Stratum Holdings Corp.
For the period ended Dec 31, 2024. Filed Apr 15, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Apr 15, 2025
LRHC$0.76-15.4%Stored close · as of Oct 16, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-04-16.
0001213900-24-033444
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-04-15.
0001213900-25-032211
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 93 previous paragraphs and 105 current paragraphs.
58 unchanged; 26 reworded; 19 added; 9 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (19)
Current report
On October 12, 2023, we consummated our IPO. Following our IPO, during the fiscal year ended December 31, 2023, we acquired majority ownership of the following franchisees of the Company: Nona Legacy Powered By La Rosa Realty, Inc. (formerly, La Rosa Realty Lake Nona Inc.), Horeb Kissimmee Realty, LLC, La Rosa Realty Premier, LLC, La Rosa Realty Orlando, LLC, and 100% ownership of the following franchisees of the Company: La Rosa CW Properties, LLC and La Rosa Realty North Florida LLC. In December 2023, we also formed our majority owned subsidiary La Rosa Realty Texas LLC. During the fiscal year ended December 31, 2024, we acquired majority ownership of the following franchisees and affiliates of the Company: La Rosa Realty Georgia LLC, La Rosa Realty California, La Rosa Realty Lakeland LLC DBA La Rosa Realty Prestige, and La Rosa Realty Success LLC, and 100% ownership of La Rosa Realty Winter Garden LLC, BF Prime LLC, Nona Title Agency LLC, La Rosa Realty Beaches LLC, and Baxpi Holdings. Additionally, we acquired the remaining non-controlling interest portions of Nona Legacy Powered By La Rosa Realty, Inc. (formerly, La Rosa Realty Lake Nona Inc.) and La Rosa Realty Premier, LLC, making them both 100% owned entities.
Current report
In December 2024, the Company opened its first office and wholly owned subsidiary in North Carolina, La Rosa Realty NC LLC.
Current report
Coaching services revenue declined slightly by $60 thousand during the year ended December 31, 2024 against the comparable prior year period. This is attributable to structural changes to increase recruitment and NAR related matters.
Current report
Payroll and benefits increased $1.9 million or 78%, in the year ended December 31, 2024 against the comparable prior year period primarily due to changes in the executive management team, bonus, payroll taxes and acquisitions from the 4 th quarter of 2023 and during 2024. In addition, headcount increases to facilitate growth and replace 3 rd party costs.
Current report
Rent and occupancy increased as the Company leases its corporate office and other offices from various entities. With $669 thousand of the total increase of $724 thousand related to the acquisitions from the fourth quarter of 2023 and companies acquired in 2024.
Current report
Professional fees increased $1.334 million, or 513%, in the year ended December 31, 2024 against the comparable prior year period. Primarily this increase is related to $666,390 of legal cost related to acquisitions, litigation and SEC reporting. Secondarily, an increase of $523,191 in fees related to the company and other professional accounting services related to audits and acquisitions.
Current report
Public company cost increased due to fees paid to the Board of Directors of $231 thousand, investor relation and related of $357 thousand.
Current report
Additionally, as part of total operating cost the Company recognized impairment of goodwill for $787 thousand due to triggering conditions as described in Note 4 – Goodwill and Intangible Assets, triggering events were noted on October 1, 2024 with the most significant event share price performance. We further evaluated triggering events through December 31, 2024 and determined no further impairment was necessary.
Current report
In May 2024, we entered into a standard merchant cash advance agreement with Cedar Advance LLC (“Cedar”) where we sold in the aggregate $761,250 in future receipts of the Company for $500,000. Until the purchase price has been repaid, the Company agreed to pay Cedar $23,000 per week.
Current report
In July 2024, we received $444,600 in net proceeds, excluding debt issuance costs of approximately $25,000, through our private sale of a 13% OID senior secured promissory note in the principal amount of $468,000 for a purchase price of $444,600 to the same accredited investor in our February 2024 and April 2024 private placements.
Current report
In August 2024, we received $725,000 in net proceeds, excluding equity issuance costs of approximately $25,000, by issuing 761,689 shares of Common stock and a pre-funded warrant to purchase 509,498 shares of Common stock pursuant to a securities purchase agreement with an institutional accredited investor, Brown Stone Capital Ltd., at a price equal to $0.59 per share.
Current report
In September 2024, we entered into a promissory note for the principal amount of $200,000. The promissory note bore interest at 12.5% per annum. The note is payable in three monthly installments of $75,000, beginning on November 1, 2024, with subsequent payments due on December 1, 2024, and January 1, 2025.
Current report
In October 2024, we entered into a standard merchant cash advance agreement with Arin Funding LLC (“Arin”) where we sold in the aggregate $588,000 in future receipts of the Company for $420,000. Until the purchase price has been repaid, the Company agreed to pay Arin $15,474 per week.
Current report
In October 2024, we entered into a standard merchant cash advance agreement with Cedar where we sold in the aggregate $616,250 in future receipts of the Company for $403,750. Until the purchase price has been repaid, the Company agreed to pay Cedar $15,400 per week. A portion of the funds provided were used to pay off the remaining balance of $301,250 of the May 2024 cash advance agreement.
Current report
In November 2024, we entered into an ATM Agreement with A.G.P./Alliance Global Partners, as sales agent, relating to the sale of Common Stock. During the year ended December 31, 2024, we issued an aggregate of 222,000 shares of Common Stock pursuant to such ATM Agreement for net proceeds of $169,236. We paid the sales agent compensation with respect to sale of such shares in the amount of $5,728.
Current report
In November 2024, we received $480,000 in net proceeds, excluding equity issuance costs of approximately $20,000, by issuing 936,264 shares of Common stock and a pre-funded warrant to purchase 399,562 shares of Common stock pursuant to a securities purchase agreement with an institutional accredited investor, Abri Advisors, LTD. at a price equal to $0.37 per share.
Current report
For the year ended December 31, 2024 net cash used in operating activities was $2.997 million, which was primarily attributable to the net loss of $8.222 million, excluding stock-based compensation and changes in operating assets and liabilities. Adding back non-cash items such as amortization and depreciation and debt discount of $1.668 million, change in fair value of derivatives, impairment of goodwill, loss on extinguishment of debt and non-cash lease and other expenses totaling $3.556 million.
Current report
For the year ended December 31, 2024, net cash used in investing activities was $69 thousand. This was the result of the purchase of property plan equipment and cash acquired through acquisitions.
Current report
For the year ended December 31, 2024, net cash provided by financing activities was $4.2 million. This was driven by cash flows from debt and equity financing that provided $6.592 million in proceeds. These proceeds were offset by $2.389 of payments and advances on debt and other financing instruments,
Removed paragraphs (9)
Previous report
On October 12, 2023, we consummated our IPO pursuant to a registration statement on Form S-1 (File No: 333-264372), which was declared effective by the SEC on October 4, 2023, and we became an Exchange Act reporting company pursuant to a Form 8-A, as amended (File No. 001-41588) on October 4, 2023. On the IPO, we sold 1,000,000 shares of our Common Stock, par value $0.0001, at a price to the public of $5.00 per share, resulting in gross proceeds of $5,000,000. We received net proceeds of $4,360,000 after underwriter discounts, commissions, and expenses. We used the proceeds to repay existing debt and accrued interest of approximately $375,000, related party debt of approximately $150,000, existing accounts payable of $1,000,000, and to fund certain acquisitions, noted below. The remaining funds will be used for general corporate purposes, including continuing to develop propriety technology and to consider accretive acquisitions.
Previous report
As disclosed by the Company in the current reports on Form 8-K filed with the SEC on October 13, 2023, on October 19, 2023, on December 18, 2023, on December 27, 2023, January 4, 2024, February 23, 2024, March 13, 2024, and March 21, 2024 we acquired controlling interests in 9 of our franchisees: Nona Legacy Powered By La Rosa Realty, Inc. (formerly, La Rosa Realty Lake Nona Inc.), Horeb Kissimmee Realty, LLC, La Rosa CW Properties, LLC, La Rosa Realty Premier, LLC, La Rosa Realty Orlando, LLC, La Rosa Realty North Florida LLC, La Rosa Realty Winter Garden LLC, La Rose Realty Georgia LLC, and La Rosa Realty California, for a total consideration of $6,351,105, including $565,000 in cash from the proceeds from our IPO, with the remainder in Common Stock.
Previous report
Coaching services revenue remained relatively constant in the year ended December 31, 2023 against the comparable prior year period. We were able to maintain the same year-over-year coaching revenue while residential transactional volume decreased by emphasizing our coaching program, which increased our coaching volume, along with additional ancillary coaching services that started at the end of the June 2023.
Previous report
Payroll and benefits increased $394 thousand, or 19%, in the year ended December 31, 2023 against the comparable prior year period primarily due to changes in the executive management team at the end of 2022, additional payroll of $177 thousand due to the six acquisitions completed in the fourth quarter of 2023, the imputed bonus award to the CEO to extinguish a related party receivable in the amount of $45 thousand, and the employer portion of payroll tax withholding of approximately $36 thousand for the employees who had their restricted stock units vest upon the Company’s IPO.
Previous report
Rent and occupancy increased as the Company leases its corporate office from an entity owned by the chief executive officer. The rent expense for 2023 was $135 thousand. During 2022, no rent expense was charged to the Company for its corporate office.
Previous report
Professional fees decreased $488 thousand, or 65%, in the year ended December 31, 2023 against the comparable prior year period primarily due to a reclass in 2023 of accrued director fees through September 30, 2023 of $346 thousand to stock-based compensation, as the directors accepted stock options in lieu of cash payments. In addition, in 2022, we incurred accounting fees for possible franchise acquisition targets as part of our expected IPO that we did not acquire. As such, the fees were charged to expense.
Previous report
Since our IPO in October 2023, we have started incurring public company costs, including listing costs, printer costs, transfer agent fees, and investor relation costs and related professional fees.
Previous report
For the year ended December 31, 2022, net cash used in operating activities was $1.177 million, which was primarily attributable to the net loss of $2.239 million, excluding stock-based compensation and the non-cash loan forgiveness of $0.2 million, partially offset by contributions from working capital of $0.355 million, non-cash interest expense, amortization of debt discount and financing fees, and the increase expense for the value of derivatives of $0.631 million, and a provision for credit losses of $0.076 million.
Previous report
For the year ended December 31, 2022, we received cash of $1.067 million in financing activities attributable to proceeds from related party debt, notes payable, and convertible debt totaling $1.902 million, offset by cash paid for deferred offering costs of $0.512 million and distributions of $0.230 million.
Reworded paragraphs (26)
Previous wording
A significant driver of our past growth, and we believe, our future growth is our ability to create revenue by referring or requiring our agents and our franchisees’ agents use of business services that we provide. For example, all agents new to our Company are required to have a “coach” and to attend multi-day training sessions to learn the Company’s philosophy, technology, and business practices. Concurrently, the agent works with his or her coach in obtaining listings, working with consumers, and closing transactions. All these activities are run through our La Rosa Coaching, LLC subsidiary which teaches advanced techniques for team building, personal growth, and business development, which we believe will enhance our revenue at a nominal increase in cost to us. In addition, unlike other residential real estate brokerages, we encourage our sales agents to pursue commercial real estate transactions and require them to utilize the services of our commercial real estate company, La Rosa CRE, LLC.
Current wording
A significant driver of our past growth, and we believe, our future growth is our ability to create revenue by requiring our agents and our franchisees’ agents to use business services that we provide. For example, all agents new to our Company are required to have a “coach” and to attend multi-day training sessions to learn the Company’s philosophy, technology, and business practices. Concurrently, the agent works with his or her coach in obtaining listings, working with consumers, and closing transactions. All these activities are run through our La Rosa Coaching, LLC, our subsidiary which teaches advanced techniques for team building, personal growth, and business development, which we believe will enhance our revenue at a nominal increase in cost to us. In addition, unlike other residential real estate brokerages, we encourage our sales agents to pursue commercial real estate transactions and require them to utilize the services of our commercial real estate company, La Rosa CRE, LLC.
Previous wording
Our agent centric methodology, our advanced technology, and ancillary services, such as property management, will enable us to organically grow our agent base with virtually no incremental cost. In environments with increasing mortgage rates and declining sales transactions, we believe our model is more attractive to real estate agents, who retain more of their commission proceeds compared to traditional brokerage models. In fact, we have organically increased our agent count by just over five and half percent from December 31, 2022 to December 31, 2023.
Current wording
Our agent centric methodology, our advanced technology, and ancillary services, such as property management, will enable us to organically grow our agent base with virtually no incremental cost. In environments with increasing mortgage rates and declining sales transactions, we believe our model is more attractive to real estate agents, who retain more of their commission proceeds compared to traditional brokerage models. In fact, we have organically increased our agent count by just over 11 percent from December 31, 2022 to December 31, 2024.
Previous wording
In order to continue to provide cutting edge technology and provide best-in-class coaching and education, we increased our pricing structure effective September 1, 2023, including increasing our agent annual fees and monthly fees, the fixed transaction fee, technology and accounting fees, and property management fees. The fee increases are the first in over two years.
Current wording
In order to continue to provide cutting edge technology and provide best-in-class coaching and education, we periodically review our pricing structure, including increasing our agent annual fees and monthly fees, the fixed transaction fee, technology and accounting fees, and property management fees. We maintain a competitive pricing structure within the industry while simultaneously providing the necessary tools, education and perpetual innovation.
Previous wording
Our financial results are primarily driven by the total number of sales agents in our Company, the number of sales agents closing residential real estate transactions, the number of sales agents utilizing our coaching services, the number of agents who work with our franchisees, and the number of properties under management. We grew our agent count by just over five and half percent from 2,305 at December 31, 2022 to 2,434 at December 31, 2023.
Current wording
Our financial results are primarily driven by the total number of sales agents in our Company, the number of sales agents closing residential real estate transactions, the number of sales agents utilizing our coaching services, the number of agents who work with our franchisees, and the number of properties under management. We grew our agent count by six percent from 2,434 at December 31, 2023 to 2,581 at December 31, 2024.
Previous wording
The majority of our revenue is derived from a stable set of fees paid by our brokers, franchisees, and consumers. We have multiple revenue streams, with the majority of our revenue derived from commissions paid by consumers who transact business with our and our franchisees’ agents, royalties paid by our franchisees, dues and technology fees paid by our sales agents, our franchisees, and our franchisees’ agents. Our major revenue streams come from such sources as: (i) residential real estate brokerage revenue, (ii) revenue from our property management services, (iii) franchise royalty fees, (iv) fees from the sale or renewal of franchises and other franchise revenue, (v) coaching, training and assistance fees, (vi) brokerage revenue generated transactionally on commercial real estate, and (vii) fees from our events and forums.
Current wording
The majority of our revenue is derived from a stable set of fees paid by our brokers, franchisees, and consumers. We have multiple revenue streams, with the majority of our revenue derived from commissions paid by consumers who transact business with our and our franchisees’ agents, royalties paid by our franchisees, dues and technology fees paid by our sales agents, our franchisees, and our franchisees’ agents. Our major revenue streams come from such sources as: (i) residential real estate brokerage revenue, (ii) revenue from our property management services, (iii) franchise royalty fees, (iv) fees from the sale or renewal of franchises and other franchise revenue, (v) coaching, training and assistance fees, (vi) brokerage revenue generated transactionally on commercial real estate, (vii) fees generated from title services revenue and insurance and (viii) fees from our events and forums.
Previous wording
The U.S. Federal Reserve continues to take action intended to address sharp increases in inflation. The Federal Reserve Board increased the federal funds rate to a range of 525 to 550 basis points as of March 20, 2024 from a range of 0 to 25 basis points as of the first quarter of 2022. These increases have impacted interest rates, which have significantly contributed to rising mortgage rates. During the second half of 2022, the benchmark 30 year fixed conforming mortgage rate rose above 6% for the first time since 2008, according to Freddie Mac data, and has reached a recent peak of about 8% during the second half of 2023. That interest rate stood at 6.87% as of March 21, 2024. Consequently, housing demand is softening, prices are rising, consumer sentiment has weakened and home sales are declining. In 2023, the existing home sales market declined 18.7% compared to 2022, the slowest year for US home sales in nearly 30 years, according to the National Association of Realtors. This decline had an adverse impact on consumer demand for our services, as consumers weighed the financial implications of selling or purchasing a home. Continuing poor housing market conditions would adversely affect our operating performance and results of operations.
Current wording
The U.S. Federal Reserve continues to take action intended to address inflation. The Federal Reserve Board maintained the federal funds rate at 533 basis points from August of 2023 through mid-September 2024, when it was reduced to 483 basis points. In February 2025, the federal funds rate was 433 basis points. The fluctuations impact interest rates, which significantly contribute to mortgage rate adjustments. During the second half of 2022, the benchmark 30 year fixed conforming mortgage rate rose above 6% for the first time since 2008, according to Freddie Mac data, and reached a peak of about 8% during the second half of 2023. That interest rate sat in between 6.62% and 6.85% during 2024. Consequently, housing demand remained soft, prices are rising, consumer sentiment has weakened, and home sales are declining. In February 2025, the existing home sales market decreased 1.2% compared to February 2024 according to the NAR. This decline had an adverse impact on consumer demand for our services, as consumers weighed the financial implications of selling or purchasing a home. Continuing poor housing market conditions would adversely affect our operating performance and results of operations.
Previous wording
Residential real estate services revenue increased $4.037 million, or 25%, in the year ended December 31, 2023 against the comparable prior year period. The increase was driven by $4.586 million of revenue from the six acquisitions completed in the fourth quarter of fiscal year 2023, offset by a 13% decrease in total transaction volume. We increased our transaction fee, monthly agent fee, and annual fee effective September 1, 2023, which, if volume remains consistent, real estate brokerage services revenue will increase in 2024.
Current wording
Residential real estate services revenue increased $36.574 million, or 179%, in the year ended December 31, 2024 against the comparable prior year period. The increase was driven by $9.789 million of revenue from the seven acquisitions completed during fiscal year 2024, in addition the increase was due to a full year of income from the six acquired companies in 2023 of $27.166 million. Also, we received a full year of revenue from the increased transaction fee, monthly agent fee, and annual fee effective September 1, 2023.
Previous wording
Franchising services revenue decreased $151 thousand, or 15%, in the year ended December 31, 2023 against the comparable prior year period. The decrease was partially attributable from the six acquisitions completed in the fourth quarter of fiscal year 2023, which no longer contribute to franchising royalties fees, which would have totaled $71 thousand in the fourth quarter of 2023. Our remaining franchisees saw a similar decrease in volume related to the same market conditions in our residential services, which negatively impacted our franchising royalty fee revenue.
Current wording
Franchising services revenue decreased $554 thousand, or 63%, in the year ended December 31, 2024 against the comparable prior year period. The decrease is primarily attributable to the six franchise acquisitions completed in the fourth quarter of fiscal year 2023 and the six franchise acquisitions during fiscal year 2024, which no longer contribute to franchising royalty fees. These fees would have totaled $658 thousand for the year ended December 31, 2024. Our remaining franchisees saw a slight increase in revenue due to market conditions in our residential services stabilizing in 2024, which partially offset the decline in franchising royalty fee revenue. Franchising royalties would be expected to decline as the acquisition of additional franchises continues.
Previous wording
Property management revenue increased $1.650 million, or 21%, in the year ended December 31, 2023 against the comparable prior year period primarily due to a significant increase in the number of properties under management along with a management fee price increase effective September 1, 2023.
Current wording
Property management revenue increased $1.435 million, or 15%, in the year ended December 31, 2024 against the comparable prior year period primarily due to increases in the number of properties under management from 600 in 2023 to 650 in 2024 along with the full year benefit in 2024 of a management fee price increase effective September 1, 2023 from $44 to $55 in 2024 per agent property.
Previous wording
Costs related to residential real estate brokerage services increased $3.823 million, or 26%, in the year ended December 31, 2023 against the comparable prior year period. The increase was driven by $4.233 million of cost of revenue from the six acquisitions completed in the fourth quarter of fiscal year 2023, offset by a decrease in total transaction volume. The gross profit increased $316 thousand, or 13%, from 2022 to 2023 primarily attributable to the gross profit from acquisitions. The gross margin on the six acquisitions was lower than our historical results, which reduced our gross margin to 8.2% compared to our 2022 gross margin of 9.0%.
Current wording
Costs related to residential real estate brokerage services increased $3.654 million, or 217%, in the year ended December 31, 2024 against the comparable prior year period. The increase was driven in part by $8,945 million of cost of revenue from the seven acquisitions completed during fiscal year 2024. In addition we saw a full year impact from the six acquisitions from the 4 th Quarter of 2023. The gross profit increased $3.654 million, or 216.7%, from 2023 to 2024 primarily attributable to the fee increases enacted in September of 2023 and gross profit from acquisitions. Due to these factors our gross margin increased to 9.4% compared to our 2023 gross margin of 8.2%.
Previous wording
The Company uses external software that supports the Company’s franchises, which is directly used to manage real estate transactions that generates revenue. The software is classified as a cost of revenue, and the Company expects to continue to use the software for the foreseeable future. The decrease in cost of franchising revenue is due to the six acquisitions, which no longer contribute to the cost of franchising revenue, as well as a reduction of price per usage of the software costs based on our review of usage of the software. The gross profit increased $57 thousand, or 16%, from 2022 to 2023 primarily attributable to the reduction in the cost of revenue.
Current wording
The Company uses external software that supports the Company’s franchises, which is directly used to manage real estate transactions that generates revenue. The software is classified as a cost of revenue, and the Company expects to continue to use the software for a significant portion of 2025, with internally developed options coming online in the latter half of 2025. The decrease in cost of franchising revenue is due to the six acquisitions from 2023 and six from 2024, which no longer contribute to the cost of franchising revenue, as well as a reduction of price per usage of the software costs based on our review of usage of the software in 2023. The gross profit decreased $570 thousand, or 138.7%, from 2023 to 2024 primarily attributable to the reduction in the cost of revenue.
Previous wording
Costs related to coaching services increased $27 thousand, or 9%, in the year ended December 31, 2023 against the comparable prior year period. Costs related to coaching services moved proportionally with the change in related revenue. Gross profit slightly decreased by $22 thousand, or 7%, due to new initiatives of marketing the coaching programs.
Current wording
Costs related to coaching services decreased $20 thousand, or 6.1%, in the year ended December 31, 2024 against the comparable prior year period. Costs related to coaching services moved proportionally with the change in related revenue. Gross profit decreased by $40 thousand, or 13.5%, due to new initiatives to drive recruiting which impacted coaching programs.
Previous wording
Costs related to property management services increased $1.596 million, or 21%, in the year ended December 31, 2023 against the comparable prior year period. The increase in property management costs were primarily related to the increase in properties under management. The gross margin is consistent from 2022 to 2023.
Current wording
Costs related to property management services increased $1.424 million, or 15.2%, in the year ended December 31, 2024 against the comparable prior year period. The increase in property management costs were primarily related to the increase in properties under management. The gross margin is consistent from 2023 to 2024.
Previous wording
Selling, general and administrative costs increased $533 thousand, or 12%, in the year ended December 31, 2023 against the comparable prior year period. Sales and marketing costs decreased as the Company worked to improve the efficiency of its marketing spend.
Current wording
Selling, general and administrative costs increased $6.8 million, or 12%, in the year ended December 31, 2024 against the comparable prior year period. Sales and marketing costs increased as the Company worked to expand and grow the business.
Previous wording
Office and technology costs decreased due to the Company’s efforts to curtail expenses and improve productivity and efficiency. In particular, the Company’s CTO, who joined the Company in early 2022, streamlined the Company’s software applications, which reduced technology costs after subscription periods ended.
Current wording
Office and technology costs decreased by $56 thousand due to the Company’s efforts to curtail expenses and improve productivity and efficiency. In particular, the Company streamlined its software applications, which reduced technology costs after subscription periods ended.
Previous wording
Insurance, training and other costs increased in 2023 primarily due to our new directors and officers (D&O) policies that provide for liability coverage.
Current wording
Insurance, training and other costs increased in 2024 primarily due to our new directors and officers (D&O) policies that provide liability coverage.
Previous wording
We incurred stock-based compensation of $5.100 million in 2023 based upon restricted stock units granted to agents and employees, most of which was part of the IPO ($1.998 million), consultants who provided various services to the company ($1.286 million), option awards to non-management directors ($421 thousand), and an option grant to our CEO pursuant to the terms of his employment agreement ($1.395 million). We incurred stock-based compensation of $231 thousand in 2022 primarily due to option grants given to the non-management directors of our Board in February 2022.
Current wording
We incurred stock-based compensation of $4.7 million in 2024 based upon restricted stock units granted to agents and employees, ($1.0 million), consultants who provided various services to the company ($1.4 million), and an option grant to our CEO pursuant to the terms of his employment agreement ($2.3 million). During 2023, we incurred stock-based compensation of $5.1 million in 2023 based upon restricted stock units granted to agents and employees, most of which was part of the IPO ($1.998 million), consultants who provided various services to the company ($1.286 million), option awards to non-management directors ($421 thousand), and an option grant to our CEO pursuant to the terms of his employment agreement ($1.395 million).
Previous wording
Other expense, net for the year ended December 31, 2023 was $731 thousand compared to other expense, net of $465 thousand for the comparable prior year. The 2023 expense was due to costs related to the amortization of financing fees related to convertible debt instruments with embedded equity elements issued in the fourth quarter of fiscal year 2022 along with interest expense associated with the existing debt issuances in 2022, partially offset by a decrease in the revaluation of the derivative liabilities and the IRS employee retention credit received for prior tax years, net of legal costs to obtain the credit. The 2022 expense was due to costs related to the convertible debt issued in the fourth quarter of 2021, namely, amortization of finance fees, fair market value adjustments of the derivative liability related to the convertible notes, and interest expense on the convertible notes. These additional costs were partially offset by the forgiveness of debt of $149 thousand.
Current wording
Other expense, net for the year ended December 31, 2024 was $3.15 million compared to other expense, net of $0.7 million for the comparable prior year. The 2024 expense was mostly due to a $1.47 million change in the fair value of derivative liabilities, $0.7 million loss on extinguishment of debt and $0.4 million for the amortization of discount on debt instruments. The 2023 expense was due to costs related to the amortization of financing fees on convertible debt instruments with embedded equity elements issued in the fourth quarter of fiscal year 2022 along with interest expense associated with the existing debt issuances in 2022, partially offset by a decrease in the revaluation of the derivative liabilities and the IRS employee retention credit received for prior tax years, net of legal costs to obtain the credit.
Previous wording
On December 31, 2023 and 2022 we had cash of $0.96 million and $0.12 million, respectively, on hand.
Current wording
On December 31, 2024 and 2023 we had cash of $1.4 million and $0.96 million, respectively, on hand.
Previous wording
On February 20, 2024, we entered into securities purchase agreement with an accredited investor for the issuance of a 13% senior secured promissory note with a principal amount of $1,052,632 and a purchase price of $1,000,000 after an original issue discount of $52,632. The note is convertible into shares of our Common Stock at the option of the lender. In addition, on April 1, 2024, we entered into securities purchase agreement with the same accredited investor for the issuance of a 13% senior secured promissory note with a principal amount of $1,316,000 and a purchase price of $1,250,200 after an original issue discount of $65,800. The note is convertible into shares of our Common Stock at the option of the lender. The two promissory notes begin amortizing five months after the date of each loan, with full maturity occurring twelve months after the date of each loan. See Note 15, “Subsequent Events” of the Notes to the consolidated financial statements in Part II, Item 8 of this Form 10-K for additional information.
Current wording
In February 2024, we entered into securities purchase agreement with an accredited investor for the issuance of a 13% senior secured promissory note with a principal amount of $1,052,632 and a purchase price of $1,000,000 after an original issue discount of $52,632. The note was convertible into shares of our Common Stock at the option of the lender. In addition, on April 1, 2024, we entered into securities purchase agreement with the same accredited investor for the issuance of a 13% senior secured promissory note with a principal amount of $1,316,000 and a purchase price of $1,250,200 after an original issue discount of $65,800. The note was convertible into shares of our Common Stock at the option of the lender. The two promissory notes began amortizing five months after the date of each loan, with full maturity occurring twelve months after the date of each loan.
Previous wording
During 2023, we issued 1,523 shares of series A preferred stock to 77 investors in a private placement pursuant to Regulation D under the Securities Act, raising $1,523,000. We also exchanged convertible debt with an outstanding balance of $598,836, including accrued interest of $87,836, for 591 shares of series A preferred stock. On March 27, 2023, we exchanged a portion of our related party debt with an outstanding gross balance of $1,324,631, excluding debt discount of $469,785, and including accrued interest of $28,101, for 1,321 shares of series A preferred stock. See Note 8, “Stockholders’ Equity” of the Notes to the consolidated financial statements in Part II, Item 8 of this Form 10-K for additional information on the series A preferred stock.
Current wording
During 2023, we issued 1,523 shares of series A preferred stock to 77 investors in a private placement pursuant to Regulation D under the Securities Act, raising $1,523,000. We also exchanged convertible debt with an outstanding balance of $598,836, including accrued interest of $87,836, for 591 shares of series A preferred stock. In March 2023, we exchanged a portion of our related party debt with an outstanding gross balance of $1,324,631, excluding debt discount of $469,785, and including accrued interest of $28,101, for 1,321 shares of series A preferred stock. See Note 8, “Stockholders’ Equity” of the Notes to the consolidated financial statements in Part II, Item 8 of this Form 10-K for additional information on the series A preferred stock.
Previous wording
When we completed our IPO in the fourth quarter of 2023, we raised net proceeds of $4,360,000 after deducting underwriter discounts, commissions, and expenses. We used the proceeds to satisfy existing term debt and accrued interest in the aggregate amount of approximately $375,000, the existing balance of our line of credit of approximately $140,000, related party debt of approximately $150,000, and existing accounts payable of $1,000,000. On October 13, 2023 and on October 16, 2023, we acquired controlling interests in two of our franchisees, Nona Legacy Powered By La Rosa Realty, Inc. (formerly, La Rosa Realty Lake Nona Inc.) and Horeb Kissimmee Realty, LLC for a total consideration of $2,963,147, including $550,000 in cash from the proceeds of the IPO, with the remainder in common stock. See Note 3, “Business Combinations” of the Notes to the consolidated financial statements in Part II, Item 8 of this Form 10-K for additional information regarding the acquisitions.
Current wording
When we completed our IPO in the fourth quarter of 2023, we raised net proceeds of $4,360,000 after deducting underwriter discounts, commissions, and expenses. We used the proceeds to satisfy existing term debt and accrued interest in the aggregate amount of approximately $375,000, the existing balance of our line of credit of approximately $140,000, related party debt of approximately $150,000, and existing accounts payable of $1,000,000. In October 2023, we acquired controlling interests in two of our franchisees, Nona Legacy Powered By La Rosa Realty, Inc. (formerly, La Rosa Realty Lake Nona Inc.) and Horeb Kissimmee Realty, LLC for a total consideration of $2,963,147, including $550,000 in cash from the proceeds of the IPO, with the remainder in Common Stock. See Note 3, “Business Combinations” of the Notes to the consolidated financial statements in Part II, Item 8 of this Form 10-K for additional information regarding the acquisitions.
Previous wording
We are subject to the risks and challenges associated with companies at a similar stage of development. These include dependence on key individuals, successful development and marketing of its offerings, and competition with larger companies with greater financial, technical, and marketing resources than us. Furthermore, during the period required to achieve substantially higher revenue in order to become profitable, we will require additional funds that might not be readily available or might not be on terms that are acceptable to us. Until such time that we fully implement our growth strategy, we expect to continue to generate operating losses in the foreseeable future, mostly due to corporate overhead and costs of being a public company. As such, we anticipate that our existing working capital, including cash on hand, and cash generated from operations will not be sufficient to meet projected operating expenses for the foreseeable future through at least twelve months from the issuance of this annual report on Form 10-K. We will be required to raise additional capital to service the two promissory notes issued in the first half of 2024, to repay the principal balance of each of the notes, and to fund ongoing operations.
Current wording
We are subject to the risks and challenges associated with companies at a similar stage of development. These include dependence on key individuals, successful development and marketing of its offerings, and competition with larger companies with greater financial, technical, and marketing resources than us. Furthermore, during the period required to achieve substantially higher revenue in order to become profitable, we will require additional funds that might not be readily available or might not be on terms that are acceptable to us. Until such time that we fully implement our growth strategy, we expect to continue to generate operating losses in the foreseeable future, mostly due to corporate overhead and costs of being a public company. As such, we anticipate that our existing working capital, including cash on hand, and cash generated from operations will not be sufficient to meet projected operating expenses for the foreseeable future through at least twelve months from the issuance of this annual report on Form 10-K. We will be required to raise additional capital to service outstanding notes and fund ongoing operations.
Previous wording
For the year ended December 31, 2023, net cash used in operating activities was $0.141 million, which represents the cash consideration paid for the six acquisitions acquired in the fourth quarter of 2023, less cash acquired. See Note 3, “Business Combinations” of the Notes to the consolidated financial statements in Part II, Item 8 of this Form 10-K for additional information regarding the acquisitions.
Current wording
For the year ended December 31, 2023, net cash used in investing activities was $0.1 million, which represents the cash consideration paid for the six acquisitions acquired in the fourth quarter of 2023, less cash acquired. See Note 3, “Business Combinations” of the Notes to the consolidated financial statements in Part II, Item 8 of this Form 10-K for additional information regarding the acquisitions.
Previous wording
We intend to fund our contractual obligations with cash on hand, working capital and the debt raises on February 20, 2024 and April 1, 2024.
Current wording
We intend to fund our contractual obligations with cash on hand, working capital and the debt raises obtained in 2024 and February 2025.
Previous wording
Goodwill is tested for impairment at least annually in the fourth quarter of our fiscal year. We may first perform a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount, and, if so, we then quantitatively compare the fair value of our reporting units to their carrying amount. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not impaired. If the carrying amount of a reporting unit exceeds its fair value, we then record an impairment loss equal to the difference, up to the carrying value of goodwill. The carrying values of identifiable intangible assets are reviewed for recoverability on a quarterly basis. The facts and circumstances considered include the recoverability of the cost of other intangible assets from future undiscounted cash flows to be derived from the use of the asset or asset group. It is not possible for us to predict the likelihood of any possible future impairments or, if such an impairment were to occur, the magnitude of any impairment. Intangible assets are subject to amortization over the expected period of economic benefit to us. We evaluate whether events or circumstances have occurred that warrant a revision to the remaining useful lives of intangible assets. In cases where a revision is deemed appropriate, the remaining carrying amounts of the intangible assets are amortized over the revised remaining useful life.
Current wording
Goodwill is tested for impairment at least annually in the fourth quarter of our fiscal year. We first perform a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount, and, if so, we then quantitatively compare the fair value of our reporting units to their carrying amount. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not impaired. If the carrying amount of a reporting unit exceeds its fair value, we then record an impairment loss equal to the difference, up to the carrying value of goodwill. The carrying values of identifiable intangible assets are reviewed for recoverability on a quarterly basis. The facts and circumstances considered include the recoverability of the cost of other intangible assets from future undiscounted cash flows to be derived from the use of the asset or asset group. It is not possible for us to predict the likelihood of any possible future impairments or, if such an impairment were to occur, the magnitude of any impairment. Intangible assets are subject to amortization over the expected period of economic benefit to us. We evaluate whether events or circumstances have occurred that warrant a revision to the remaining useful lives of intangible assets. In cases where a revision is deemed appropriate, the remaining carrying amounts of the intangible assets are amortized over the revised remaining useful life.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Furthermore, during the period required to achieve substantially higher revenue in order to become profitable, we will require additional funds that might not be readily available or might not be on terms that are acceptable to us, or at all. Until such time that we fully implement our growth strategy, we expect to continue to generate operating losses in the foreseeable future, mostly due to corporate overhead and costs of being a public company. As such, we anticipate that our existing working capital, including cash on hand and cash generated from operations, will not be sufficient to meet projected operating expenses for the foreseeable future through at least twelve months from the issuance of this Annual Report on Form 10-K. We will be required to raise additional capital to service debt issued in the first half of 2025 and to fund ongoing operations.
Current report — wording carried from elsewhere
We have incurred recurring net losses, and our operations have not provided net positive cash flows. In view of these matters, there is substantial doubt about our ability to continue as a going concern. We plan on continuing to expand via acquisition, which will help achieve future profitability, and we have plans to raise capital from outside investors, as we have done in the past, to fund operating losses and to provide capital for further business acquisitions. We cannot provide any assurance that we can successfully raise the capital needed on favorable terms, if at all.