{"url_path":"/sec/lrhc/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-04","source_url":"https://www.sec.gov/Archives/edgar/data/1879403/0001213900-26-065276-index.html","accession_number":"0001213900-26-065276","cik":"0001879403","ticker":"LRHC","issuer_name":"La Rosa Holdings Corp.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1879403/0001213900-26-065276-index.html","primary_entity_key":"0001879403","primary_entity_name":"La Rosa Holdings Corp."},"word_count":6419,"has_tables":true,"body_markdown":"**Item\n7. Management’s Discussion and Analysis of Financial Condition and Results of Operations**\n\n \n\n*Prospective\ninvestors should read the following discussion and analysis of our financial condition and results of operations together with our financial\nstatements and the related notes and other financial information included elsewhere in this annual report. Some of the information contained\nin this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy\nfor our business, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking\nStatements and Industry Data*.*” This discussion should be read in conjunction with our audited consolidated financial statements\nand the notes thereto included elsewhere in this report.*\n\n \n\n*The\ndiscussion in this section has been impacted by the restatement described in the Explanatory Note at the beginning of this Comprehensive\nForm 10-K and in Note 2 and Note 3 of the consolidated financial statements of this Comprehensive Form 10-K. Certain of the financial\nand other information provided in this Management’s Discussion and Analysis of our Financial Condition and Results of Operations\nhas been updated to reflect the restatement adjustments.*\n\n \n\n**Business\nOverview**\n\n** **\n\nWe\noperate primarily in the United States residential real estate market. Our agent-centric commission model enables our sales agents to\nobtain higher net commissions than they would otherwise receive from many of our competitors in our local markets. Moreover, we believe\nthat our proprietary technology, training, and the support we provide to our agents at a minimal cost to them is one of the best offered\nin the industry. We are currently in the process of developing and deploying our own proprietary technology which will further decrease\nour overall expenses as we eliminate the need for outside technology services.\n\n \n\nA\nsignificant driver of our past growth, and we believe, our future growth is our ability to create revenue by requiring our agents and\nour franchisees’ agents to use business services that we provide. For example, all agents new to our Company are required to have\na “coach” and to attend multi-day training sessions to learn the Company’s philosophy, technology, and business practices.\nConcurrently, the agent works with his or her coach in obtaining listings, working with consumers, and closing transactions. All these\nactivities are run through our La Rosa Coaching, LLC, our subsidiary which teaches advanced techniques for team building, personal growth,\nand business development, which we believe will enhance our revenue at a nominal increase in cost to us. In addition, unlike other residential\nreal estate brokerages, we encourage our sales agents to pursue commercial real estate transactions and require them to utilize the services\nof our commercial real estate company, La Rosa CRE, LLC.\n\n  \n\nOur\nagent centric methodology, our advanced technology, and ancillary services, such as property management, will enable us to organically\ngrow our agent base with virtually no incremental cost. In environments with increasing mortgage rates and declining sales transactions,\nwe believe our model is more attractive to real estate agents, who retain more of their commission proceeds compared to traditional brokerage\nmodels. In fact, we have organically increased our agent count by just over 31 percent from December 31, 2022 to December 31, 2025.\n\n \n\nIn\norder to continue to provide cutting edge technology and provide best-in-class coaching and education, we periodically review our pricing\nstructure, including increasing our agent annual fees and monthly fees, the fixed transaction fee, technology and accounting fees, and\nproperty management fees. We maintain a competitive pricing structure within the industry while simultaneously providing the necessary\ntools, education and perpetual innovation.\n\n \n\n50\n\n \n\n \n\nTo\nmaximize the utility of our technological infrastructure, we anticipate acquiring additional brokerage firms that will increase our agent\ncount. We also expect to acquire other complementary businesses, such as title and insurance agencies and a mortgage brokerage. We continue\nto evaluate opportunities to drive our near-term and long-term growth.\n\n \n\nOn\nOctober 12, 2023, we consummated our initial public offering (the “IPO”). Since then, we acquired majority ownership of the\nfollowing franchisees of the Company: Nona Legacy Powered By La Rosa Realty, Inc. (formerly, La Rosa Realty Lake Nona Inc.), Horeb Kissimmee\nRealty, LLC, La Rosa Realty Georgia LLC, La Rosa Realty California, and La Rosa Realty Success LLC and 100% ownership of the following\nfranchisees of the Company: La Rosa Realty Orlando, LLC, La Rosa Realty Premier, LLC, La Rosa CW Properties, LLC, La Rosa Realty North\nFlorida LLC, La Rosa Realty Winter Garden LLC, BF Prime LLC, FPG Title Group, LLC (formerly, Nona Title Agency LLC), La Rosa Realty Lakeland\nLLC (DBA La Rosa Realty Prestige), La Rosa Realty Beaches LLC, and Baxpi Holdings LLC. In December 2023, we also formed our majority\nowned subsidiary La Rosa Realty Texas LLC. In December 2024, we opened our first office and wholly owned subsidiary in North Carolina,\nLa Rosa Realty NC LLC. In January 2025, we formed LR Luxury, LLC, engaged mostly in the residential real estate brokerage business. In\nApril 2025, we formed LR Agent Advance, LLC, offering a commission advancement program exclusively for La Rosa agents. In 2025, we also\nformed LR Realty Spain, S.L., our wholly owned subsidiary in Spain.\n\n \n\n During\nthe fiscal year ended December 31, 2025, in an effort to simplify our corporate structure, we dissolved Baxpi Holdings LLC, which was\nnon-operational, La Rosa Realty NC LLC, which was not profitable, and La Rosa Realty Success LLC, agents of which were moved to La Rosa\nCW Properties LLC. In February 2026, we also sold our majority interests in Horeb Kissimmee Realty, LLC to the minority member of that\nentity.\n\n \n\n**Description\nof Our Revenues**\n\n \n\nOur\nfinancial results are primarily driven by the total number of sales agents in our Company, the number of sales agents closing residential\nreal estate transactions, the number of sales agents utilizing our coaching services, the number of agents who work with our franchisees,\nand the number of properties under management. We grew our agent count by 18 percent from 2,581 as of December 31, 2024 to 3,050 as of\nDecember 31, 2025.\n\n \n\nThe\nmajority of our revenue is derived from a stable set of fees paid by our brokers, franchisees, and consumers. We have multiple revenue\nstreams, with the majority of our revenue derived from commissions paid by consumers who transact business with our franchisees’\nagents, royalties paid by our franchisees, dues and technology fees paid by our sales agents, our franchisees, and our franchisees’\nagents. Our major revenue streams come from such sources as: (i) residential real estate brokerage revenue, (ii) revenue from our property\nmanagement services, (iii) franchise royalty fees, (iv) fees from the sale or renewal of franchises and other franchise revenue, (v)\ncoaching, training and assistance fees, (vi) brokerage revenue generated transactionally on commercial real estate, (vii) fees generated\nfrom title services revenue and insurance and (viii) fees from our events and forums.\n\n \n\nThe\nmajority 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\nlow fixed cost structure of both our Company and franchise models, the addition of new sales agents generally requires little incremental\ninvestment in capital or infrastructure. Accordingly, the number of commission producing sales agents in our Company and our franchisees\nis the most important factor affecting our results of operations and the addition of new agents can favorably impact our revenue and\nour earnings before interest, taxes, depreciation and amortization (“EBITDA”). Historically, the number of agents in the\nresidential real estate industry has been highly correlated with overall home sale transaction activity. We believe that the number of\nagents and those that produce commissions in our network is the primary statistic that drives our revenue. Another major factor is the\ncyclicality of the real estate industry that has peaks and valleys depending on macroeconomic conditions that we cannot control. And\nfinally, our revenues fluctuate based on the changes in the aggregate fee revenue per sales agent as a significant portion of our revenue\nis tied to various fees that are ultimately tied to the number of agents, including annual dues, continuing franchise fees, and certain\ntransaction or service-based fees. Our revenue per agent also increases in other ways including when transaction sides and transaction\nsizes increase since a portion of our revenue comes from fees tied to the number and size of real estate transactions closed by our agents.\n\n \n\nWhile\nthe Company was not named as a defendant in any of the recent class action lawsuits alleging antitrust violations, it is possible that\nit could be a litigant at some point in the future. Several of these lawsuits have been settled (see “Risk Factors - *Adverse\noutcomes in litigation and regulatory actions against the NAR, other real estate brokerage companies and agents in our industry could\nadversely impact our financial results).* These settlements can result in changes in the way real estate brokers are compensated for\ntheir services. Most notably, home sellers will no longer be required to pay buyer agent commissions which will result in lower buyer\nagent compensation. We cannot predict the full breadth of the outcome of these lawsuits but believe that they will result in a significant\nadverse effect on our financial condition and results of operations for the foreseeable future.\n\n \n\n**Key Factors\nAffecting our Performance**\n\n** **\n\nAs\na result of a number of factors, our historical results of operations may not be comparable to our results of operations in future periods,\nand our results of operations may not be directly comparable from period to period. Set forth below is a brief discussion of the key\nfactors impacting our results of operations.\n\n \n\n51\n\n \n\n \n\nSeasonality\n\n \n\nOur\nbusiness is affected by the seasons and weather. The spring and summer seasons, when school is out, have typically resulted in higher\nsales volumes compared to fall and winter seasons. With the slowdown in the later months, we have experienced slower listing activity,\nfewer transaction closings and lower revenues and have seen more agent turnover as well. Bad weather or natural disasters also negatively\nimpact listings and sales which reduces our operating income, net income, operating margins and cash flow. While this pattern is fairly\npredictable, there can be no assurance that it will continue. Moreover, with the impact of climate change, we expect more business disruptions\nin the coming years, many of which could be unpredictable and extreme.\n\n \n\nOur\nrevenues and operating margins will fluctuate in successive quarters due to a wide variety of factors, including seasonality, weather,\nhealth exigencies, holidays, national or international emergencies, the school year calendar’s impact on timing of family relocations,\nand changes in mortgage interest rates. This fluctuation may make it difficult to compare or analyze our financial performance effectively\nacross successive quarters. \n\n \n\nInflation\nand Market Interest Rates\n\n \n\nThe\nbenchmark 30-year fixed conforming mortgage rate rose to a peak of about 8% during the second half of 2023, according to Freddie\nMac data. That interest rate then retreated to between 6.08% and 7.22% during 2024 and between 6.15% to 7.04% during 2025. Consequently,\nhousing demand remained soft, prices are rising, consumer sentiment has weakened, and home sales are declining. The U.S. Federal Reserve\ncontinues to take action intended to address inflation. The Federal Reserve Board maintained the federal funds rate at 533 basis points\nfrom August of 2023 through mid-September 2024, when it was reduced to 483 basis points. In February 2026, the federal funds rate was\n364 basis points. The fluctuations impact interest rates, which significantly contribute to mortgage rate adjustments. In February 2026,\nthe existing home sales market decreased 1.2% compared to February 2025 according to the NAR. This decline had an adverse impact on consumer\ndemand for our services, as consumers weighed the financial implications of selling or purchasing a home. Continuing poor housing market\nconditions would adversely affect our operating performance and results of operations.\n\n \n\n**Recent\nLegal Challenges to Sales Agents’ Commission Structure**\n\n \n\nRecent\ndevelopments in the real estate industry have seen increased scrutiny and legal challenges related to the structure of real estate agent\ncommissions. Legal actions and regulatory inquiries have been initiated to examine the fairness, transparency, and potential anticompetitive\npractices associated with the traditional commission model. Courts and regulatory bodies may be increasingly focused on ensuring transparency\nin commission structures, potentially leading to reforms that impact the earnings and business models of real estate professionals. Changes\nin legislation or legal precedents could impact the standard practices of commission-sharing between listing agents and buyer’s agents\nand may adversely affect our business model and revenues.\n\n \n\nOn\nOctober 31, 2023, in the matter of Burnett v. National Association of Realtors (U.S. District Court for the Western District of Missouri),\na federal jury found the NAR and certain other remaining brokerage defendants liable for $1.8 billion in damages on claims that\nthese companies conspired to artificially inflate brokerage commissions, which is in violation of federal antitrust law (the “Burnett\nRuling”). The verdict was appealed on October 31, 2023. Additionally, certain other brokerage defendants settled with the plaintiffs,\nincluding both monetary and non-monetary settlement terms. That same day, the NAR, EXP World Holdings, Inc., Compass, Inc., Redfin Corporation,\nWeichert Realtors, United Real Estate, Howard Hann Real Estate Services, Douglas Elliman, Inc., The Keyes Company, Illustrated Properties,\nLLC, Baird & Warner, Inc., Real Estate One, Inc., and others were named as defendants in Gibson v. National Association of Realtors\n(U.S. District Court for the Western District of Missouri), alleging a similar fact pattern and antitrust violations. On or about March\n15, 2024, NAR agreed to settle the Burnett Ruling, along with a sister litigation, by agreeing to pay $418 million over approximately\nfour years, and changing certain of its rules surrounding agent commissions. On November 26, 2024, the NAR Settlement was granted over\nobjections, The final approval order is currently being appealed. If the NAR Settlement is sustained on appeal, it is expected to resolve\nclaims against the NAR and certain companies related to this matter. The terms of the NAR Settlement provide that NAR has agreed to put\nin place a new rule prohibiting offers of compensation on the MLS, as well as adopt new rules requiring written agreements between buyers\nand buyers’ agents.\n\n \n\nOn\nMarch 22, 2024, real estate brokerage company Compass Inc. (“Compass”) announced that it will pay $57.5 million as part of\na proposed settlement to resolve lawsuits over real estate commissions and agreed to change its business practices to ensure clients\ncan more easily understand how brokers and agents are compensated for their services. Compass’s motion for final approval of the\nsettlement agreement was granted on October 31, 2024 and the settlement agreement is now effective. The final approval ruling was appealed\nby certain class members that objected to the settlement and is now pending before the United States Circuit Court of Appeals for the\nEighth Circuit. In the same litigation, the court granted final approval of multiple additional settlements, including (i) an $8.62 million\nsettlement on June 25, 2025 involving The Keyes Company, Illustrated Properties, LLC, Baird & Warner, Inc., Real Estate One, Inc.,\nand other defendants, and (ii) a $42 million settlement on February 5, 2026 involving William Raveis Real Estate Inc., Hanna Holdings\nInc., Windermere Real Estate Services Company Inc., Exit Realty Corp. International, Exit Realty Corp. USA, and William L. Lyon &\nAssociates Inc.\n\n \n\n52\n\n \n\n \n\nThese\nsettlements may result in changes in the way real estate brokers are compensated for their services. Most notably, home sellers may no\nlonger be required to pay buyer agent commissions which would result in lower buyer agent compensation. We cannot predict the full breadth\nof the outcome of these lawsuits but believe that they may result in a significant adverse effect on our financial condition and results\nof operations for the foreseeable future.\n\n \n\nThe\nCompany will continue to monitor ongoing and similar antitrust litigation against our competitors. However, the litigation and its ramifications\ncould cause unforeseen turmoil in our industry, the impacts of which could have a negative effect on us as an industry participant.\n\n \n\n**Recent\nAccounting Pronouncements**\n\n \n\nSee\nNote 1, “Basis of Presentation and Summary of Significant Accounting Policies” of the Notes to the consolidated financial\nstatements in Part II, Item 8 of this Comprehensive Form 10-K. \n\n \n\n**Results\nof Operations**\n\n** **\n\n**Revenue**\n\n \n\n  \nYear\nEnded December 31,  \nChange \n\n  \n2025  \n2024\n\n(restated)  \n$  \n% \n\nReal Estate Brokerage Services\n(Residential) \n$66,547,103  \n$57,024,911  \n$9,522,192  \n 17%\n\nFranchising Services \n 129,702  \n 329,069  \n (199,367) \n -61%\n\nCoaching Services \n 443,863  \n 568,516  \n (124,653) \n -22%\n\nProperty Management (1) \n 395,291  \n 348,721  \n 46,570  \n 13%\n\nReal Estate Brokerage Services (Commercial) \n 694,133  \n 327,912  \n 366,221  \n 112%\n\nTitle Settlement and\nInsurance \n 297,714  \n 83,010  \n 214,704  \n \n259\n% \n\nTotal\nRevenue \n$68,507,806  \n$58,682,139  \n$9,825,667  \n 17%\n\n \n\n(1)\nManagement\nidentified that certain property management fee revenue for the year ended December 31, 2024 had been incorrectly recorded on a gross\nbasis. Revenue should have been presented on a net basis reflecting only the fee retained by LRPM. See Note 2 *Restatement of Previously\nIssued Consolidated Financial Statements.*\n\n \n\n*Real\nEstate Brokerage Services (Residential)*\n\n \n\nResidential\nreal estate services revenue increased $9.5 million, or 17%, in the year ended December 31, 2025 against the comparable prior year period.\nThe increase was primarily related to $9.8 million of revenue due to a full year of income from the seven acquisitions completed in fiscal\nyear 2024.\n\n \n\n*Franchising\nServices*\n\n \n\nFranchising\nservices revenue decreased $199 thousand, or 61%, in the year ended December 31, 2025 against the comparable prior year period. The decrease\nis primarily attributable to the six franchise acquisitions during fiscal year 2024, which no longer contribute to franchising royalty\nfees. Our remaining franchisees saw a slight increase in revenue due to market conditions in our residential services stabilizing in\n2024, which partially offset the decline in franchising royalty fee revenue. Franchising royalties would be expected to decline as the\nacquisition of additional franchises continues.\n\n \n\n*Coaching\nServices*\n\n \n\nCoaching\nservices revenue declined by $125 thousand, or 22%, in the year ended December 31, 2025 against the comparable prior year period. This\nis attributable to a shift in focus by management in the agent plans to focus on agent count growth that does not require coaching. This\nwas done in anticipation of boosting transaction volume.\n\n \n\n*Property\nManagement*\n\n \n\nProperty\nmanagement revenue increased $47 thousand, or 13%, in the year ended December 31, 2025 against the comparable prior year period primarily\ndue to increases in application fees despite a reduction in total properties managed.\n\n \n\n*Real\nEstate Brokerage Services (Commercial)*\n\n \n\nResidential\nreal estate services revenue increased $366 thousand, or 112%, in the year ended December 31, 2025 against the comparable prior year\nperiod. The increase was driven mostly organically due to a change in the segments management.\n\n \n\n53\n\n \n\n \n\n*Title\nSettlement and Insurance*\n\n \n\nRevenues\nincreased $215 thousand, or 259%, in the year ended December 31, 2025 against the comparable prior year period. The increase is due to\nreporting full year of revenue for the first time since this segment was acquired in August of 2024.\n\n \n\n**Gross\nProft and Gross Margin**\n\n** **\n\n  \nYear\nEnded December 31,  \nChange \n\n  \n2025  \n2024  \n$  \n% \n\nReal Estate Brokerage Services\n(Residential) \n$6,264,127  \n$5,340,029  \n$924,098  \n 17%\n\nGross\nMargin \n 9.4% \n 9.4% \n 0.0% \n   \n\nFranchising Services \n$(210,700) \n$(159,067) \n$(51,633) \n 32%\n\nGross Margin \n -162.4% \n -48.3% \n -114.1% \n   \n\nCoaching Services  \n$175,781  \n$258,228  \n$(82,447) \n -32%\n\nGross Margin \n 39.6% \n 45.4% \n -5.8% \n   \n\nProperty Management \n$318,316  \n$341,206  \n$(22,890) \n -7%\n\nGross Margin \n 80.5% \n 3.1% \n 77.5% \n   \n\nReal Estate Brokerage Services (Commercial) \n$123,151  \n$89,873  \n$33,278  \n 37%\n\nGross Margin \n 17.7% \n 27.4% \n -9.7% \n   \n\nTitle Settlement and Insurance \n$297,714  \n$83,010  \n$214,704  \n 259%\n\nGross Margin \n 100.0% \n 100.0% \n 0.0% \n   \n\nTotal Gross Profit \n$6,968,389  \n$5,953,279  \n$1,015,110  \n 17%\n\nTotal Gross Margin \n 10.2% \n 8.6% \n 1.6% \n   \n\n** **\n\n*Real\nEstate Brokerage Services (Residential)*\n\n \n\nThe\npercentage of gross margin remained the same year over year. Gross margin related to residential real estate brokerage services increased\n$924 thousand, or 17%, in the year ended December 31, 2025 against the comparable prior year period. The increase was driven in part\nby an increase in revenue of $9.5 million and a related cost of revenue increase of $8.6 million primarily from the seven acquisitions\ncompleted during fiscal year 2024. Therefore, gross margin remained relatively constant year-over-year.\n\n \n\n*Franchising\nServices*\n\n \n\nThe\npercentage of gross margin declined by 114.1%. Gross margin related to franchising services declined by $52 thousand. The decline is\nattributable to the acquisitions of the seven acquisitions in 2024 related to franchises. As a result, this decreased the franchising\nrevenues and costs though not necessarily proportionally due to changes in aspects of cost of sales.\n\n \n\n*Coaching\nServices*\n\n \n\nThe\npercentage of gross margin declined by 5.8%. Gross margin related to coaching services declined by $82 thousand, primarily due to a change\nin operations which do not require the coaching services for certain plans, to expediate onboarding, therefore this resulted in the overall\nreduction of coaching revenues and cost of sales throughout 2025 as compared to 2024.\n\n \n\n*Property\nManagement*\n\n \n\nThe\npercentage of gross margin declined by 77.5%. Gross margin related to property management services declined by $23 thousand the year\nended December 31, 2025 against the comparable prior year period. The increase in property management costs is related to fixed costs\nof sales that did not change while the number of properties under management declined.\n\n \n\n*Real\nEstate Brokerage Services (Commercial)*\n\n \n\nThe\npercentage of gross margin declined year over year. Gross margin related to commercial real estate brokerage services increased $33 thousand,\nor 37%, in the year ended December 31, 2025, against the comparable prior year period. The change was driven in part by an increase in\nrevenue of $366 thousand and a related cost of revenue increase of $333 thousand primarily from organic growth.\n\n \n\n54\n\n \n\n \n\n*Title\nSettlement and Insurance*\n\n \n\nThe\npercentage of gross margin increased by 259%. Gross margin related to title settlement and insurance increased by $215 thousand for the\nyear ended December 31, 2025 against the comparable prior year period due to a full year of activity as this segment was acquired in\nAugust of 2024.\n\n \n\n**Selling,\nGeneral and Administrative Expense**\n\n \n\n  \nYear\nEnded December 31,  \nChange \n\n  \n2025  \n2024  \n$  \n% \n\nSales and Marketing \n$1,542,680  \n$1,007,077  \n$535,603  \n 53%\n\nPayroll and benefits \n 6,087,560  \n 4,339,402  \n 1,748,158  \n 40%\n\nRent and other \n 1,542,322  \n 1,070,708  \n 471,614  \n 44%\n\nProfessional fees \n 3,231,891  \n 1,594,262  \n 1,637,629  \n 103%\n\nOffice \n 287,674  \n 384,218  \n (96,544) \n -25%\n\nTechnology \n 710,319  \n 372,010  \n 338,309  \n 91%\n\nInsurance, training and other \n 559,329  \n 614,145  \n (54,816) \n -9%\n\nPublic company costs \n 761,838  \n 1,231,872  \n (470,034) \n -38%\n\nAmortization and depreciation \n 689,039  \n 1,018,934  \n (329,895) \n -32%\n\nTotal SG&A Expenses \n$15,412,652  \n$11,632,628  \n$3,780,024  \n 32%\n\n \n\nSelling,\ngeneral and administrative costs increased $3.8 million, or 32%, in the year ended December 31, 2025 against the comparable prior year\nperiod. Sales and marketing costs increased as the Company worked to expand and grow the business.\n\n \n\nPayroll\nand benefits increased $1.7 million or 40%, in the year ended December 31, 2025 against the comparable prior year period primarily due\nto benefits offered and headcount increases and certain one-time bonuses paid to our executives.\n\n \n\nRent\nand occupancy increased $472 thousand or 44% in the year ended December 31, 2025 against the comparable prior year period due to the\nseven acquisitions in 2024.\n\n \n\nProfessional\nfees increased $1.6 million, or 103%, in the year ended December 31, 2025 against the comparable prior year period. This increase was\nprimarily due to professional and legal fees incurred related to financing transactions entered into in 2025.\n\n \n\nOffice\nand technology costs increased by $242 thousand, or 66%, in the year ended December 31, 2025 against the comparable prior year period.\nThis is primarily due to one-time costs related to upgrading our accounting and internally developed customer resource applications.\n\n \n\nInsurance,\ntraining and other costs decreased $54 thousand, or 9%, in the year ended December 31, 2025 against the comparable prior year period.\nThis is due to new favorable contracts and using alternative less costly providers for trainings.\n\n \n\nPublic\ncompany costs decreased $470 thousand in the year ended December 31, 2025 against the comparable prior year period. This is due to a\nreduction in cost related to investor relations and cost related to acquisition activity.\n\n \n\nAdditionally,\nas part of total operating cost the Company recognized in December 31, 2025 and 2024, there were impairments of intangible and goodwill\nfor $6,911,134 and $787,438, respectively, due to triggering conditions.\n\n \n\n**Stock-based\ncompensation**\n\n \n\nWe incurred stock-based compensation\nof $5.0 million in 2025 based mostly upon restricted stock units granted to consultants ($1.8), agents and employees ($0.5 million) and\noption grants and restricted Common Stock awards to our CEO pursuant to the terms of his employment agreement and 2022 Plan ($2.7 million).\n\n \n\nWe\nincurred stock-based compensation of $4.7 million in 2024 based upon restricted stock units granted to agents and employees ($0.8 million),\nconsultants who provided various services to the company ($1.4 million), an option grant to our CEO pursuant to the terms of his employment\nagreement ($2.1 million) and an option grant to our COO pursuant to her employment agreement ($400,000).\n\n \n\n55\n\n \n\n \n\n**Other\nIncome (Expense), Net**\n\n \n\nOther\nexpense, net for the year ended December 31, 2025 was $10.1 million compared to other expense, net of $3.2 million for the comparable\nprior year. The 2025 expense was mostly due to $15.4 million in expenses related to our convertible debt and associated warrants, partially\noff-set by a $4.0 million gain on the extinguishment of debt and a $0.9 million change in the fair value of derivative liabilities.\n\n \n\n**Liquidity\nand Capital Resources**\n\n \n\nOn\nDecember 31, 2025 and 2024 we had cash of $3.1 million and $1.4 million, respectively, on hand.\n\n \n\nOn\nFebruary 4, 2025, the Company and an institutional investor entered into the securities purchase agreement, pursuant to which the Company\nissued to the 2025 Investor: (i) the Initial Note in the original principal amount of $5,500,000 maturing on February 4, 2027; and (ii)\nsixteen (16) Incremental Warrants, each to purchase additional Notes in an original principal amount up to $2,500,000 at an exercise\nprice of $2,256,250, in substantially the same form as the Initial Note. The purchase price paid by the 2025 Investor under the agreement\nfor the Initial Note and Incremental Warrants was $4,963,750, of which $910,250, $496,191 and $148,724 were used to assume or extinguish\nother debt for net proceeds of $3,408,585. Remaining funds from the offering were used by the Company to pay-off certain indebtedness\nof the Company, pay certain outstanding fees and expenses (including expenses of the offering, and fees payable to the placement agent\nand advisors), acquisitions and general corporate purposes. Of the proceeds from the offering, $354,450 was paid to satisfy, in full,\nthe remaining balance of the standard merchant cash advance agreements with Cedar Advance, LLC, $340,421 was paid to satisfy, in full,\nthe remaining balance of the standard merchant cash advance agreement with Arin Funding, LLC and $910,250 was paid to satisfy, in full,\nthe remaining balance of the senior secured promissory notes with an accredited investor. On June 18, 2025, the Company and 2025 Investor\nentered into the Exchange Agreement, pursuant to which (among other things) the 2025 Investor surrendered and exchanged all of its Incremental\nWarrants in exchange for 6,000 shares of the Series B Preferred Stock. The 2025 Investor fully converted the Initial Note, and the Company\nissued the 2025 Investor 8,215 in 2025 and 750 shares in the first quarter of 2026 for an aggregate of 8,965 shares of Common Stock upon\nsuch conversion. *See Note 8 – Borrowings*to the accompanying consolidated financial statements for further disclosure.\n\n \n\nIn\naddition to the debt pay downs during the year ended December 31, 2025, the Company eliminated all warrants tied to the investor senior\nsecured promissory notes outstanding as of December 31,2024. Two of the three warrants were exercised on a cashless basis, with the third\nwarrant being bought back by the Company in the amount of $379,083, fully eliminating these unfavorable ratchet warrants.\n\n \n\nDuring\nthe year ended December 31, 2025, the Company received proceeds from the sale of 3,871 shares of Common Stock pursuant to its sales agreement\nwith AGP (“ATM Agreement”) of $7,496,361. The Company paid the sales agent compensation with respect to sale of such shares\nin the amount of $105,885.\n\n \n\nDuring\nthe year ended December 31, 2025, the Company sold 500 shares of Common Stock pursuant to the Facility for aggregate proceeds of $111,902.\n\n \n\nThe\nCompany is subject to the risks and challenges associated with companies at a similar stage of development. These include dependence\non key individuals, successful development and marketing of its offerings, and competition with larger companies with greater financial,\ntechnical, and marketing resources. Furthermore, during the period required to achieve substantially higher revenue in order to become\nprofitable, the Company will require additional funds that might not be readily available or might not be on terms that are acceptable\nto the Company. Until such time that the Company fully implements its growth strategy, it expects to continue to generate operating losses\nin the foreseeable future, mostly due to corporate overhead and costs of being a public company. As such, the Company anticipates that\nits existing working capital, including cash on hand, and cash generated from operations will not be sufficient to meet projected operating\nexpenses for the foreseeable future through at least twelve months from the issuance of the consolidated financial statements. The Company\nwill be required to raise additional capital to service its promissory notes, to repay the principal balance of each of the notes, and\nto fund ongoing operations.\n\n* *\n\nWe\nhave incurred recurring net losses, and our operations have not provided net positive cash flows. In view of these matters, there is\nsubstantial doubt about our ability to continue as a going concern. We plan on continuing to expand via acquisition, which will help\nachieve future profitability, and we have plans to raise capital from outside investors, as we have done in the past, to fund operating\nlosses and to provide capital for further business acquisitions. We cannot provide any assurance that we can successfully raise the capital\nneeded on favorable terms, if at all.\n\n \n\n56\n\n \n\n \n\n**Summary\nof Cash Flows**\n\n \n\n \n \n**For\nthe year ended\nDecember 31,**\n \n\n \n \n**2025**\n \n \n**2024**\n \n\nNet Cash Used in Operating Activities\n \n$\n(7,528,859\n)\n \n$\n(2,997,307\n)\n\nNet Cash Used by Investing Activities\n \n$\n—\n \n \n$\n(68,625\n)\n\nNet Cash Provided by Financing Activities\n \n$\n8,852,524\n \n \n$\n4,202,713\n \n\n \n\n*Cash\nFlows Used in Operating Activities*\n\n \n\nFor\nthe year ended December 31, 2025, net cash used in operating activities was $7.5 million, which was primarily attributable to the net\nloss of $26.5 million, excluding stock-based compensation and changes in operating assets and liabilities. Non-cash provided primarily\nincluded: Loss on issuance of senior secured convertible note and warrants, change on fair value of convertible note and warrants, gain\non settlement of incremental warrants, amortization and depreciation and debt discount, change in fair value of derivatives, impairment\nof goodwill and non-cash lease and other expenses totaling $19.0 million.\n\n \n\nFor\nthe year ended December 31, 2024, net cash used in operating activities was $3.0 million, which was primarily attributable to the net\nloss of $8.2 million, excluding stock-based compensation and changes in operating assets and liabilities. Non-cash provided primarily\nincluded: amortization and depreciation and debt discount, change in fair value of derivatives, impairment of goodwill, loss on extinguishment\nof debt and non-cash lease and other expenses totaling $3.6 million.\n\n \n\n*Cash\nFlows Used in Investing Activities*\n\n* *\n\nFor\nthe year ended December 31, 2025, there was no cash impact from investing activities.\n\n \n\nFor\nthe year ended December 31, 2024, net cash used in investing activities was $69 thousand. This was the result of the purchase of property\nand equipment and cash acquired through acquisitions.\n\n \n\n*Cash\nFlows Provided by Financing Activities*\n\n* *\n\nFor\nthe year ended December 31, 2025, net cash provided by financing activities was $8.9 million. This was driven by cash flows from debt\nand equity financing that provided $11.0 million in proceeds. These proceeds were offset by $2.2 million of payments and advances on\ndebt and other financing instruments,\n\n \n\nFor\nthe year ended December 31, 2024, net cash provided by financing activities was $4.2 million. This was driven by cash flows from debt\nand equity financing that provided $6.6 million in proceeds. These proceeds were offset by $2.4 of payments and advances on debt and\nother financing instruments,\n\n \n\n57\n\n \n\n \n\n**Off-Balance\nSheet Arrangements**\n\n \n\nOn\nDecember 31, 2025, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future\neffect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures\nor capital resources. Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured\nfinance, special purpose entities or variable interest entities. We have no off-balance sheet arrangements that have or are reasonably\nlikely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of\noperations, liquidity, capital expenditures or capital resources that is material to stockholders.\n\n \n\n**Critical\nAccounting Estimates**\n\n \n\nA\ncritical accounting estimate is one that is both important to the portrayal of a company’s financial condition and results of operations\nand requires management’s most difficult, subjective or complex judgements, often as a result of the need to make estimates about\nthe effect of matters that are inherently uncertain.\n\n \n\nUse\nof Estimates. The preparation of financial statements in accordance with generally accepted accounting principles in the U.S. requires\nus to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets\nand liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.\nThe financial statements in this report include estimates based on currently available information and our judgment as to the outcome\nof future conditions and circumstances. Changes in the status of certain facts or circumstances could result in material changes to the\nestimates used in the preparation of the financial statements and actual results could differ from the estimates and assumptions. The\nCompany’s significant estimates in these financial statements are listed below:\n\n \n\n**Revenue\nRecognition**\n\n** **\n\nThe\nCompany records revenue based upon the consideration specified in the client arrangement, and revenue is recognized when the performance\nobligations in the client arrangement are satisfied. A performance obligation is a contractual promise to transfer a distinct good or\nservice to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue\nwhen or as, the customer receives the benefit of the performance obligation. Under ASC 606, revenue is recognized when a customer obtains\ncontrol of promised goods or services in an amount that reflects the consideration the Company expects to receive in exchange for those\ngoods or services.\n\n \n\n**Goodwill\nand Intangible Assets**\n\n** **\n\nGoodwill\nis tested for impairment at least annually in the fourth quarter of our fiscal year. We first perform a qualitative assessment of whether\nit is more likely than not that a reporting unit’s fair value is less than its carrying amount, and, if so, we then quantitatively\ncompare the fair value of our reporting units to their carrying amount. If the fair value of a reporting unit exceeds its carrying amount,\ngoodwill is not impaired. If the carrying amount of a reporting unit exceeds its fair value, we then record an impairment loss equal\nto the difference, up to the carrying value of goodwill. The carrying values of identifiable intangible assets are reviewed for recoverability\non a quarterly basis. The facts and circumstances considered include the recoverability of the cost of other intangible assets from future\nundiscounted cash flows to be derived from the use of the asset or asset group. It is not possible for us to predict the likelihood of\nany possible future impairments or, if such an impairment were to occur, the magnitude of any impairment. Intangible assets are subject\nto amortization over the expected period of economic benefit to us. We evaluate whether events or circumstances have occurred that warrant\na revision to the remaining useful lives of intangible assets. In cases where a revision is deemed appropriate, the remaining carrying\namounts of the intangible assets are amortized over the revised remaining useful life.\n\n \n\n58\n\n \n\n \n\n**Business\nCombinations**\n\n \n\nThe\nallocation of the purchase price for acquisitions requires use of accounting estimates and judgments to allocate the purchase price to\nthe identifiable tangible and intangible assets acquired, including franchise agreements, agent relationships, existing real estate listings,\nand non-compete agreements and liabilities assumed based on their respective fair values. The estimates we make include expected cash\nflows, expected cost savings, and the appropriate weighted average cost of capital. We complete these assessments as soon as practical\nafter the acquisition closing dates. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired\nis recorded as goodwill.\n\n \n\n**Stock-Based\nCompensation**\n\n \n\nWe\nuse the fair value method of accounting for our stock options and restricted stock units (“RSUs”) granted to employees, contractors\nand consultants to measure the cost of services received in exchange for the stock-based awards. The fair value of stock option awards\nwith only service conditions is estimated on the grant date using the Black-Scholes option-pricing model. The Black-Scholes option-pricing\nmodel requires inputs such as the risk-free interest rate, expected term and expected volatility. These inputs are subjective and generally\nrequire significant judgment. The fair value of RSUs is measured on the grant date based on the prior day closing fair market value of\nour Common Stock. The resulting cost is recognized over the period during which an employee is required to provide service in exchange\nfor the awards, usually the vesting period. Stock-based compensation expense is recognized on a straight-line basis, net of actual forfeitures\nin the period.\n\n \n\nAs\nwe accumulate additional employee stock-based awards data over time and as we incorporate market data related to our Common Stock, we\nmay calculate significantly different volatilities and expected lives, which could materially impact the valuation of our stock-based\nawards and the stock-based compensation expense that we will recognize in future periods.\n\n \n\n**Income\nTaxes**\n\n \n\nWe\nare subject to taxes in the United States. Significant judgment is required in determining our provision for income taxes, our deferred\ntax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We make these estimates and judgments\nabout our future taxable income that are based on assumptions that are consistent with our future plans. Tax laws, regulations and administrative\npractices may be subject to change due to economic or political conditions including fundamental changes to the tax laws. As of December\n31, 2025, we had recorded a full valuation allowance on our net U.S. deferred tax assets because we expect that it is more likely than\nnot that our U.S. deferred tax assets will not be realized. Should the actual amounts differ from our estimates, the amount of our valuation\nallowance could be materially impacted."}