations regarding overall economic and demographic trends, including the continued growth of the U.S. residential real estate market; |
| ● | our ability to grow our business organically in the various local markets that we serve; |
| ● | our ability to attract and retain additional qualified agents and other personnel; |
| ● | our ability to expand our franchises in both new and existing markets; |
| ● | our ability to increase the number of closed transactions sides and sides per agent; |
| ● | our ability to cross-sell our services among our subsidiaries; |
| ● | our ability to maintain compliance with the law and regulations of federal, state, foreign, county and local governmental authorities, or private associations and governing boards; |
| ● | our ability to expand, maintain and improve the information technologies and systems that we rely upon to operate; |
| ● | our ability to prevent security breaches, cybersecurity incidents and interruptions, delays and failures of our technology infrastructure; |
| ● | our ability to retain our founder and current executive officers and other key employees; |
| ● | our ability to identify quality potential acquisition candidates in order to accelerate our growth; |
| ● | our ability to manage our future growth and dependence on our agents; |
23
| ● | our ability to maintain the strength of our brands; |
| ● | our ability to maintain and increase our financial performance; |
| ● | the market price for our common stock may be particularly volatile given our status as a relatively unknown company with a small and thinly traded public float, and minimal profits, which could lead to wide fluctuations in our share price; |
| ● | there have recently been recent instances of extreme stock price run-ups followed by rapid price declines and stock price volatility seemingly unrelated to company performance following a number of recent initial public offerings, particularly among companies, like ours, that have had relatively smaller public floats; |
| ● | sales of our common stock by us or our stockholders, which may result in increased volatility in our stock price; and |
| ● | other factors, including the risks contained in the section entitled “Risk Factors” of our annual report on Form 10-K for the fiscal year ended December 31, 2024, filed with the U.S. Securities Exchange Commission (“SEC” or “Commission”) on April 15, 2025, relating to our industry, our operations, and results of operations. |
The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements.
Moreover, new risks regularly emerge, and it is not possible for our management to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available to us on the date of this Quarterly Report on Form 10-Q. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained above and throughout this Quarterly Report on Form 10-Q.
Business Overview
We are the holding company for six agent-centric, technology-integrated, cloud-based, multi-service real estate segments.
Our business was founded by Mr. Joseph La Rosa, a successful real estate developer, business and life coach, author, podcaster, and public speaker. Mr. La Rosa’s self-help book “Do It Now” is a roadmap to personal success and well-being based on his transformative theories of family, passion and growth. His philosophy, seminars and educational forums have attracted numerous successful realtors that have spurred the growth of our business.
In addition to providing person-to-person residential and commercial real estate brokerage services to the public, we cross-sell ancillary technology-based products and services primarily to our sales agents and the sales agents associated with our franchisees. Our business is organized based on the services we provide internally to our agents and to the public, which are residential and commercial real estate brokerage, franchising, real estate brokerage education and coaching, property management, and title services. Our real estate brokerage business operates primarily under the trade name La Rosa Realty. We have 26 La Rosa Realty corporate real estate brokerage offices and branches located in Florida, California, Texas, Georgia, North Carolina and Puerto Rico. The Company also has 6 La Rosa Realty franchised real estate brokerage offices and branches and 3 affiliated real estate brokerage offices, that pay us fees in 7 states in the United States and Puerto Rico. Additionally, the Company has a full-service escrow settlement and title company in Florida.
Our real estate brokerage offices, both corporate and franchised, are staffed with 2,769 licensed real estate brokers and sales associates as of March 31, 2025.
Our franchised offices are currently:
| Name | Location | |
| La Rosa Realty Bayamón LLC | Bayamón, Puerto Rico | |
| La Rosa Realty Internacional, LLC | Celebration, Florida | |
| La Rosa Realty Central Florida, LLC | Davenport, Florida | |
| La Rosa Realty Jacksonville, LLC | Jacksonville, Florida | |
| La Rosa Realty Kendall, LLC | Miami, Florida | |
| The Realty Experience Powered By LRR LLC | St. Cloud, Florida |
We have built our business by providing the home-buying public with well-trained, knowledgeable realtors who have access to our proprietary and third-party in-house technology tools and quality education and training, and valuable marketing that attracts some of the best local realtors who provide value-added services to our home buyers and sellers that are attracted to our brands. We give our real estate brokers and sales agents who are seeking financial independence a turnkey solution and support them in growing their brokerages while they fund their own businesses.
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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. They can then use these additional commissions to reinvest in their businesses or as take-home profit. We believe that this is a strong incentive for them to compete against the discount, flat fee and internet brokerages that have sprung up in the past several years. Instead of us taking a greater share of their income, our agents pay what we believe to be reduced rates for training and mentorship and our proprietary technology. Our franchise model has a similar pricing methodology, permitting the franchise owner the freedom to operate their business with minimal control and lower expense than other franchise offerings.
Moreover, we believe that our proprietary technology, training, and the support that we provide to our agents at a minimal cost to them is one of the best offered in the industry.
Our business stands on three pillars: Family, Passion, and Growth. We believe that our support and philosophy have attracted and will continue to attract and retain the highest producing realtors in our local markets. We believe that our focus on the interaction between our human agents and their clients is a strong weapon against internet-only commodity websites and the low touch discount brokerages. Our agent count continues to grow organically and through acquisition, we attribute our organic growth to the positive culture created in our Company and the competitive plans that we offer our agents. By creating a custom solution and a unique experience, we believe that our agents are able to guide their clients seamlessly through what may be their most expensive lifetime purchase.
On October 12, 2023, we consummated our IPO. Following our IPO, during the fiscal year ended December 31, 2023, 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 Premier, LLC, La Rosa Realty Orlando, LLC, and 100% ownership of the following franchisees of the Company: La Rosa CW Properties, LLC and La Rosa Realty North Florida LLC. In December 2023, we also formed our majority owned subsidiary La Rosa Realty Texas LLC. During the fiscal year ended December 31, 2024, we acquired majority ownership of the following franchisees and affiliates of the Company: La Rosa Realty Georgia LLC, La Rosa Realty California, La Rosa Realty Lakeland LLC DBA La Rosa Realty Prestige, and La Rosa Realty Success LLC, and 100% ownership of La Rosa Realty Winter Garden LLC, BF Prime LLC, Nona Title Agency LLC, La Rosa Realty Beaches LLC, and Baxpi Holdings. Additionally, we acquired the remaining non-controlling interest portions of Nona Legacy Powered By La Rosa Realty, Inc. (formerly, La Rosa Realty Lake Nona Inc.) and La Rosa Realty Premier, LLC, making them both 100% owned entities.
In December 2024, the Company opened its first office and wholly owned subsidiary in North Carolina, La Rosa Realty NC LLC. In January 2025, the Company formed LR Luxury, LLC, engaged mostly in the residential real estate brokerage business. In April 2025, the Company also formed LR Agent Advance, LLC, offering a commission advancement program exclusively for La Rosa agents.
It is management’s intention to acquire additional franchisees and other entities through the remainder of 2025. We continuously search for potential acquisition targets. Management is in discussions with several franchisees and other entities; however, any future agreements may have terms that are materially different than the terms of completed acquisitions. We cannot guarantee that the Company will actually enter into any binding acquisition agreements with any of those companies. If we do, we cannot assure you that the terms of such acquisitions will be substantially the same or better for the Company than those of completed acquisitions.
Recent Developments
Nasdaq Notice Regarding Minimum Bid Price Requirement
On October 10, 2024, we received a letter from the Nasdaq Listing Qualifications Department notifying us that, for the 30 consecutive business day period between August 28, 2024 through October 9, 2024, our common stock had not maintained a minimum closing bid price of $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided an initial period of 180 calendar days, or until April 8, 2025 (the “Compliance Period”), to regain compliance with the Bid Price Rule. In order to regain compliance with the Bid Price Rule, our common stock was required to maintain a minimum closing bid price of $1.00 for a minimum of ten consecutive business days during the Compliance Period prior to April 9, 2025.
As of April 8, 2025, the common stock has not regained compliance with the Bid Price Rule. However, in a letter dated April 9, 2025 (the “Second Nasdaq Bid Price Letter”), Nasdaq notified the Company that Nasdaq’s Staff has determined that the Company is eligible for an additional 180 calendar day period, or until October 6, 2025, to regain compliance (the “Second Compliance Period”). As of the date of this report our common stock has not regained compliance with the Bid Price Rule. If the Company chooses to implement a reverse stock split, it must complete the split no later than ten business days prior to the end of the Second Compliance Period in order to timely regain compliance. If we fail to regain compliance with the Bid Price Rule within the Second Compliance Period, or if we fail to continue to meet all applicable continued listing requirements for Nasdaq in the future, Nasdaq could delist our securities.
The Second Nasdaq Bid Price Letter has no immediate effect on the listing or trading of the common stock. Our common stock continues to be listed on the Nasdaq Capital Market under the symbol “LRHC”. We are currently evaluating our options for regaining compliance.
Nasdaq Notice Regarding Filing Deficiency
On May 21, 2025, the Company also received a notice (the “Notice”) from the Nasdaq Listing Qualifications Department (the “Staff”) that the Company is not in compliance with Nasdaq Listing Rule 5250(c)(1) as a result of its failure to timely file its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2025 (the “Filing”) with the SEC.
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The Notice informed the Company that, under Nasdaq rules, the Company has 60 calendar days to submit a plan to regain compliance, and if the Staff accepts such plan, they can grant an exception of up to 180 calendar days from the Filing’s due date (or until November 17, 2025) to regain compliance.
The notice from Nasdaq has no immediate effect on the listing of the Company’s common stock and its common stock will continue to be listed on The Nasdaq Capital Market under the symbol “LRHC”. The Company intends to regain compliance with Nasdaq Listing Rule 5250(c)(1) as a result of filing of this Quarterly Report on Form 10-Q.
Amendment to CEO Employment Agreement
On February 3, 2025, on the approval of the Compensation Committee of the Board of Directors (the “Compensation Committee”) of the Company amended the employment agreement between the Company and Joseph La Rosa, the Company’s Chief Executive Officer. The amendment provided Mr. La Rosa with a right to receive certain annual equity awards and milestone equity awards not only in the form of stock options but also in the form of restricted stock units and amended Section 4.3(b) to include subsection (vii), according to which for every $1,000,000 raised by the Company through financing, Mr. La Rosa shall be granted an equity award equal to 2% of the outstanding shares of common stock of the Company.
February 2025 Financing
On February 4, 2025, we entered into the SPA with an institutional investor (“2025 Investor”) pursuant to which we issued and sold to the 2025 Investor on such date: (i) a Senior Secured Convertible Note in the original principal amount of $5,500,000 which matures on the two-year anniversary of the Closing Date (the “Initial Note”); and (ii) sixteen (16) warrants (the “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 (Incremental Notes and together with the Initial Note, the “Notes”). The purchase price paid by 2025 Investor under the SPA for the Initial Note and Incremental Warrants was $4,963,750, which was used by the Company to pay-off certain indebtedness, pay certain outstanding fees and expenses, acquisitions and general corporate purposes. The Company also granted 2025 Investor registration rights in the shares of common stock issuable upon conversion of the Notes. The Company Group also entered into a Security and Pledge Agreement with or in favor of the 2025 Investor pursuant to which the Company Group granted the 2025 Investor a security interest in substantially all of the property and assets of the Company Group to secure the Company’s obligations under the SPA, Notes, Incremental Warrants, Registration Rights Agreement and other Transaction Documents (as defined) and the Company’s subsidiaries guaranteed or obligations of the Company thereunder. The Company also agreed to obtain shareholder approval for the issuance of more than 19.99% of the issued and outstanding common stock in this financing.
On the Closing Date, as required by the SPA, Joseph La Rosa, as the majority stockholder of the Company, approved (i) the issuance of the Initial Note, the Incremental Warrants and Incremental Notes, all shares of common stock issuable as interest thereunder and all of the Conversion Shares and Incremental Conversion Shares in excess of 19.99% (without regard to any limitation on conversion or exercise thereof) of the Company’s issued and outstanding common stock at a price less than the minimum price required by the Nasdaq in accordance with Nasdaq Listing Rules 5635(b) and 5635(d); (ii) authorization to complete a reverse split of our common stock; and (iii) authorization to increase the number of authorized shares of our common stock to ensure that the Company has a sufficient number of authorized shares reserved for issuance to equal at least 200% of the maximum number of shares issuable upon conversion of the Notes, as determined under the Securities Purchase Agreement. Such approval was effective on March 27, 2025, or 20 days after the commencement of mailing of the definitive information statement regarding this approval to the stockholders of the Company.
Third Amended Agent Plan
On February 4, 2025, the Compensation Committee, our Board of Directors, and the majority stockholders approved the Third Amended and Restated La Rosa Holdings 2022 Agent Incentive Plan (“Third Amended Agent Plan”), which became effective on March 28, 2025.
The Third Amended Agent Plan revised the vesting terms of the grants under Agent Equity Program and added new terms allowing the participants to authorize the Company to set aside 5% of their agent net commissions on transactions in their name to purchase shares of the common stock at a 20% discount from the prior 30 day volume weighted average closing price of the common stock on Nasdaq.
Certain Future Corporate Actions
On February 4, 2025, our Board of Directors, and the majority stockholders approved the amendment (the “Reverse Stock Split Amendment”) to the Amended and Restated Articles of Incorporation of the Company to provide for a reverse stock split (the “Reverse Stock Split”) of the common stock of the Company at a ratio ranging from one for two (1:2) to one for one hundred (1:100) (the “Split Ratio Range”), the final determination of which shall be made by the Board of Directors, and the authorization to the Board of Directors to effect the Reverse Stock Split at their discretion. As of the date hereof, the Reverse Stock Split was not effected by the Company.
On February 4, 2025, our Board of Directors, and the majority stockholders approved the Certificate of Amendment to the Company’s Amended and Restated Articles of Incorporation to increase the number of the Company’s authorized shares of common stock to two billion (2,000,000,000) shares of common stock, and to restate Sections 3.01 and 3.02 thereof to reflect such increase. As of the date hereof, the Certificate of Amendment was not effected by the Company.
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Change in Controlled Company Status
As of December 31, 2024, the Company qualified as a “controlled company” because more than 50% of the voting power for the election of directors was held by Joseph La Rosa, our Chief Executive Officer and Chairman. As a result of certain sales under the Company’s previously announced at-the-market offering, as of April 16, 2025 Mr. La Rosa no longer holds more than 50% of the voting power for the election of directors. As a result, the Company is no longer considered a “controlled company” for the purposes of the listing requirements of the Nasdaq Capital Market. Since the Company did not take availed itself of certain of the controlled company exemptions afforded by Nasdaq to controlled companies, such change in the Company’s status did not result in any corporate governance changes for the Company.
Stock Repurchase Program
On April 23, 2025, the Company’s Board of Directors has approved a new Share Repurchase Program, which authorizes the Company to purchase up to an aggregate of $500,000 of the Company’s outstanding shares of common stock in the open market in accordance with all applicable securities laws and regulations. Repurchases under this program may be made at management’s discretion at the time and in the amounts determined by the Chief Executive Officer and Chief Operating Officer of the Company. The Share Repurchase Program has an expiration date of December 31, 2025.
Change of Auditor
On April 29, 2025, the Company was notified by Marcum LLP (“Marcum”) that Marcum resigned as the Company’s independent registered accounting firm effective immediately. On April 29, 2025, the Company, with the approval of the Audit Committee (the “Committee”) of the Board of Directors of the Company, accepted resignation of Marcum as the Company’s independent registered public accounting firm effective immediately. On November 1, 2024, CBIZ CPAs P.C. (“CBIZ CPAs”) acquired the attest business of Marcum. On April 29, 2025, the Company, with the approval of the Committee, engaged CBIZ CPAs to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2025 to be effective immediately.
ATM Offering
On November 22, 2024, the Company entered into a sales agreement (“ATM Agreement”) with A.G.P./Alliance Global Partners, as sales agent (“AGP”), relating to the sale of common stock. During the first quarter ended March 31, 2025, the Company issued an aggregate of 7,446,442 shares of common stock pursuant to such ATM Agreement for net proceeds of $2,919,192. The Company paid the sales agent compensation with respect to sale of such shares in the amount of $104,371.
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 increased our agent count by 12.8%, from 2,454 at March 31, 2024 to 2,769 at March 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 and 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.
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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 our Annual Report on Form 10-K for 2024 fiscal year “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 will 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 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 April 2025, the federal funds rate was 433 basis points. The fluctuations impact interest rates, which significantly contribute to mortgage rate adjustments. During the second half of 2022, the benchmark 30 year fixed conforming mortgage rate rose above 6% for the first time since 2008, according to Freddie Mac data, and reached a peak of about 8% during the second half of 2023. That interest rate sat in between 6.62% and 6.85% during 2024 and was 6.65% by the end of March 2025. Consequently, housing demand remained soft, prices are rising, consumer sentiment has weakened, and home sales are declining. In March 2025, existing-home sales fell 5.9% month-over-month to a seasonally adjusted rate of 4.02 million. Year-over-year, sales drew back 2.4%. According to National Association of Realtors (“NAR”) Chief Economist Lawrence Yun, “Home buying and selling remained sluggish in March due to the affordability challenges associated with high mortgage rates. Residential housing mobility, currently at historic lows, signals the troublesome possibility of less economic mobility for society.”
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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, a federal jury in Missouri found that NAR and certain companies conspired to artificially inflate brokerage commissions, which violates federal antitrust law. The judgment was appealed on October 31, 2023, while these and other plaintiffs have filed similar lawsuits against a number of other large real estate brokerage companies. We have not, as of the date hereof, been named as a defendant in any antitrust litigation. On or about March 15, 2024, NAR agreed to settle these lawsuits, by agreeing to pay $418 million over approximately four years, and changing certain of its rules surrounding agent commissions. This settlement resolves claims against NAR and nearly every NAR member; all state, territorial and local REALTOR® associations; all association-owned MLSs; and all brokerages with an NAR member as principal whose residential transaction volume in 2022 was $2 billion or below and is subject to court approval. Due to this litigation, there will be rule changes for the NAR. In the settlement, effective mid-July 2024, 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. However, the direct and indirect effects, if any, of the judgment upon the real estate industry are not yet entirely clear.
There could also be further changes in real estate industry practices. All of this has prompted discussion of changes to rules established by local or state real estate boards or multiple listing services. All of this may require changes to many brokers’ business models, including changes in agent and broker compensation. For example, we will likely have to develop mechanisms and a plan that enable buyers and sellers to negotiate commissions. 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.
Cybersecurity
Our business faces cybersecurity risks that could have a material adverse effect on our business operations, financial condition, and reputation. Key factors contributing to cybersecurity risks include, but are not limited to:
| ● | Constantly Evolving Threat Landscape: The landscape of cybersecurity threats is constantly evolving, with new attack vectors, malware, and vulnerabilities emerging regularly. We may not be able to anticipate or mitigate all potential threats effectively. |
| ● | Data Vulnerability: We collect, store, and process sensitive customer and corporate data, making us a target for cybercriminals seeking to steal or exploit this information. A data breach could lead to financial and legal liabilities, including regulatory fines and customer trust erosion. |
| ● | Third-Party Risks: Our reliance on third-party service providers exposes us to risks associated with their cybersecurity practices. A breach or security failure in a third-party system could impact our operations and data. |
| ● | Phishing and Social Engineering: Employees and individuals connected to our organization may be susceptible to phishing attacks or social engineering tactics that compromise security. Human error or manipulation can lead to breaches. |
| ● | Regulatory Compliance: We are subject to various data protection and privacy regulations, and non-compliance could result in legal and financial penalties. Adhering to these regulations requires ongoing efforts and resources. |
| ● | Business Interruption: A cyberattack or system breach may disrupt our operations, affecting our ability to serve customers, fulfill orders, and maintain revenue, resulting in financial losses. |
| ● | Reputation Damage: A publicized cybersecurity incident can significantly damage our brand and reputation, leading to customer churn and reduced market confidence. |
The recently adopted SEC cybersecurity disclosure rules for public companies require disclosure regarding cybersecurity risk management (including the corporate board’s role in overseeing cybersecurity risks, management’s role and expertise in assessing and managing cybersecurity risks, and processes for assessing, identifying and managing cybersecurity risks) in annual reports. These new cybersecurity disclosure rules also require the disclosure of material cybersecurity incidents in a Form 8-K, generally within four days of determining an incident is material. We have included respective disclosures in our Annual Report on Form 10-K for fiscal year ended December 31, 2024 filed with the Commission on April 15, 2025.
We may at times fail (or be perceived to have failed) in our efforts to comply with our privacy and data security obligations. Moreover, despite our efforts, our personnel or third parties on whom we rely on may fail to comply with such obligations, which could negatively impact our business operations.
Any failure or perceived failure by us or third parties upon whom we rely to comply with obligations, relating to privacy and data security may result in significant consequences including but not limited to governmental investigations and enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar), litigation, additional reporting requirements and/or oversight, bans on processing personal data, and orders to destroy or not use personal information.
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to loss of customers; interruptions or stoppages in our business operations; inability to process personal information; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.
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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 judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. During the first quarter of 2025, the Company entered into a securities purchase agreement providing for the issuance of a convertible note and incremental warrants which required a fair value evaluation under ASC 825. This evaluation constituted an additional critical accounting estimate to the Company. See Note 4 Fair Value Measurements and Other Liabilities and Note 5 Borrowings to the accompanying condensed consolidated financial statements for more information. There have been no other material changes to the Company’s critical accounting estimates as compared to the estimates described in the Annual Report on Form 10-K as of December 31, 2024 which we believe are the most critical to our business and understanding of our results of operations and affect the more significant judgments and estimates that we use in preparation of our condensed consolidated financial statements. Other than the fair value evaluation mentioned above, there have been no other material changes to the Company’s critical accounting estimates since the Annual Report on Form 10-K as of December 31, 2024.
Results of Operations
Revenue
| Three Months Ended March 31, | Change | |||||||||||||||
| 2025 | 2024 | $ | % | |||||||||||||
| Real Estate Brokerage Services (Residential) | $ | 14,270,279 | $ | 10,237,749 | $ | 4,032,530 | 39 | % | ||||||||
| Franchising Services | 38,778 | 144,381 | (105,603 | ) | -73 | % | ||||||||||
| Coaching Services | 94,534 | 132,993 | (38,459 | ) | -29 | % | ||||||||||
| Property Management | 2,976,533 | 2,544,587 | 431,946 | 17 | % | |||||||||||
| Real Estate Brokerage Services (Commercial) | 57,066 | 29,189 | 27,877 | 96 | % | |||||||||||
| Title Settlement and Insurance | 77,204 | - | 77,204 | NM | ||||||||||||
| Total Revenue | $ | 17,514,394 | $ | 13,088,899 | $ | 4,425,495 | 34 | % | ||||||||
NM: Not Meaningful
Real Estate Brokerage Services (Residential)
Residential real estate services sales revenue increased by approximately $4.0 million, or 39%, in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. The increase was driven primarily by approximately $3.6 million of revenue from the six acquisitions completed in the 2nd – 4th quarter of fiscal year 2024 along with incremental additional revenue from the three acquisitions completed in the first quarter of fiscal year 2024. We increased our transaction fee, monthly agent fee, and annual fee effective September 1, 2023, which, if volume returns to 2023 levels, real estate brokerage services revenue, excluding incremental acquisition revenue, will increase in 2025.
Franchising Services
Franchising services revenue decreased by approximately $106 thousand, or 73%, in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. The decrease is attributable to the five of the six acquisitions completed in the 2nd – 4th quarter of fiscal year 2024 that were franchisees, which no longer contribute to franchising royalties fees. Our remaining franchisees did not see a significant changes in transaction revenues between the per.
Coaching Services
Coaching services revenue decreased by approximately $39 thousand, or 29%, in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to a strategic shift to allow large teams to onboard without coaching in an effort to increase onboarding at the expense of Coaching.
Property Management
Property management revenue increased by approximately $432 thousand, or 172%, in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to an increase in the number of properties under management along with a management fee price increase effective September 1, 2023.
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Gross Profit and Gross Margin
| Three Months Ended March 31, | Change | |||||||||||||||
| 2025 | 2024 | $ | % | |||||||||||||
| Real Estate Brokerage Services (Residential) | $ | 1,374,395 | $ | 1,033,728 | $ | 340,667 | 33 | % | ||||||||
| Gross Margin | 9.6 | % | 10.1 | % | -0.5 | % | ||||||||||
| Franchising Services | $ | (73,013 | ) | $ | 14,292 | $ | (87,305 | ) | -611 | % | ||||||
| Gross Margin | -188.3 | % | 9.9 | % | -198.2 | % | ||||||||||
| Coaching Services | $ | 38,654 | $ | 59,988 | $ | (21,334 | ) | -36 | % | |||||||
| Gross Margin | 40.9 | % | 45.1 | % | -4.2 | % | ||||||||||
| Property Management | $ | 97,393 | $ | 29,619 | $ | 67,774 | 229 | % | ||||||||
| Gross Margin | 3.3 | % | 1.2 | % | 2.1 | % | ||||||||||
| Real Estate Brokerage Services (Commercial) | $ | 23,035 | $ | 24,370 | $ | (1,335 | ) | -5 | % | |||||||
| Gross Margin | 40.4 | % | 83.5 | % | -43.1 | % | ||||||||||
| Title Settlement and Insurance | $ | 77,204 | $ | - | $ | 77,204 | NM | |||||||||
| Gross Margin | 100.0 | % | 0.0 | % | 0.0 | % | ||||||||||
| Total Gross Profit | $ | 1,537,668 | $ | 1,161,997 | $ | 375,671 | 32 | % | ||||||||
| Total Gross Margin | 8.8 | % | 8.9 | % | -0.1 | % | ||||||||||
NM: Not Meaningful
Real Estate Brokerage Services (Residential)
Costs related to residential real estate brokerage services increased by approximately $3.7 million, or 40%, in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. The increase was driven by approximately $6.9 million of cost of revenue from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the three acquisitions completed in the first quarter of fiscal year 2024. The gross profit increased by approximately $341 thousand, or 33%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 primarily attributable to the gross profit from acquisitions.
Franchising Services
Costs of revenue for franchising services decreased by approximately $18 thousand, or 14%, in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, related to the acquisition of the five out of the six franchises acquired in the 2nd - 4th quarters of 2024. The gross profit of franchising services has decreased by $87 thousand, or about 611%, for the three-month period ending March 31, 2025 over the comparable prior year period, which is attributable to the reduction in the cost of revenue due to the acquisitions of the franchises in 2023 and 2024.
Coaching Services
Costs of revenue related to coaching services decreased by approximately $17 thousand, or 23%, in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. Costs related to coaching services is related to the augmentation of the coaching program. The gross profit of coaching services has decreased by $21 thousand, or about 36%, for the three-month period ending March 31, 2025 over the comparable prior year period due to a shift in priority to growth in onboarding without a coaching requirement.
Property Management
Costs of revenue related to property management services increased by approximately $364 thousand, or 14%, in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. The increase in property management costs was primarily related to an increase in properties under management. The gross profit of property management services has increased by $68 thousand, or about 229%, for the three-month period ending March 31, 2025 over the comparable prior year period related to increase in properties under management.
Title Settlement and Insurance
We acquired Nona Title rebranded FPG Title near the end of the third quarter of 2024, increases are related to this acquisition generating revenues, cost of revenues and general and administrative expenses for the first time for the three months ended March 31, 2025.
Selling, General and Administrative Expense
| Year Ended March 31, | Change | |||||||||||||||
| 2025 | 2024 | $ | % | |||||||||||||
| Sales and Marketing | $ | 563,149 | $ | 232,727 | $ | 330,422 | 142 | % | ||||||||
| Payroll and benefits | 1,530,793 | 936,492 | 594,301 | 63 | % | |||||||||||
| Rent and other | 381,689 | 230,771 | 150,918 | 65 | % | |||||||||||
| Professional fees | 1,003,345 | 310,565 | 692,780 | 223 | % | |||||||||||
| Office | 78,446 | 76,969 | 1,477 | 2 | % | |||||||||||
| Technology | 117,444 | 75,959 | 41,485 | 55 | % | |||||||||||
| Insurance, training and other | 167,829 | 128,205 | 39,624 | 31 | % | |||||||||||
| Public company costs | 217,933 | 378,095 | (160,162 | ) | -42 | % | ||||||||||
| Amortization and depreciation | 230,046 | 184,799 | 45,247 | 24 | % | |||||||||||
| Total SG&A Expenses | $ | 4,290,674 | $ | 2,554,582 | $ | 1,736,092 | 68 | % | ||||||||
NM: Not Meaningful
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Selling, general and administrative costs increased by approximately $1.7 million, or 68%, in the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. Of this $695 thousand is related to professional service, $594 thousand is related to payroll and related cost $330 for sales and marketing.
Stock-based compensation
We incurred stock-based compensation of approximately $1.9 million in the three months ended March 31, 2025, primarily due to option grants to our CEO pursuant to the terms of his employment agreement ($1.3 million), and consultants who provided various services to the Company ($0.6 million).
Other Income (Expense), Net
Other expense, net for the three months ended March 31, 2025, increased approximately $91.0 million compared to other expense, net, for the three months ended March 31, 2024. The increase in expense in 2025 was primarily due to the loss on issuance of senior secured convertible note for $128.8 million and loss on extinguishment of debt for $152 thousand, offset by a gain of $37.1 million on the change in fair value of convertible note and warrants and a $0.9 million gain on the change in fair value of a derivative liability.
Liquidity and Capital Resources
On March 31, 2025, the Company had a cash balance of $4.9 million and negative working capital of $94.0 million.
On February 4, 2025, the Company and an institutional investor entered into the SPA, pursuant to which the Company issued to the Investor: (i) a Senior Secured Convertible Note in the original principal amount of $5,500,000 which matures on February 4, 2027 (the “Initial Note”); and (ii) sixteen (16) warrants (the “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 (“Incremental Notes” and together with the Initial Note, the “Notes”). The purchase price paid by the Investor under the SPA for the Initial Note and Incremental Warrants was $4,963,750.
The $4,963,750 in gross proceeds from the offering was 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. See Note 5 – Borrowings for further discussion to the accompanying condensed consolidated financial statements for further disclosure.
In addition to the debt pay downs during the quarter, 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.
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.
The Company has incurred recurring net losses, and the Company’s operations have not provided net positive cash flows. In view of these matters, there is substantial doubt about the Company’s ability to continue as a going concern. The Company plans on continuing to expand via acquisition, which will help achieve future profitability, and the Company has plans to raise capital from outside investors, as it has done in the past, to fund operating losses and to provide capital for further business acquisitions. There can be no assurance the Company can successfully raise the capital needed.
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Summary of Cash Flows
| For the year ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net Cash Used in Operating Activities | $ | (3,493,029 | ) | $ | (538,305 | ) | ||
| Net Cash Provided by Investing Activities | $ | — | $ | 98,612 | ||||
| Net Cash Provided by Financing Activities | $ | 4,831,768 | $ | 679,404 | ||||
Cash Flows from Operating Activities
During the three months ended March 31, 2025, operating activities consumed $3.5 million of our cash on hand, which was primarily attributable to the net loss of $2.3 million, excluding stock-based compensation, loss on issuance of senior secured convertible notes, fair market value adjustments, and amortization and depreciation, changes in operating assets and liabilities consumed a further $1.2 million, mostly due to an increase in accounts payable and an increase in contract liabilities.
Cash Flows from Investing Activities
During the three months ended March 31, 2025 there were no activities that consumed cash for the quarter.
Cash Flows from Financing Activities
During the three months ended March 31, 2025, we received net cash provided by financing activities of $4.8 million, which included net proceeds from our S-3 of $2.9 million and from our debt issuance in February 2025 of $2.9 million, offset by $1.8 million in payments to notes payable, post-acquisition consideration, and advances on future receipts.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this item.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of March 31, 2025, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Interim Chief Financial Officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our Chief Executive Officer and Interim Chief Financial Officer concluded that our disclosure controls and procedures are ineffective, as we are a newly publicly traded company with limited resources in our finance department, and we are in the process of establishing our procedures around our disclosure controls.
Changes in Internal Control over Financial Reporting
As reported in our Annual Report on Form 10-K for 2024 fiscal year, material weaknesses were identified due to lack of segregation of duties, control environment and size and nature of cybersecurity staffing. We have therefore concluded that our internal controls over financial reporting are not effective at the reasonable assurance level. A material weakness is a deficiency, or combination of deficiencies, in our internal controls over financial reporting such that there is a reasonable possibility that a material misstatement of our consolidated financial statements would not be prevented or detected on a timely basis.
Our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties. Therefore, it is difficult to effectively segregate accounting duties which comprises a material weakness in internal controls. To the extent reasonably possible given our limited resources, we intend to take measures to cure the weaknesses, including, but not limited to, increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate controls over our Exchange Act reporting disclosures. As such, we consider these material weaknesses to not be remediated as of March 31, 2025.
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(t) and 15d-15(f) under the Exchange Act, during the fiscal quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time the Company is involved in litigation, claims, and other proceedings arising in the ordinary course of business. Such litigation and other proceedings may include, but are not limited to, actions relating to employment law and misclassification, intellectual property, commercial or contractual claims, brokerage or real estate disputes, or other consumer protection statutes, ordinary-course brokerage disputes like the failure to disclose property defects, commission disputes, and vicarious liability based upon conduct of individuals or entities outside of the Company’s control, including agents and third-party contractor agents. Litigation and other disputes are inherently unpredictable and subject to substantial uncertainties and unfavorable resolutions could occur.
As previously disclosed, on February 13, 2023, Mr. Mark Gracy, who served as our Chief Operating Officer from November 18, 2021 to November 15, 2022, filed a civil lawsuit in the Circuit Court of Osceola County, Florida, seeking a jury trial and claiming that the Company breached his employment agreement by reducing his salary and failing to pay him his full severance payments and is looking for payment of his alleged severance of $249,000. On April 11, 2023, the Company filed a motion to dismiss Mr. Gracy’s complaint, which is still pending. As of the date of this report, the case remains pending, discovery is proceeding and the Company will be filing a summary judgment motion on Plaintiff’s claims.
As previously disclosed, on January 3, 2024, Ms. Sarah Palmer filed a putative national class action complaint against La Rosa Realty, LLC in the United States District Court, Middle District of Florida, Orlando Division. Ms. Palmer alleges that she received two (2) brief pre-recorded calls one week apart to her cell phone from La Rosa Realty, LLC presenting her an employment opportunity as a real estate agent. Ms. Palmer seeks an undisclosed amount of monetary damages from La Rosa Realty, LLC for the alleged would-be injurious, isolated and opportunistic employment gestures to her through a purported nationwide class action. Ms. Palmer claims that the defendant violated her privacy, annoyed and harassed her, constituted a nuisance, and occupied her telephone line. The action settled at mediation and was recently dismissed without prejudice pending completion of the settlement terms.
As previously disclosed, on July 19, 2024, LPT Realty, LLC commenced a civil action in the Ninth Judicial Circuit in Orange County, Florida against La Rosa Holdings Corp; Joseph La Rosa a/k/a Joe La Rosa; La Rosa Realty Lake Nona, Inc. n/k/a Nona Legacy Powered By La Rosa Realty, Inc.; & La Rosa Realty, LLC, seeking damages, reasonable royalty of all real estate transactions conducted by all the La Rosa defendants and injunctive relief for misappropriation of trade secrets as to all the defendants. The case was voluntarily dismissed on March 26, 2025.
As previously disclosed, on March 5, 2025, Joshua Epstein, our former employee and Chief Strategy Officer, filed a civil lawsuit in Osceola County, Florida Circuit Court alleging claims for breach of contract, promissory estoppel, conversion, unjust enrichment, breach of good faith and fair dealings, fraud in the inducement, and to recover alleged unpaid compensation in the amount of $$100,000 from the Company. The Company strongly opposed and denied these claims. The Company intends to file a dispositive motion seeking judgment against Mr. Epstein.
The Company believes that the above claims are without merit, and it will vigorously defend against such claims. Moreover, these claims, in the aggregate, would not have a material adverse effect on the Company’s financial condition, business, or results of operations, should the Company’s defense not be successful in whole or in part. Except as stated herein, there is no other action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers, threatened against or affecting our Company or our officers or directors in their capacities as such.
ITEM 1A. RISK FACTORS.
There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on April 15, 2025.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES
(a) In addition to the issuances of unregistered securities described in the Current Reports on Form 8-K filed by the Company with the SEC, in the first quarter of 2024 the Company issued the following securities which were not registered under the Securities Act.
On March 10, 2025, the Company issued 250,000 unregistered shares of common stock to a consultant as consideration for services rendered in connection with a consulting agreement, dated March 10, 2025.
In the quarter ended March 31, 2025, the Company issued 646,117 restricted stock units to its agents and an employee in line with the grants earned through the agent incentive plan and per the employees agreement, respectively.
In the quarter ended March 31, 2025, the Company issued 56,472 unregistered shares of common stock to its agents pursuant to a conversion of restricted stock units held by them into shares of unregistered shares of common stock of the Company in accordance with the terms of respective grant agreements.
On January 2, 2025, the Company issued Joseph La Rosa, its Chief Executive Officer and Chairman a stock option to purchase 200,000 shares of common stock with an exercise price of $0.84 per share under the Amended and Restated La Rosa Holdings 2022 Equity Incentive Plan (“2022 Plan”). The stock option was issued pursuant to the employment agreement between the Company and Mr. La Rosa.
In the quarter ended March 31, 2025, the Company issued several contractors stock options to purchase in aggregate 125,421 shares of common stock with an average exercise price of $0.47 per share under 2022 Plan.
Unless otherwise noted, the securities above were issued pursuant to the registration requirements of the Securities Act provided by Section 4(a)(2) and/or Rule 506 of Regulation D promulgated under the Securities Act, in light of the fact that none of the issuances involved a public offering of securities and no solicitation or advertisements for such securities were made by any party.
(b) Not applicable.
(c) None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
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ITEM 6. EXHIBITS.
(a) Exhibits. The following documents are filed as part of this report:
36
| * | Filed herewith |
| ** | Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing. |
| # | Management contracts or compensatory plans, contracts or arrangements. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LA ROSA HOLDINGS CORP. | ||
| Date: May 28, 2025 | By: | /s/ Joseph La Rosa |
| Name: | Joseph La Rosa | |
| Title: | Founder, Chief Executive Officer, and Director | |
| (Principal Executive Officer) | ||
| Date: May 28, 2025 | By: | /s/ Joseph La Rosa |
| Name: | Joseph La Rosa | |
| Title: | Interim Chief Financial Officer | |
| (Principal Financial Officer) (Principal Accounting Officer) |
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