Exhibit 99.2
Table of Contents
| Report of Independent Registered Public Accounting Firm (PCAOB ID No. |
2 |
| Consolidated Financial Statements: | |
| Consolidated Balance Sheets | 5 |
| Consolidated Statements of Comprehensive Loss | 6 |
| Consolidated Statements of Changes in Equity | 7 |
| Consolidated Statement of Cash Flows | 8 |
| Notes to the Consolidated Financial Statements | 9-33 |
| 1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of The Real Brokerage Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of The Real Brokerage Inc. and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of comprehensive loss, changes in equity, and cash flows, for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 6, 2025 expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
| 2 |
Revenue Share — Refer to Note 2W and Note 4 to the financial statements.
Critical Audit Matter Description
The Company has a revenue sharing plan where its agents can receive additional commission income from real estate transactions consummated by agents they have attracted to the Company. Amount paid to agents under the revenue sharing plan is based on (1) the number of qualifying agents attracted to the Company and (2) the amount earned by the Company from real estate transactions consummated by such agents.
Revenue share calculation is based on multi-tiered compensation structure and limited to maximum amount to be paid per agent attracted to the Company. The calculation is done in internally developed system and is based on conditions determined in the revenue sharing plan.
We identified revenue share expense as a critical audit matter because of the complexity of the automated calculations, significant volume of data and multiple parameters involved in the calculation of revenue share expenses. This required an increased extent of audit effort to audit and evaluate the accuracy of revenue share expenses recorded under the revenue sharing plan.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to revenue share included the following, among others:
| ● | With the assistance of our IT specialists, we: | |
| ● | Identified the significant system used to process revenue share transactions and tested the general IT controls over the system, including testing of user access controls, change management controls, and IT operations controls. | |
| ● | Performed testing of automated controls for the system calculation of revenue share and the system determination of qualifying active agents. | |
| ● | We selected samples of agents and tested their association with the respective attracting agent by reading independent contractor agreements and tested appropriateness of the agent as a qualifying agent by obtaining evidence of agents reaching the required sales transaction volume. | |
| ● | For a sample of revenue share expenses, we performed detail testing by recalculating the revenue sharing allocation in accordance with the terms of the revenue sharing plan and traced underlying transactions data to third party documents such as settlement statements or residential purchase agreements. |
/s/
Certified Public Accountants
A Firm in the Deloitte Global Network
March 6, 2025
We have served as the Company’s auditor since 2014.
| 3 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of The Real Brokerage Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of The Real Brokerage Inc. and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our report dated March 6, 2025, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/Brightman Almagor Zohar & Co
Certified Public Accountants
A Firm in the Deloitte Global Network
Tel Aviv, Israel
March 6, 2025
| 4 |
THE
REAL BROKERAGE INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of U.S. dollars)
| As of | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Investments in financial assets | ||||||||
| Trade receivables | ||||||||
| Other receivables | ||||||||
| Prepaid expenses and deposits | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Property and equipment, net | ||||||||
| TOTAL NON-CURRENT ASSETS | ||||||||
| TOTAL ASSETS | ||||||||
| LIABILITIES AND EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | ||||||||
| Accrued liabilities | ||||||||
| Customer deposits | ||||||||
| Other payables | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Warrants liability | ||||||||
| TOTAL NON-CURRENT LIABILITIES | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies | ||||||||
| EQUITY | ||||||||
| EQUITY ATTRIBUTABLE TO OWNERS | ||||||||
| Common Shares, $ par value, Common Shares authorized, Shares issued and outstanding (in thousands) at December 31, 2024; and Shares issued and outstanding (in thousands) at December 31, 2023 | ||||||||
| Additional Paid in Capital | ||||||||
| Deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||
| Treasury stock, at cost, and Common Shares (in thousands) at December 31, 2024 and 2023, respectively | ( | ) | ( | ) | ||||
| EQUITY ATTRIBUTABLE TO OWNERS | ||||||||
| Non-controlling interests | ( | ) | ||||||
| TOTAL EQUITY | ||||||||
| TOTAL LIABILITIES AND EQUITY | ||||||||
The accompanying notes form an integral part of the consolidated financial statements.
| 5 |
THE
REAL BROKERAGE INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Expressed in thousands of U.S. dollars, except for per share amounts)
| For the Year Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Revenues | $ | $ | ||||||
| Cost of Sales | ||||||||
| Gross Profit | ||||||||
| General and administrative expenses | ||||||||
| Marketing expenses | ||||||||
| Research and development expenses | ||||||||
| Settlement of litigation | ||||||||
| Operating Expenses | ||||||||
| Operating Loss | ( | ) | ( | ) | ||||
| Other income (expenses), net | ( | ) | ||||||
| Finance expenses, net | ( | ) | ( | ) | ||||
| Net Loss | ( | ) | ( | ) | ||||
| Net income attributable to noncontrolling interests | ||||||||
| Net Loss Attributable to the Owners of the Company | ( | ) | ( | ) | ||||
| Other comprehensive income/(loss), Items that will be reclassified subsequently to profit or loss: | ||||||||
| Unrealized gain on investments in financial assets | ||||||||
| Foreign currency translation adjustment | ( | ) | ||||||
| Total Comprehensive Loss Attributable to Owners of the Company | ( | ) | ( | ) | ||||
| Total Comprehensive Income Attributable to Non-Controlling Interest | ||||||||
| Total Comprehensive Loss | ( | ) | ( | ) | ||||
| Loss per share | ||||||||
| Basic and diluted loss per share | $ | ) | $ | ) | ||||
| Weighted-average shares, basic and diluted | ||||||||
The accompanying notes form an integral part of the consolidated financial statements.
| 6 |
THE
REAL BROKERAGE INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(U.S. dollar in thousands)
| Additional Paid in Capital | Deficit | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Equity Attributable to Owners | Non-Controlling Interests | Total Equity | ||||||||||||||||||||||
| Balance at, January 1, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Total net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Total other comprehensive income (loss) | ||||||||||||||||||||||||||||
| Distributions to non-controlling interests | ( | ) | ( | ) | ||||||||||||||||||||||||
| Acquisitions of commons shares for Restricted Share Unit (RSU) plan | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Release of treasury shares | ( | ) | ||||||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||||||
| Exercise of warrants | ||||||||||||||||||||||||||||
| Shares withheld for taxes | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Equity-settled share-based payment | ||||||||||||||||||||||||||||
| Balance at, December 31, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance at, January 1, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Total net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Total other comprehensive income (loss) | ||||||||||||||||||||||||||||
| Distributions to non-controlling interests | ( | ) | ( | ) | ||||||||||||||||||||||||
| Acquisitions of commons shares for Restricted Share Unit (RSU) plan | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Release of treasury shares | ( | ) | ||||||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||||||
| Shares withheld for taxes | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Equity-settled share-based payment | ||||||||||||||||||||||||||||
| Balance at, December 31, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
The accompanying notes form an integral part of the consolidated financial statements.
| 7 |
THE
REAL BROKERAGE INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(U.S. dollar in thousands)
| For the Year Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments for: | ||||||||
| Depreciation and amortization | ||||||||
| Impairment of goodwill | ||||||||
| Equity-settled share-based payments | ||||||||
| Finance costs | ||||||||
| Change in fair value of warrants liability | ||||||||
| Changes in operating asset and liabilities: | ||||||||
| Contingent consideration | ( | ) | ||||||
| Trade receivables | ( | ) | ( | ) | ||||
| Other receivables | ( | ) | ||||||
| Prepaid expenses and deposits | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued liabilities | ||||||||
| Customer deposits | ||||||||
| Other payables | ( | ) | ||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | ||||||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Purchase of financial assets | ( | ) | ( | ) | ||||
| Sale of financial assets | ||||||||
| NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | ( | ) | ||||||
| FINANCING ACTIVITIES | ||||||||
| Purchase of common shares for Restricted Share Unit (RSU) Plan | ( | ) | ( | ) | ||||
| Payment of employee taxes on certain share-based arrangements | ( | ) | ( | ) | ||||
| Proceeds from exercise of stock options | ||||||||
| Distributions to non-controlling interest | ( | ) | ( | ) | ||||
| NET CASH USED IN FINANCING ACTIVITIES | ( | ) | ( | ) | ||||
| Net change in cash, cash equivalents and restricted cash | ||||||||
| Cash, cash equivalents and restricted cash, beginning of year | ||||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | ||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH BALANCE, ENDING BALANCE | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: | ||||||||
| Warrants exercised | ||||||||
The accompanying notes form an integral part of the consolidated financial statements
| 8 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
1. BUSINESS
Description of Business
The Real Brokerage Inc. (“Real” or the “Company”) is a growing real estate technology company located in the United States and Canada. As a licensed real estate brokerage, the Company’s revenue is generated primarily by processing real estate transactions which entitle us to commissions. The Company pays a portion of its commission revenue to real estate agents who are affiliated with the Company. The Company is taking a first principles approach to redefining the role of a real estate brokerage in the lives of agents and within the broader housing ecosystem. The Company focuses on developing technology to enhance real estate agent performance, while aiming to build a scalable, efficient brokerage operation that allows for technologically supported brokerage oversight that is not dependent on a cost-heavy brick and mortar presence in the markets in which the Company operates. The Company’s goal is to establish itself as the destination brokerage for agents, by offering a combination of technology, support, and financial incentives. The Company’s vision is to transform home buying under the guidance of an agent through an integrated consumer technology product, while growing its ancillary services, including mortgage broker and title services. In addition, the Company plans to expand its suite of tools and products tailored for agents, including Company-branded financial products.
The consolidated operations of Real include the subsidiaries of Real, including those involved in the brokerage, title, mortgage broker, and wallet operations.
Common Shares
On May 24, 2023, the Company announced that it renewed its NCIB pursuant to which, Real may purchase up to approximately million Common Shares, representing approximately % of the total million Common Shares issued and outstanding as of May 18, 2023. On May 14, 2024, the Company announced that it renewed its NCIB again pursuant to which Real may purchase up to approximately million Common Shares, representing approximately % of the total million Common Shares issued and outstanding as of May 1, 2024. Purchases are made at prevailing market prices and may be conducted during the twelve-month period ended May 28, 2025.
The NCIB is being conducted to acquire Common Shares for the purposes of satisfying restricted share unit (each, an “RSU”) obligations. The Company appointed CWB Trust Services (the “Trustee”) as the trustee for the purposes of arranging the acquisition of Common Shares and to hold the Common Shares in trust for the purposes of satisfying RSU payments as well as to deal with other administrative matters. Through the Trustee, RBC Capital Markets was engaged to undertake purchases under the NCIB.
On June 15, 2021, the Company’s Common Shares commenced trading on the NASDAQ under the symbol “REAX”. On July 26, 2022, the Company’s Common Shares commenced trading on the Toronto Stock Exchange (the “TSX”) under the symbol “REAX”.
On July 28, 2023, the Company announced that its application for a voluntary delisting of its Common Shares from the TSX had been approved by the Company’s Board of Directors and the TSX. The Common Shares were delisted from the TSX effective as of close of markets on August 11, 2023. The Common Shares continue to be listed and traded on the NASDAQ under the symbol “REAX”.
| 9 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies described below have been applied consistently to all periods presented.
A. Basis of preparation
These consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”).
B. Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company, its wholly-owned subsidiaries and entities in which we have a controlling voting interest in. Intercompany transactions and balances are eliminated upon consolidation.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the year are included in profit or loss from the date the Company gains control until the date when the Company ceases to control the subsidiary.
Where necessary, adjustments are made to the financial statements of subsidiaries to ensure subsidiaries’ accounting policies are in line with Company’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses, and cash flows relating to transactions between the members of the Company and its subsidiaries are eliminated on consolidation.
| 10 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
C. Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to legal contingencies, income taxes, revenue recognition, stock-based compensation, intangible assets, goodwill and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
D. Certain significant risks and business uncertainties
We operate in the residential real estate industry and are a technology-focused company. Accordingly, we are affected by a variety of factors that could have a significant negative effect on our future financial position, results of operations, and cash flows. These factors include: negative macroeconomic factors affecting the health of the residential real estate industry, negative factors disproportionately affecting markets where we derive most of our revenue, intense competition in the residential real estate industry, changes in prevailing interest rates, maintaining and managing rapid growth, industry changes as the result of certain class action lawsuits or government investigations and maintaining compliance with laws and regulations.
Certain financial instruments, primarily cash and cash equivalents and investments, potentially subject us to concentrations of credit risk. We generally place our cash and cash equivalents and investments with major financial institutions we deem to be of high-credit-quality in order to limit our credit exposure. We maintain our cash accounts with financial institutions where deposits exceed federal insurance limits. Credit risk in regard to accounts receivable is spread across a large number of customers.
E. Functional and presentation currency
These consolidated financial statements are presented in U.S. dollars, which is the Company’s functional currency. All amounts have been rounded to the nearest thousands of dollars, unless otherwise noted.
F. Foreign currency
Foreign currency transactions and balances
Transactions in foreign currencies are initially recognized in the financial statements using exchange rates prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the relevant functional currency at the exchange rates prevailing at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary assets and liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction. Foreign currency differences arising on translation are recognized in the statements of comprehensive loss for determination of net profit or loss during the period.
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the functional currency at exchange rates at the reporting date. The income and expenses of foreign operations and cash flows are translated using average exchange rates during the period. Such differences are included in accumulated other comprehensive income. When a foreign operation is disposed of, in part or in full, the relevant amount within accumulated other comprehensive income is transferred to profit or loss.
| 11 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
G. Operating segments
The Company uses judgement in determining its operating segments by taking into consideration the Chief Operating Decision Maker’s (“CODM”) assessment of overall performance and decisions such as resource allocations and delegation of authority.
The segment information disclosed in these consolidated Financial Statements reflects historical results consistent with the identifiable reportable segments of The Real Brokerage Inc. and financial information that the CODM reviews to evaluate segmental performance and allocate resources among the segments. The CODM is the Company’s Chief Executive Officer.
Detailed segment information is disclosed in Note 5.
H. Revenue from contracts with customers
The Company generates substantially all its revenue from commissions generated from the sale of real estate properties. Other sources of revenue relate to ancillary services.
The Company is contractually obligated to provide services for the fulfillment of transfer of real estate between buyers and sellers. The Company satisfies its performance obligations through closing of a transaction and provides services between the agents and buyers and sellers as a principal. Accordingly, the Company recognizes revenues in the gross commission amount of consideration, to which it expects to be entitled to.
Please see Note 3 for more information about the Company’s revenues from contracts with customers.
Performance obligations and revenue recognition policies
Revenue is measured based on the consideration specified in a contract with a customer. The Company recognizes revenue upon the satisfaction of its performance obligation when it transfers control over a good or service to a customer.
| 12 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms, and related revenue recognition policies.
| Type of product or service | Nature of timing of satisfaction of performance obligations including significant payment terms | Revenue recognition policies | ||
| Commissions from real estate contracts | Customers obtain control of real estate property on the closing date, which is ordinarily when consideration is received | Revenue is recognized at a point in time as the purchase agreement is closed and the sale is executed | ||
| Title Fees (Escrow and Title Insurance) | Customers obtain control of real estate property on the closing date, which is ordinarily when consideration is received | Revenue is recognized at a point in time when the transaction is closed and paid | ||
| Mortgage Broker | Customers obtain control of real estate property on the closing date, which is ordinarily when consideration is received | Revenue is recognized at a point in time when the loan has been funded | ||
| Wallet | Transactions based fees are recognized when the service is performed, while interest income from deposit and credit lines is recognized over time as it accrues based on the effective interest rate | Revenue is recognized either at a point in time or over time depending on the nature of the service provided |
I. Cost of Sales
Cost of Sales represents real estate commissions paid to the Company’s agents, as well as to outside brokerages in Canada, and Title Fee Expenses.
J. Share-based compensation
The Company’s real estate agents receive remuneration in the form of share-based compensation, whereby those agents are entitled to restricted share units. In addition, the Company grants its employees and members of the board of directors’ remuneration in the form of share-based compensation, whereby employees and the board of directors render services in consideration for equity instruments.
Share-based payment arrangements
The grant-date fair value excluding the effect of non-market equity-settled share-based payment arrangements granted to employees is generally recognized as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
For awards that vests in tranches subject only to a service condition (e.g., time-based vesting), the Company recognizes compensation cost over the requisite service period for each separately-vesting tranche as though each tranche of the award is, in substance, a separate award.
Restricted share unit plan
Under the restricted share unit plans, eligible participants receive restricted share units (RSUs), which generally vest over a period of up to four years. The expense in relation to RSUs earned in recognition of service performance conditions is recognized at grant-date fair value during the applicable vesting period based on the best available estimate of the number of equity instruments expected to vest with a corresponding increase in equity. Non-bonus RSUs granted under the agent stock purchase plan are fully vested at grant date. The expense in relation to such RSUs is recognized at grant-date fair value with a corresponding increase in equity. Please see Note 7.D for more information about the Company’s restricted share unit.
| 13 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
The Company also awards performance-based RSUs which require certain conditions, communicated within each individual award, to be met for vesting to occur. Expense related to the issuance of performance-based RSUs is recorded over the vesting period, is initially based on the fair value of the award on the grant date, and is subsequently remeasured at each reporting date based upon the probability that the performance target will be met.
Forfeiture rates are based on historical experience and are adjusted in subsequent periods for differences in actual forfeitures from those estimated. The Company’s forfeiture assumptions serve to reduce the unamortized grant date fair value of outstanding awards as well as the associated stock-based compensation expense. As awards are actually forfeited, the number of awards outstanding is reduced, and the remaining unamortized grant date fair value is compared to assumed forfeiture levels. True-up adjustments are made as deemed necessary. For the years presented, the Company assumed a % forfeiture rate on Share-based payment arrangements and RSU awards.
K. Income tax
The Company accounts for income taxes under the asset and liability method pursuant to ASC 740, Income Taxes. Under this method, the Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded for deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized based on all available positive and negative evidence.
Tax benefits related to uncertain tax positions are recognized when it is more likely than not that a tax position will be sustained during an audit. Interest and penalties related to unrecognized tax benefits are included within the provision for income tax.
L. Property and equipment
Recognition and measurement
Items of property and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. If significant parts of an item of property and equipment have different useful lives, then they are accounted for as separate items (significant components) of property and equipment.
Any gain or loss on disposal of an item of property and equipment is recognized in profit or loss.
Depreciation
Depreciation is calculated to write off the cost of items of property and equipment less their estimated residual values using the straight-line method over their estimated useful lives and is recognized in profit or loss.
The estimated useful lives of property and equipment for current and comparative periods are as follows:
| Computer hardware and software: | ||
| Furniture and fixtures: |
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted, if appropriate.
| 14 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
M. Research and Development
Research and development expense consists primarily of salaries and benefits, share based compensation, and other related expenses. The Company expenses research and development costs as incurred and record them in Research and development expenses, except as described under Note 2N below.
N. Software Development Costs
Software development costs include costs to develop software to be used solely to meet internal needs and applications used to deliver our services. These software development costs meet the criteria for capitalization once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended. Capitalized amounts are presented under property and equipment.
O. Available for sale debt securities
Debt securities that the Company doesn’t have the intent and ability to hold to maturity and aren’t held principally for the purpose of selling them in the near term are classified as available for sale. Debt securities classified as available for sale are reported at fair value and subject to impairment testing. Other than impairment losses, unrealized gains and losses are reported, net of the related tax effect, in other comprehensive income. Upon sale, realized gains and losses are reported in net income.
P. Fair Value Measurements
The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. The fair value hierarchy prioritizes the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:
| Input Level | Definitions | |
| Level 1 | Inputs are quoted market prices in active markets for identical assets or liabilities (these are observable market inputs). | |
| Level 2 | Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability (includes quoted market prices for similar assets or identical or similar assets in markets in which there are few transactions, prices that are not current or prices that vary substantially). | |
| Level 3 | Inputs are unobservable inputs that reflect the entity’s own assumptions in pricing the asset or liability (used when little or no market data is available). |
Refer to Note 15 for further information regarding the Companies fair value measurements.
Q. Cash and Cash Equivalents and Restricted Cash
In the consolidated balance sheets, cash and bank balances comprise cash (i.e. cash on hand and demand deposits) and cash equivalents. Cash equivalents consist primarily of money market fund and other short-term (generally with original maturity of three months or less), highly liquid investments that are readily convertible to a known amount of cash and which are subject to an insignificant risk of changes in value. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.
Bank balances for which use by the Company is subject to third party contractual restrictions are included in Restricted cash in the consolidated balance sheets. Restricted cash consists of cash held in escrow by the Company’s brokers and agents on behalf of real estate buyers. The Company recognizes a corresponding customer deposit liability until the funds are released. Once the cash is transferred from escrow, the Company reduces the respective customers’ deposit liability.
| 15 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheet that sum to the total of the same amounts shown on the statement of cash flows.
| As of | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Cash and Cash Equivalents | $ | $ | ||||||
| Restricted Cash | ||||||||
| Total cash, cash equivalents, and restricted cash, ending balance | $ | $ | ||||||
R. Goodwill
Goodwill represents the excess of the consideration paid over the estimated fair value of assets acquired and liabilities assumed in a business combination. The Company evaluates goodwill for impairment on an annual basis in the fiscal fourth quarter or on an interim basis if an event occurs or circumstances change that would more likely than not indicate that the fair value of the reporting unit is less than its carrying amount. Generally, this evaluation begins with a qualitative assessment to determine if the fair value of the reporting unit is more likely than not less than its carrying value. The test for impairment requires management to make judgments relating to future cash flows, discount and growth rates and economic and market conditions.
For the year ended December 31, 2024 and 2023, we performed an assessment of goodwill related to our previous business acquisition which resulted in an impairment charge for the year ended December 31, 2023 (See Note 11).
S. Intangible Assets
The Company’s intangible assets are finite lived and consist primarily of customer relationships. Determining the fair value of the intangible assets acquired requires management’s judgment, often utilizes third-party valuation specialists, and involves the use of significant estimates and assumptions with respect to the timing and amounts of future cash flows, discount rates, replacement costs, and asset lives, among other estimates.
The judgments made in the determination of the estimated fair value assigned to the intangible assets acquired and the estimated useful life of each asset could significantly impact our consolidated financial statements in periods after the acquisition, such as through depreciation and amortization expense.
The Company evaluates its intangible assets for recoverability and potential impairment, or as events or changes in circumstances indicate the carrying value may be impaired.
The
Company’s intangible assets are finite lived and consist primarily of customer relationships which is amortized on a straight-line
basis over its useful life of
T. Impairment
The Company periodically evaluates the carrying value of long-lived assets to be held and used when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is less than its carrying value. When assets are considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved.
U. Leases
At the inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
| 16 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated over the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements (i.e. changes in lease term) of the lease liability.
The lease liability is initially measured at the present value of lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
The Company applies the short-term lease recognition exemption to leases that have a lease term of 12 months or less from the commencement date. Lease payments on short-term leases are recognized as expenses on a straight-line basis over the lease term.
As of December 31, 2023 and December 31, 2024, the Company has no outstanding long term operating or finance lease arrangements for which a right of use asset or lease liability were recognized.
V. Business combinations
The Company allocates the purchase price of an acquired company, including when applicable, the fair value of contingent consideration between tangible and intangible assets acquired and liabilities assumed from the acquired businesses based on estimated fair values, with any residual of the purchase price recorded as goodwill.
Estimating fair values requires significant judgments, estimates and assumptions including but not limited to: discount rates, future cash flows and the economic lives of acquired intangible assets. These estimates are based on historical experience and information obtained from the management of the acquired companies, and are inherently uncertain.
W. Revenue Share
The Company has a revenue sharing plan where its agents can receive additional commission income from real estate transactions consummated by agents they have attracted to the Company. The amount paid to agents under the revenue sharing plan is based on (1) the number of qualifying agents attracted to the Company and (2) the amount earned by the Company from real estate transactions consummated by such agents. Brokers are eligible for earning 1% of the revenue share that is generated by transactions closed in their states. Revenue share expenses are included as part of Marketing Expenses in the Consolidated Statements of Comprehensive Loss.
X. Warrants Accounting
Warrants are a financial instrument that allow the holder to purchase stock of the issuer at a specified price during the warrant term.
Liability Classified
The Company classifies a warrant to purchase shares of its common stock as a liability on its consolidated balance sheets when either:
a) the warrant is a freestanding financial instrument which is either mandatorily redeemable, may require the repurchase of the Company’s shares, or the Company has an obligation to issue a variable number of shares which monetary value is based solely or predominately on any one of the following:
i) a fixed monetary amount known at inception.
ii) variations in something other than fair value of the shares.
iii) variations inversely related to changes in fair value of the shares.
b) the warrant is a freestanding financial instrument that isn’t indexed to the companies own stock or doesn’t meet the criteria for equity classification per the guidance within ASC 815-40.
| 17 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
Each liability classified warrant is initially recorded at fair value on date of grant using the Black-Scholes model and net of issuance costs, and it is subsequently re-measured to fair value at each subsequent balance sheet date. Changes in fair value of the warrant are recognized as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrant.
Company shares held by the Company are recognized at cost of purchase and presented as a deduction from equity. Any gain or loss arising from a purchase, sale, issue or cancellation of treasury shares is recognized directly in equity.
Z. Advertising Costs
Advertising costs are expensed as incurred. Advertising costs are included in marketing expense in the accompanying consolidated statements of comprehensive loss.
Advertising
costs for the years ended December 31, 2024, and 2023 were $
AA. Litigation
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, some of which involve claims for damages that are substantial in amount. The Company is also from time to time subject to legal proceedings outside the ordinary course. Some of these matters may be covered by insurance, which contain deductibles, exclusions, claim limits and aggregate policy limits. While the ultimate liability for these legal proceedings cannot be determined, the Company uses judgment in the evaluation of claims and the need for accrual for loss contingencies quarterly. The Company records an accrual for litigation related losses where the likelihood of loss is both probable and estimable. The Company accrues legal fees for litigation as the legal services are provided.
BB. Accounting policy developments
Recently Adopted Accounting Pronouncement
The Financial Accounting Standard Board (“FASB”) issued Accounting Standard Update (“ASU’) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. This ASU does not alter the methodology employed by the Company in identifying its operating segments, aggregating those operating segments or applying the quantitative thresholds to determine its reportable segments. Instead, the new ASU adds required disclosures concerning significant segment expenses that are regularly provided to or easily computed from information regularly provided to by the chief operating decision maker (“CODM”) and included within the Company’s reported measure of segment profit or loss, as well as certain other disclosures. The new ASU also allows disclosure of multiple measures of segment profitability if those measures are used to allocate resources and assess performance by the CODM. Furthermore, certain annual disclosures will be required on an interim basis. The new ASU is effective for annual financial statements of public business entities for fiscal years beginning after December 15, 2023 and in interim periods in fiscal years beginning after December 15, 2024, with early adoption permitted. The new guidance should be adopted retrospectively unless impracticable. The Company has adopted ASU 2023-07 retrospectively beginning from January 1, 2023.
New Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), to require disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information on income taxes paid. The new requirements should be applied on a prospective basis with an option to apply them retrospectively. ASU 2023-09 will be effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.
| 18 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (DISE) requiring additional disclosure of the nature of expenses included in the income statement. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. DISE will be effective for annual reporting periods beginning after December 15, 2026 with early adoption permitted. The Company is evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.
3. REVENUE
In the following table, revenue (in thousands) from contracts with customers is disaggregated by major service lines.
| For the Year Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Main revenue streams | ||||||||
| Commissions | ||||||||
| Title | ||||||||
| Mortgage Broker Income | ||||||||
| Wallet | ||||||||
| Total Revenue | ||||||||
4. EXPENSES BY NATURE
The following table presents a breakdown of operating expenses (in thousands):
| For the Year Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Cost of Sales | ||||||||
| Operating Expenses | ||||||||
| General and Administrative Expenses | ||||||||
| Salaries and Benefits | ||||||||
| Stock Based Compensation | ||||||||
| Administrative Expenses | ||||||||
| Professional Fees | ||||||||
| Depreciation Expense | ||||||||
| Other General and Administrative Expenses | ||||||||
| Marketing Expenses | ||||||||
| Salaries and Benefits | ||||||||
| Stock Based Compensation for Employees | ||||||||
| Stock Based Compensation for Agents | ||||||||
| Revenue Share | ||||||||
| Other Marketing and Advertising Cost | ||||||||
| Research and Development Expenses | ||||||||
| Salaries and Benefits | ||||||||
| Stock Based Compensation | ||||||||
| Other Research and Development | ||||||||
| Settlement of Litigation | ||||||||
| Total Operating Expenses | ||||||||
| Total Cost of Sales and Operating Expenses | ||||||||
| 19 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
Finance Expenses
The following table provides a detailed breakdown of Finance costs (in thousands) as reported in the consolidated statement of comprehensive loss:
| For the Year Ended | ||||||||
| Description | December 31, 2024 | December 31, 2023 | ||||||
| Change in Fair Value of Warrants Liability | ||||||||
| Realized Losses (Gains) | ( | ) | ||||||
| Bank Fees | ||||||||
| Finance Costs | ||||||||
| Total Finance Expenses | ||||||||
5. OPERATING SEGMENTS DISCLOSURES
Segment information aligns with how the Chief Operating Decision Maker (“CODM”), the Chief Executive Officer, manages the business and allocates resources into four operating segments:
| ● | North American Brokerage: generates revenue by processing real estate transactions which entitles the Company to commissions. | |
| ● | One Real Title: generates revenue by offering title insurance and closing services for residential and/or commercial transactions. | |
| ● | One Real Mortgage: derives revenue from premiums associated with facilitating mortgage transactions between borrowers and lenders. | |
| ● | Real Wallet: derives revenue from fees associated with the program and the offering of financial products. |
| 20 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
The Company determines an operating segment if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has discrete financial information and is (iii) regularly reviewed by the CODM. Once operating segments are identified, the Company performs a quantitative analysis of the current and historic revenues and profitability for each operating segment, together with a qualitative assessment to determine if operating segments have similar operating characteristics.
The Company has determined that it operates as a single reporting segment - North American Brokerage which comprises of more than 90% of Group’s total revenue and income (loss) from operations. The other three segments One Real Title, One Real Mortgage and Real Wallet are not considered as reporting segments as their revenue and net loss do not meet quantitative threshold set for reporting segments. These three segments are disclosed in an ‘other segments’ category below.
The presentation in this note for prior periods has been restated following the retrospective adoption of ASU 2023-07.
The CODM uses revenues, gross profit and operating income (loss) as key metrics to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions. All segments follow the same basis of presentation and accounting policies as those described throughout the Notes to the Audited Consolidated Financial Statements included herein. The following table provides information about the Company’s reportable segments (in thousands).
| For the Year Ended December 31, 2024 | ||||||||||||
| North American Brokerage | Other Segments | Total | ||||||||||
| Revenues | ||||||||||||
| Cost of Sales | ||||||||||||
| Gross Profit | ||||||||||||
| Operating Expenses(1)(2) | ||||||||||||
| Operating Loss | ( | ) | ( | ) | ( | ) | ||||||
| Reconciliation of profit or loss (segment profit/(loss)) | ||||||||||||
| Other income (expenses), net | ||||||||||||
| Finance expenses, net | ( | ) | ||||||||||
| Net Loss | ( | ) | ||||||||||
| 1 |
| 2 |
| 21 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
| For the Year Ended December 31, 2023 | ||||||||||||
| North American Brokerage | Other Segments | Total | ||||||||||
| Revenues | ||||||||||||
| Cost of Sales | ||||||||||||
| Gross Profit | ||||||||||||
| Operating Expenses(1)(2) | ||||||||||||
| Operating Loss | ( | ) | ( | ) | ( | ) | ||||||
| Reconciliation of profit or loss (segment profit/(loss)) | ||||||||||||
| Other income (expenses), net | ( | ) | ||||||||||
| Finance expenses, net | ( | ) | ||||||||||
| Net Loss | ( | ) | ||||||||||
| 1 |
| 2 |
Segment revenue reported above represents revenue generated from external customers. There were no intersegment sales in the current and in the prior year.
The assets and liabilities of each segment are not reported to the CODM on a regular basis therefore they are not disclosed in these consolidated financial statements.
Depreciation and Amortization
| For the Year Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| North American Brokerage | ||||||||
| Other Segments | ||||||||
| Total Company | ||||||||
The amount of revenue from external customers, by geography, is shown in the table below:
| For the Year Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| United States | ||||||||
| Canada | ||||||||
| Total revenue by region | ||||||||
Non-current assets, by geography, are shown in the tables below:
| As of December 31, 2024 | ||||||||||||||||
| Canada | Israel | United States | Total | |||||||||||||
| Non-Current Assets | ||||||||||||||||
| Intangible Assets | ||||||||||||||||
| Goodwill | ||||||||||||||||
| Property and Equipment | ||||||||||||||||
| Total Non-Current Assets | ||||||||||||||||
| As of December 31, 2023 | ||||||||||||||||
| Canada | Israel | United States | Total | |||||||||||||
| Non-Current Assets | ||||||||||||||||
| Intangible Assets | ||||||||||||||||
| Goodwill | ||||||||||||||||
| Property and Equipment | ||||||||||||||||
| Total Non-Current Assets | ||||||||||||||||
| 22 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
Basic loss per share is computed by dividing the loss for the period by the weighted average number of Common Shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) less any preferred dividends for the period by the weighted average number of Common Shares outstanding plus, any potentially dilutive Common Shares outstanding during the period. The Company does not pay dividends or have participating shares outstanding.
| For the Year Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Issued Common Shares,Balance at the beginning of the year | ||||||||
| Warrant Exercises | ||||||||
| Effect of Treasury Purchases | ( | ) | ( | ) | ||||
| Release of Shares | ||||||||
| Effect of Treasury Issuance | ||||||||
| Effect of Share Options Exercise | ||||||||
| Weighted-average numbers of Common Shares | ||||||||
| Loss per share | ||||||||
| Basic and diluted loss per share | ) | ) | ||||||
| For the Year Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Options | ||||||||
| RSU | ||||||||
| Total | ||||||||
| 23 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
A. Description of share-based payment arrangements
Stock option plan (equity-settled)
On January 20, 2016, the Company established a stock option plan (the “Stock Option Plan”) that entitles key management personnel and employees to purchase shares in the Company. Under the Stock Option Plan, holders of vested Options are entitled to purchase Common Shares for the exercise price as determined at the grant date.
On
February 26, 2022, the Company established an omnibus incentive plan providing for up to
In
connection with the graduation to the TSX, the Company amended its Omnibus Incentive Plan (the “A&R Plan”) on
July 13, 2022, and the Company’s shareholders approved the A&R Plan on June 9, 2023. Pursuant to the A&R Plan, the maximum
number of Common Shares issuable pursuant to outstanding Options at any time shall be limited to
| Grant Date | Number of Options | Vesting Conditions | Contractual Life of Options | |||||
| Balance January 1, 2023 | ||||||||
| On March, 2023 | years | |||||||
| On March, 2023 | years | |||||||
| On June, 2023 | years | |||||||
| On August, 2023 | years | |||||||
| On November, 2023 | years | |||||||
| Balance December 31, 2023 | ||||||||
| Balance January 1, 2024 | ||||||||
| On April, 2024 | years | |||||||
| On August, 2024 | years | |||||||
| On November, 2024 | years | |||||||
| Balance December 31, 2024 | ||||||||
B. Measurement of fair value
| December 31, 2024 | December 31, 2023 | |||||||
| Share price | $ to $ | $ to $ | ||||||
| Expected volatility (weighted-average) | % - % | % - % | ||||||
| Expected life (weighted-average) | to years | years | ||||||
| Expected dividends | % | % | ||||||
| Risk-free interest rate (based on US government bonds) | – % | –% | ||||||
| Weighted-average grant date fair value | $ | $ | ||||||
| 24 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
Expected volatility has been based on an evaluation of historical volatility of the company’s share price.
C. Reconciliation of outstanding stock-options
| December 31, 2024 | December 31, 2023 | |||||||||||||||
| Number of Options | Weighted-Average Exercise Price | Number of Options | Weighted-Average Exercise Price | |||||||||||||
| Outstanding at beginning of year | $ | | $ | | ||||||||||||
| Granted | ||||||||||||||||
| Forfeited/ Expired | ( | ) | ( | ) | ||||||||||||
| Exercised | ( | ) | ( | ) | ||||||||||||
| Outstanding at end of year | $ | $ | ||||||||||||||
| Exercisable at end of year | ||||||||||||||||
The Options outstanding as of December 31, 2024 had a weighted average exercise price of $ (December 31, 2023: $) and a weighted-average remaining contractual life of years (December 31, 2023: years).
| For the Year Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Fair value of options vested | $ | $ | ||||||
| Intrinsic value of options exercised | $ | $ | ||||||
D. Restricted share unit plan
Restricted share unit plan
Under
the Company’s agent performance grant program, the Company issues RSUs to agents based on an agent meeting certain performance
metrics, and successfully attracting other performing agents to the Company. The Company recognizes expense from the issuance
of these RSUs during the applicable vesting period based upon the best available estimate of the number RSUs expected to vest with a
corresponding increase in stock-based compensation reserve. The expense recognized from the issuance of RSU awards for the year ended
December 31, 2024 was $
| 25 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
Under the Company’s agent stock purchase program, agents purchase RSUs, which vest immediately, using a percentage of the agent’s commission that is withheld by the Company. Each RSU entitles the holder to one Common Share. The RSUs are expensed in the period in which they are issued with a corresponding increase in equity. Each agent pays the Company 15% of commissions until the commission paid to the Company totals that agent’s “cap” amount (the “Cap”). As an incentive to participate in the program, the Company issues additional RSUs (“Bonus RSUs”) with a value of
Stock compensation awards granted to full time employees (“FTEs”) are classified as a general and administrative, research and development, or marketing expense based on the appropriate department within the consolidated statements of comprehensive loss.
During the twelve months ended December 31, 2024, the Company granted RSU awards related to million common shares with a weighted average grant date fair value of $. Included within the RSU awards granted in 2024 were million performance-based awards. There were million common shares granted during the twelve months ended December 31, 2023, with a weighted average grant date fair value of $.
| Restricted Share Units | ||||
| Balance at, December 31, 2022 | ||||
| Granted | ||||
| Vested and Issued | ( | ) | ||
| Forfeited | ( | ) | ||
| Balance at, December 31, 2023 | ||||
| Granted | ||||
| Vested and Issued | ( | ) | ||
| Forfeited | ( | ) | ||
| Balance at, December 31, 2024 | ||||
Stock Based Compensation Expense
The following table provides a detailed breakdown of the stock-based compensation expense (in thousands) as reported in the consolidated statement of loss.
| For the Year Ended | ||||||||||||||||||||||||
| December 31, 2024 | December 31, 2023 | |||||||||||||||||||||||
| Options Expense | RSU Expense | Total | Options Expense | RSU Expense | Total | |||||||||||||||||||
| Cost of Sales – Agent Stock Based Compensation | ||||||||||||||||||||||||
| Marketing Expenses –Agent Stock Based Compensation | ||||||||||||||||||||||||
| Marketing Expenses –FTE Stock Based Compensation | ||||||||||||||||||||||||
| Research and Development –FTE Stock Based Compensation | ||||||||||||||||||||||||
| General and Administrative –FTE Stock Based Compensation | ||||||||||||||||||||||||
| Total Stock Based Compensation | ||||||||||||||||||||||||
| 26 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
8. INVESTMENTS IN AVAILABLE FOR SALE SECURITIES AT FAIR VALUE
The following table provides a detailed breakdown of short-term investments (in thousands) as reported in the Consolidated Balance Sheets:
| Description | Cost or Amortized Cost December 31, 2023 | Cost or Amortized Cost December 31, 2024 | Fair
Value December 31, 2023 | Deposit / (Withdraw) | Dividends, Interest & Income | Gross Unrealized Gains / (Losses) | Fair
Value December 31, 2024 | |||||||||||||||||||||
| Cash Investments | ( | ) | ||||||||||||||||||||||||||
| Fixed Income | ||||||||||||||||||||||||||||
| Investment Certificate | ( | ) | ||||||||||||||||||||||||||
| Total | ( | ) | ||||||||||||||||||||||||||
Investment
securities are recorded at fair value. The Company’s investment securities portfolio consists primarily of cash investments, debt
securities issued by U.S. government agencies, local municipalities and certain corporate entities. The products in the Company’s
investment portfolio have maturity dates ranging from less than one year to over
The fair value of investment securities is impacted by interest rates, credit spreads, market volatility, and liquidity conditions. Net unrealized gains and losses in the portfolio are included in Other Comprehensive Income (Loss).
At each balance sheet date, the Company assesses available-for-sale securities in an unrealized loss position to determine whether the decline in fair value below amortized cost is a result of credit losses or other factors, whether the Company expects to recover the amortized cost of the security, the Company’s intent to sell and if it is more likely than not that the Company will be required to sell the securities before the recovery of amortized cost. For the fiscal years ended December 31, 2024 and December 31, 2023, no allowance for credit losses was recorded.
9. PROPERTY AND EQUIPMENT
Property and equipment, net consisted of the following (in thousands)
| As of | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Computer hardware and software | ||||||||
| Furniture, fixture, and equipment | ||||||||
| Total property and equipment | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | ||||||||
For
the years ended December 31, 2024 and 2023, depreciation expense was $
| 27 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
10. INTANGIBLE ASSETS
The
Company’s intangible assets are finite lived and consist primarily of customer relationships which is amortized on a straight-line
basis over its useful life of
Reconciliation of Carrying Amounts (in thousands)
| Intangible Assets | ||||
| Cost | ||||
| Balance at December 31, 2022 | ||||
| Measurement Period Adjustment | ||||
| Balance at December 31, 2023 | ||||
| Additions | ||||
| Balance at December 31, 2024 | ||||
| Accumulated Amortization | ||||
| Balance at December 31, 2022 | ||||
| Amortization | ||||
| Balance at December 31, 2023 | ||||
| Amortization | ||||
| Balance at December 31, 2024 | ||||
| Carrying Amounts | ||||
| Balance at December 31, 2023 | ||||
| Balance at December 31, 2024 | ||||
As of December 31, 2024, expected amortization related to intangible assets will be;
| Expected Amortization | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 and thereafter | ||||
| Total | $ | |||
11. GOODWILL
We record goodwill associated with acquisitions of businesses when the purchase price of the business exceeds the fair value of the net tangible and intangible assets acquired. We review goodwill for impairment on an annual basis in the fiscal fourth quarter or on an interim basis if an event occurs or circumstances change that indicate goodwill may be impaired.
Goodwill impairment is recognized when the fair value of the reporting unit is less than its carrying amount.
The fair value of the reporting unit has been determined using the income approach leveraging discounted cash flows, with the market approach used as a reference.
For the year ended December 31, 2024, impairment charges were recorded as a result of the annual assessment of goodwill.
| 28 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
For
the year ended December 31, 2023, the annual impairment assessment resulted in an impairment charge for the goodwill related to the One
Real Title operating segment, recognized as part of the Expetitle transaction, which is presented as part of Other Segment (see Note
5). During the impairment evaluation, the Company determined that actual results had declined significantly from projections. Based on
this determination, the Company determined that the estimated fair value was significantly lower than the reporting unit carrying value
by $
| Realty Crunch | Expetitle | LemonBrew | Total | |||||||||||||
| Cost | ||||||||||||||||
| Balance at December 31, 2022 | ||||||||||||||||
| Impairment | ( | ) | ( | ) | ||||||||||||
| Adjustments | ( | ) | ( | ) | ||||||||||||
| Balance at December 31, 2023 | ||||||||||||||||
| Impairment | ||||||||||||||||
| Balance at December 31, 2024 | ||||||||||||||||
| Realty Crunch | Expetitle | LemonBrew | Total | |||||||||||||
| Accumulated Impairment Loss at December 31, 2022 | ||||||||||||||||
| Goodwill Impairment | ||||||||||||||||
| Accumulated Impairment Loss at December 31, 2023 | ||||||||||||||||
| Goodwill Impairment | ||||||||||||||||
| Accumulated Impairment Loss at December 31, 2024 | ||||||||||||||||
12. Income Taxes
The Canada and foreign components of income (loss) before income taxes were as follows for the years ended (in thousands):
| December 31, 2024 | December 31, 2023 | |||||||
| Domestic (CAN) | $ | ( | ) | $ | ( | ) | ||
| Foreign (US and IL) | ( | ) | ( | ) | ||||
| Income (loss) before taxes | $ | ( | ) | $ | ( | ) | ||
Current income tax expense, deferred income tax expense, and total income tax expense were all $— for both the years ended December 31, 2024, and 2023.
A reconciliation of the Company’s statutory income tax rate to the Company’s effective income tax rate is as follows for the years ended:
| December 31, 2024 | December 31, 2023 | |||||||
| Federal statutory rate | % | % | ||||||
| Statutory rate differential | ( | )% | ( | )% | ||||
| Excess benefits on equity compensation | % | % | ||||||
| Change in valuation allowance | ( | )% | ( | )% | ||||
| Nondeductible expenses | ( | )% | ( | )% | ||||
| Other | ( | )% | ( | )% | ||||
| Effective income tax rate | % | % | ||||||
| 29 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
The principal components of the Company’s deferred tax assets and liabilities at December 31, 2024 and 2023 are as follows (in thousands):
| December 31, 2024 | December 31, 2023 | |||||||
| Deferred tax assets: | ||||||||
| Capitalized Section 174 Costs | ||||||||
| Accrued Professional Fees | ||||||||
| Stock based compensation | ||||||||
| Partnership income | ||||||||
| Loss on contingency | ||||||||
| Net Operating Loss Carryforward | ||||||||
| Other | ||||||||
| Total deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax assets | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Deferred tax liabilities: | ||||||||
| Intellectual property | $ | ( | ) | $ | ( | ) | ||
| Property, plant and equipment | ( | ) | ( | ) | ||||
| Software and website development | ( | ) | ( | ) | ||||
| Goodwill | ( | ) | ( | ) | ||||
| Total deferred tax liabilities | ( | ) | ( | ) | ||||
| Net deferred tax assets (liabilities) | ||||||||
The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will be realized.
In
evaluating the need for a valuation allowance, the Company noted that it has generated cumulative losses in recent years. In 2024, the
valuation allowance increased by $
Net operating loss carryforwards (in thousands):
| December 31, 2024 | December 31, 2023 | |||||||
| NOL carryforward for Canadian income tax | ||||||||
| NOL carryforward for Israeli income tax | ||||||||
| NOL carryforward for U.S. federal income tax | ||||||||
| NOL carryforward for U.S. state income tax | ||||||||
As
of December 31, 2024 and December 31, 2023, the Company had net operating loss carryforward amounts of $
The Company is subject to ongoing examination by tax authorities in the jurisdictions in which it operates. The Company regularly assesses the status of these examinations and the potential for adverse outcomes to determine the adequacy of the provision for income taxes, as well as the provisions for indirect and other taxes and related penalties and interest. The Company was not subject to examination in any jurisdiction at December 31, 2024.
| 30 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
13. CAPITAL AND RESERVES
Common Shares
All Common Shares rank equally with regards to the Company’s residual assets. The following table is presented in thousands:
| December 31, 2024 | December 31, 2023 | |||||||
| Ordinary Shares, Beginning Balance | ||||||||
| Stock Options Exercised | ||||||||
| Release of Restricted Stock Units | ||||||||
| Warrants Exercised | ||||||||
| Ordinary Shares, Ending Balance | ||||||||
Treasury Stock
Treasury Stock is recognized at cost of purchase and presented as a deduction from equity. The following table shows the changes in treasury stock shares for the periods presented in thousands:
| December 31, 2024 | December 31, 2023 | |||||||
| Treasury Stock, Beginning Balance | ||||||||
| Repurchases of Common Shares | ||||||||
| Issuance of Treasury Stock | ( | ) | ( | ) | ||||
| Treasury Stock, Ending Balance | ||||||||
14. LIQUIDITY AND CAPITAL RESOURCES
Real defines capital as its equity. It is comprised of common shares, additional paid in capital, accumulated other comprehensive income, deficit, treasury stock, and non-controlling interests. The Company’s capital management framework is designed to maintain a level of capital that funds the operations and business strategies and builds long-term shareholder value.
The Company’s objective is to manage its capital structure in such a way as to diversify its funding sources, while minimizing its funding costs and risks. The Company sets the amount of capital in proportion to the risk and adjusts by considering changes in economic conditions and the characteristic risk of underlying assets. To maintain or adjust the capital structure, the Company may repurchase shares, return capital to shareholders, issue new shares or issue or repay debt.
Real’s objective is met by retaining adequate liquidity to provide the possibility that cash flows from its assets will not be sufficient to meet operational, investing and financing requirements. There have been no changes to the Company’s capital management policies during the years ended December 31, 2024, and December 31, 2023.
The following table presents the Company’s liquidity (in thousands):
| As of | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Cash and Cash Equivalents | ||||||||
| Other Receivables | ||||||||
| Investments in Financial Assets | ||||||||
| Total | ||||||||
| 31 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
15. FINANCIAL INSTRUMENTS – FAIR VALUE AND RISK MANAGEMENT
Accounting classifications and fair value (in thousands)
| As of December 31, 2024 | ||||||||||||||||||||||||
| Carrying Amount | Fair Value | |||||||||||||||||||||||
| Financial Assets at Amortized Cost | Other Financial Liabilities | Total | Level 1 | Level 2 | Total | |||||||||||||||||||
| Financial Assets Measured at Fair Value (FV) | ||||||||||||||||||||||||
| Investments in Financial Assets | - | |||||||||||||||||||||||
| Total Financial Assets Measured at Fair Value (FV) | - | |||||||||||||||||||||||
| As of December 31, 2023 | ||||||||||||||||||||||||
| Carrying Amount | Fair Value | |||||||||||||||||||||||
| Financial Assets at Amortized Cost | Other Financial Liabilities | Total | Level 1 | Level 2 | Total | |||||||||||||||||||
| Financial Assets Measured at Fair Value (FV) | ||||||||||||||||||||||||
| Investments in Financial Assets | - | |||||||||||||||||||||||
| Total Financial Assets Measured at Fair Value (FV) | - | |||||||||||||||||||||||
| Financial Liabilities Measured at Fair Value (FV) | ||||||||||||||||||||||||
| Warrants | - | |||||||||||||||||||||||
| Total Financial Liabilities Measured at Fair Value (FV) | - | |||||||||||||||||||||||
| 32 |
THE
REAL BROKERAGE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 and 2023
During the years ended December 31, 2024, and December 31, 2023, there have been no transfers between Level 1, Level 2 and Level 3.
16. COMMITMENTS AND CONTINGENCIES
The Company may have various other contractual obligations in the normal course of operations. The Company is not materially contingently liable with respect to litigation, claims and environmental matters. Any settlement of claims in excess of amounts recorded will be charged to profit or loss as and when such determination is made.
In
December, 2023, the Company was named as a defendant in a putative class action lawsuit, captioned Umpa v. The National Association
of Realtors, et al., which was filed in the United States District Court for the Western District of Missouri (the “Umpa Class
Action”). The Umpa Class Action alleges that certain real estate brokerages, including the Company, participated in practices that
resulted in inflated buyer broker commissions, in violation of federal antitrust laws. On April 7, 2024, the Company entered into a settlement
agreement to resolve the Umpa Class Action on a nationwide basis. This settlement conclusively addresses all claims asserted against
the Company in the Umpa Class Action, releasing the Company, its subsidiaries, and affiliated agents from these claims. The settlement
does not constitute an admission of liability by the Company, nor does it concede or validate any of the claims asserted in the litigation.
Pursuant to the terms of the settlement agreement, the Company paid $
Additionally, the Company agreed to implement specific changes to its business practices. These changes include clarifications about the negotiability of commissions, prohibitions on claims that buyer agent services are free, and the inclusion of listing broker compensation offers in communications with clients. The Company also agreed to develop training materials to support these practice changes. The settlement agreement received final court approval on October 31, 2024, and will take effect following the appeals process. There were no changes to the settlement agreement between preliminary and final approval. The Company does not foresee the settlement terms having a material impact on its future operations.
On June 14, 2024, the Company was named as a defendant in a putative class action lawsuit, captioned Kyle Miholich v. The Real Brokerage Inc., et al., which was filed in the United States District Court for the Southern District of California (“Miholich Class Action”). The Miholich Class Action alleges that real estate agents acting as independent contractors to the Company under an Independent Contractor Agreement sent text messages that violated the federal Telephone Consumer Protection Act. The Company’s policies require the independent contractor real estate agents to comply with the Telephone Consumer Protection Act. The plaintiffs are seeking certification of the Miholich Class Action, injunctive relief prohibiting future violations of the Telephone Consumer Protection Act, monetary damages for each alleged statutory violation and reimbursement of their litigation costs and attorneys’ fees. The Company will vigorously defend against the claims asserted in the Miholich Class Action, and the Company is unable to predict the outcome of the Miholich Class Action or whether an outcome unfavorable to the Company would have a material adverse effect on its results of operations or financial condition.
| 33 |