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La Rosa Holdings Corp. – IPO: ‘424B1’ on 10/10/23

On:  Tuesday, 10/10/23, at 4:40pm ET   ·   Accession #:  1575872-23-1581   ·   File #:  333-264372

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

10/10/23  La Rosa Holdings Corp.            424B1                  1:3.2M                                   DataTracks Svcs Ltd./FA

Document/Exhibit                   Description                      Pages   Size 

 1: 424B1       Prospectus - Info Previously Omitted                HTML   3.18M 

Filed Pursuant to Rule 424(b)(1)

Registration No. 333-264372

LA ROSA HOLDINGS CORP.

1,000,000 Shares of Common Stock

This is the initial public offering by La Rosa Holdings Corp., a Nevada corporation (the “Company”). We are offering 1,000,000 shares of our Common Stock, $0.0001 par value per share (the “Common Stock” or the “Securities”), in a firm commitment underwritten public offering (this “Offering”) at an initial public offering price of $5.00 per share.

We have also registered for public sale: (i) 50,000 shares of our Common Stock issuable to the representative of the underwriters (“Representative”) upon the exercise of a warrant to be issued to the Representative (or 57,500 shares if the Representative exercises the over-allotment option in full); and (ii) 2,469,840 shares of Common Stock held by 168 selling stockholders (the Representative and the selling stockholders referred to herein as the “Selling Stockholders”). We will not receive any of the proceeds from the sale of Common Stock by the Selling Stockholders. However, upon any exercise of the warrant held by the Representative (the “Representative’s Warrant”), we will receive cash proceeds per share equal to the exercise price of such warrant. The shares to be sold by the Selling Stockholders (the “Selling Stockholder Shares”) will not be purchased by the underwriters or otherwise included in the underwritten offering of our Common Stock in this initial public offering. The Selling Stockholders may sell or otherwise dispose of their shares in a number of different ways and at varying prices, but will not sell any Selling Stockholder Shares until after the closing of this Offering. See “Selling Stockholders—Plan of Distribution.” We will pay all expenses (other than discounts, concessions, commissions and similar selling expenses, if any) relating to the registration of the Selling Stockholders’ shares of Common Stock with the Securities and Exchange Commission.

There has been no public market our Common Stock prior to this Offering. Our Common Stock has been approved for listing on the Nasdaq Capital Market (“Nasdaq”), under the symbol “LRHC.”

Following the completion of this Offering, our Founder, Chairman of the board of directors and Chief Executive Officer, Mr. Joseph La Rosa, will control 83.2% of the total voting power of our voting capital stock with respect to director elections and all other matters. Although we are a “controlled company” under the rules of the Nasdaq Capital Market, our board of directors will be composed of a majority of independent directors, and we will not take advantage of the “controlled company” exemptions provided under such rules. Please see “Security Ownership of Certain Beneficial Owners and Management.”

Investing in our Securities involves a high degree of risk. See “Risk Factors” beginning on page 17 of this prospectus for a discussion of information that should be considered in connection with an investment in our Securities.

We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary — Implications of Being an Emerging Growth Company.”

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

This Offering is being underwritten on a firm commitment basis. We have granted a 45-day option to the underwriters, exercisable one or more times in whole or in part, to purchase up to an additional fifteen percent (15%) of the shares offered hereby at the public offering price per share, less the underwriting discounts payable by us, solely to cover overallotments, if any (the “Over-Allotment Option”).

The underwriters expect to deliver the Securities to the investors in this Offering, against payment therefore, on or about October 12, 2023.

Sole Book-Running Manager

Alexander Capital, L.P.

The date of this prospectus is October 9, 2023.

TABLE OF CONTENTS

Through and including November 3, 2023 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this Offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriter and with respect to their unsold allotments or subscriptions.

Neither we, the Selling Stockholders nor any of the underwriters have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus, any amendment or supplement to this prospectus and any related free writing prospectus prepared by or on behalf of us or to which we have referred you. We and the underwriters take no responsibility for and can provide no assurances as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, the shares of Common Stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus or in any applicable free writing prospectus related thereto is current only as of its date, regardless of its time of delivery or any sale of shares. Our business, financial condition, results of operations and future prospects may have changed since that date.

For investors outside the United States: Neither we, the Selling Stockholders nor any of the underwriters have done anything that would permit this Offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States (“U.S.”). Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the Offering of the Securities and the distribution of this prospectus outside of the United States.

We are responsible for the information contained in this prospectus and in any free-writing prospectus we prepare or authorize. We have not, the Selling Stockholders have not, and the underwriters have not, authorized anyone to provide you with different information, and we take no, the Selling Stockholders take no, and the underwriters take no, responsibility for any other information others may give you. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, the Selling Stockholders are not, and the underwriters are not, making an offer to sell these Securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

Copies of some of the documents referred to herein have been filed as exhibits to the registration statement of which this prospectus forms a part, and you may obtain copies of those documents as described in this prospectus under the heading “Where You Can Find More Information.”

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of La Rosa Holdings Corp. and its subsidiaries La Rosa Coaching, LLC, La Rosa CRE, LLC, La Rosa Franchising, LLC, La Rosa Property Management, LLC, and La Rosa Realty, LLC, and the companies to be acquired by La Rosa Holdings Corp. concurrently with the closing of this Offering: Horeb Kissimmee Realty, LLC and La Rosa Realty Lake Nona, Inc., which are affiliated by virtue of common management and ownership. All intercompany transactions and accounts have been eliminated. Numerical figures included in this prospectus have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them.

MARKET DATA

Market data and certain industry data and forecasts used throughout this prospectus were obtained from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. To our knowledge, certain third-party industry data that includes projections for future periods does not take into account the effects of the worldwide coronavirus pandemic. Accordingly, those third-party projections may be overstated and should not be given undue weight. We have not independently verified any of the data from third party sources, nor have we ascertained the underlying economic assumptions relied upon therein. Similarly, internal surveys, industry forecasts and market research, which we believe to be reliable based on our management’s knowledge of the industry, have not been independently verified. Forecasts are particularly likely to be inaccurate, especially over long periods of time. In addition, we do not necessarily know what assumptions regarding general economic growth were used in preparing the forecasts we cite. Statements as to our market position and industry statistics are based on the most currently available data that we could obtain. While we are not aware of any misstatements regarding the industry data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus.

TRADEMARKS

The logos, and other trade names, trademarks, and service marks of La Rosa Holdings Corp. appearing in this prospectus are the property of La Rosa Holdings Corp. Other trade names, trademarks, and service marks appearing in this prospectus are the property of their respective holders. Trade names, trademarks, and service marks contained in this prospectus may appear without the “®” or “™” symbols. Such references are not intended to indicate, in any way, that we, or the applicable owner or licensor, will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable owner or licensor to those trade names, trademarks, and service marks.

ABOUT THIS PROSPECTUS

Throughout this prospectus, unless otherwise designated or the context suggests otherwise,

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements.” Forward-looking statements reflect the current view about future events. When used in this prospectus, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions, as they relate to us or our management, identify forward-looking statements. Such statements, include, but are not limited to, statements contained in this prospectus relating to our business strategy, our future operating results and liquidity and capital resources outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward–looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance of future performance. We caution you therefore against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation:

We might not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this prospectus, particularly under “Risk Factors” starting on page 17 of this prospectus and the documents incorporated herein that we believe could cause actual results or events to differ materially from the forward-looking statements that we make.

You should read this prospectus and the documents that we have filed as exhibits to this prospectus completely and with the understanding that our actual future results may be materially different from what we expect.

Except as required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information or future events or developments. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this prospectus. You also should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. Before deciding to purchase our Common Stock, you should carefully consider the risk factors discussed in this prospectus.

RISK FACTORS

Our business is subject to many risks and uncertainties, which may affect our future financial performance. If any of the events or circumstances described below occur, our business and financial performance could be adversely affected, our actual results could differ materially from our expectations, and the price of our Common Stock could decline. The risks and uncertainties discussed below are not the only ones we face. There may be additional risks and uncertainties not currently known to us or that we currently do not believe are material that may adversely affect our business and financial performance. You should carefully consider the risks described below, together with all other information included in this prospectus including our financial statements and related notes, before making an investment decision. The statements contained in this prospectus that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our Common Stock could decline, and investors in our Securities may lose all or part of their investment. 

Risks Related to Our Business and Operations

The effects of the COVID-19 pandemic have caused and will likely continue to cause significant disruption to our real estate market, and the severity and duration of these impacts on future financial performance and results of operations remain uncertain.

The COVID-19 pandemic has spread across the globe and is impacting economic activity worldwide. The pandemic poses significant risks to our business and our employees, franchisees and agents. The COVID-19 pandemic negatively impacted our business and that of our franchisees in 2020. The pandemic poses the risk of an extended disruption to our business, that of our franchisees and other business partners, and the housing market generally, due to the impact of the disease itself, actions intended to limit or slow its spread, and other factors. These include government-imposed lockdowns, restrictions on travel or transportation, social distancing requirements, limitations on the size of gatherings, policies that ban or severely limit in-person showings of properties, closures of work facilities, schools, public buildings and businesses, cancellation of events, curtailing other activities and quarantines.

In the spring 2020, the pandemic resulted in a significant slowing of residential real estate listings and sales as the population in our market areas endured business shutdowns, work from home requirements, shortages of consumer staples and a general retreat from normal day-to-day social interactions. This slow down, however, reversed in mid-2020, resulting in a substantial increase in listings and sales, which has continued through the date of this prospectus due to a large migration of home buyers from other states.

In 2020, we applied for and received Federal government grants (“Economic Injury Disaster Loan Advances”) totaling $10,000, Economic Injury Disaster Loans totaling $365,300, and received loans totaling $421,012 under the Federal Government’s Paycheck Protection Program. The Paycheck Protection Program loans have been forgiven by the U.S. Small Business Administration. None of those funds were provided to our sales agents or franchisees.

The duration and magnitude of the impact from the COVID-19 pandemic depends on future developments that cannot be predicted at this time. There remains significant uncertainty regarding the continuing impact of COVID-19 on our business and the overall economy as a whole in the United States and internationally where we plan to establish franchise operations. In particular, there is significant concern regarding the possibility of additional waves of COVID-19 variant cases that could cause state and local governments to reinstate more restrictive measures, which could impact our business and the housing markets. There is also uncertainty regarding viable treatment options or the efficacy of vaccines and public health mandates emanating from Federal, State and local governments that have at times, been confusing and contradictory.

Business disruptions due to the pandemic may continue, particularly if stringent mitigation actions by government authorities are put in place or remain in place for a significant amount of time. The future impact of the COVID-19 pandemic on our liquidity, financial condition and results of operations is unknown, and its impact may be variable over time as government regulations, market conditions and consumer behavior changes in response to developments with respect to the pandemic.

The residential real estate market is cyclical, and we can be negatively impacted by downturns in this market and by general economic conditions.

The residential real estate market tends to be cyclical and typically is affected by changes in general economic conditions which are beyond our control. These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets, levels of unemployment, consumer confidence and the general condition of the U.S. and the global economy. The residential real estate market also depends upon the strength of financial institutions, which are sensitive to changes in the general macroeconomic environment. Lack of available credit or lack of confidence in the financial sector could impact the residential real estate market, which in turn could materially and adversely affect our business, financial condition and results of operations. Due to the cyclicality of the real estate market, we cannot predict whether the prior several year period of sustained growth will continue, whether mortgage rates which have climbed over 2022 will remain at relatively higher levels than in years past and whether home prices will stabilize. The U.S. has experienced housing “bubbles” in the past which have burst, resulting in significant price declines, mortgage defaults and home foreclosures by lenders, the last one occurring in the early 2000’s.

Any of the following could be associated with cyclicality in the housing market by halting or limiting the current growth in the housing market, and have a material adverse effect on our business by causing periods of lower growth or a decline in the number of home sales and/or home prices which, in turn, could adversely affect our revenue and profitability:

The lack of financing for homebuyers in the U.S. residential real estate market at favorable rates and on favorable terms could have a material adverse effect on our financial performance and results of operations.

Our business is significantly impacted by the availability of financing at favorable rates or on favorable terms for homebuyers, which may be affected by government regulations and policies. Certain on-going governmental actions or inactions, such as the U.S. federal government’s conservatorship of Fannie Mae and Freddie Mac, capital standards imposed on banks by the Office of the Comptroller of the Currency, the monetary policy of the U.S. government, and any rising interest rate environment may adversely impact the housing industry, including homebuyers’ ability to finance and purchase homes.

The monetary policy of the U.S. government, and particularly the Federal Reserve Board, which regulates the supply of money and credit in the U.S., significantly affects the availability of financing at favorable rates and on favorable terms, which in turn affects the domestic real estate market. Policies of the Federal Reserve Board can affect interest rates available to potential homebuyers. Further, we will be adversely affected by any rising interest rate environment. Changes in the Federal Reserve Board’s policies, the interest rate environment and mortgage market are beyond our control, are difficult to predict and could restrict the availability of financing on reasonable terms for homebuyers, which could have a material adverse effect on our business, results of operations and financial condition. We review all aspects of the current state of legislation, regulations and policies affecting the domestic real estate market and cannot predict whether or not such legislation, regulation and policies may result in increased down payment requirements, increased mortgage costs, and result in increased costs and potential litigation for housing market participants, any of which could have a material adverse effect on our financial condition and results of operations.

The U.S. Bureau of Labor Statistics (“BLS”) reported that the Consumer Price Index for All Urban Consumers (CPI-U), a broad-based measure of goods and services costs, rose 0.2 percent in June and July 2023 on a seasonally adjusted basis. The BLS noted that over the last 12 months, all items index increased 3.2% before seasonal adjustment. This increase was well above the Federal Reserve System’s (the “Fed”) targeted inflation rate of 2.0%, resulting in the Fed’s continuation of its course of raising the short-term federal funds interest rate to a target range of 5.25-5.50%, the highest level since September 2007 at the July 2023 meeting of its Open Market Committee. Fed funds rates impact interest rates on government bonds that have a correlated effect on mortgage interest rates, which, as of July 27, 2023, the current average rate for a 30-year fixed rate mortgage reached 7.23% as of August 24, 2023 according to Freddie Mac, the federally chartered home mortgage loan securitizer. Peak mortgage interest rates dropped in early 2023, invigorating a housing market that had cooled precipitously at the end of 2022 and through January 2023, but rose again in February, squashing the early momentum, with total existing-home sales transactions that include single-family homes, townhomes, condominiums and co-ops, decreasing by 2.2% in July 2023 to a seasonally adjusted annual rate of 4.07 million. This was the slowest monthly sales pace since January and the slowest July pace since 2010 according to the NAR. The slowdown of home sales transactions resulted from many would-be buyers being priced out of homeownership while many homeowners with mortgage rates below 4.0% feeling stuck in place, since selling would mean taking on a mortgage with a significantly higher interest rate. The cooling economy, with stubbornly high inflation with resulting increasing home sale prices and the prospect of a possible recession in the next 12 months, is keeping some buyers on the sidelines. This has had an adverse effect on our agents’ ability to close sales and thus on our results of operations in the year ended December 31, 2022, for the six months ended June 30, 2023 and continuing into the third quarter of 2023. Thus, we expect these trends to continue to adversely affect our revenues for the rest of 2023. Any further increase in the Fed funds rate could push the U.S. economy into a recession which is likely to have a further negative effect on our operations, income and financial condition.

The housing market is currently in flux with higher mortgage interest rates and generally increasing home prices which makes it difficult to predict future market trends. Any decrease in home sales in the future will have an adverse effect on our financial performance and results of operations.

The combination of high mortgage rates, continuing high home prices and limited inventory has slowed the housing market substantially with sales down nationally 16.6% from a year ago July. According to the Wall Street Journal, “the national median existing home price rose 1.9% in July from a year earlier to $406,700. It was the fourth time on record that this figure had risen over $400,000.” And total inventory fell in July to 1.11 million units, down 14.6% from July 2022. Homes usually go under contract a month or two before they close, so the July data is based on purchase decisions made in the Spring. The average rate for a 30-year fixed mortgage was 7.23% as of August 24, 2023, up from 5.66% a year earlier, according to Freddie Mac. This combination of higher mortgage rates and higher sales prices has kept many sellers, who would have to relinquish a mortgage at 4.0% or less, from selling, and has pushed many prospective buyers, especially first-time home buyers, out of the market. The inventory of unsold existing homes increased 3.7% from the previous month to 1.11 million at the end of July, or the equivalent of 3.3 months’ supply at the current monthly sales pace. Management expects the housing-market slowdown to persist throughout 2023 because home-buying affordability is near its lowest level in decades. Any decline in home sales directly affects the productivity and income of our agents who are paid only upon the closing of their clients’ home purchase or sale. A prolonged depression in home sales will force the least successful agents out of the industry and a decrease in the number of earning agents will have a negative impact on our financial performance and results of operations.

We may fail to successfully execute our strategies to grow our business, including increasing our agent count, expanding the number of our franchisees and agents, or we may fail to manage our growth effectively, which could have a material adverse effect on our brand, our financial performance and results of operations.

We intend to pursue a number of different strategies to grow our revenue and earnings. However, we may not be able to successfully execute these strategies. We intend to pursue a strategy of increasing our agent count by increasing our recruiting efforts. Recent history has shown that a strong real estate market brings in more realtors, some of whom have worked in the industry on a part-time basis. As the market continues to grow, we believe that will enable us to sell more franchises and recruit and retain higher numbers of agents, increasing our revenue and profitability. However, competition for qualified and effective agents is intense, and we may be unable to recruit and retain enough qualified and effective agents to satisfy our growth strategies. This competition creates challenges that include:

If we do not effectively manage our growth, our brand could suffer. In order to successfully expand our business, we must effectively recruit, develop and motivate new franchisees and new agents and employees, and we must maintain the beneficial aspects of our “three pillars” philosophy. We may not be able to hire new agents or employees and our franchisees may not be able to recruit new agents necessary to manage our growth quickly enough to meet our needs. If we fail to effectively manage our hiring needs and successfully develop our franchisees, our franchisee, agent and employee morale, productivity and retention could suffer, and our brand and results of operations could be harmed. These improvements could require significant capital expenditures and place increasing demands on our management. We may not be successful in managing or expanding our operations or in maintaining adequate financial and operating systems and controls. If we do not successfully manage these processes, our results of operations, financial condition and prospects could be adversely affected.

The failure to attract and retain highly qualified franchisees and to acquire and open new corporate offices could compromise our ability to pursue our growth strategy.

The success of our franchisees depends largely on the efforts and abilities of franchisees and their agents, which are subject to numerous factors, including the fees or sales commissions they receive, and our ability to train and oversee their operations to ensure that they provide the quality service promoted by our brands. If our franchisees do not continue to believe in the value proposition we offer with our brand, believe that we are overcharging them for the services we provide, or, for other reasons decide not to renew their franchise agreements with us, our business may be materially adversely affected. Additionally, if our franchisees are not successful, they will fail to attract and retain productive agents and will fail to generate the revenue necessary to pay the contractual fees and dues owed to us.

In addition, if we are unable to organically increase the number of, and acquire new, corporate realty offices in the future, our growth will stagnate and we could lose high producing agents to other competing brokerages, all of which would have a material adverse effect on our results of operations, financial condition and prospects.

We might not be able to attract and retain additional qualified agents and other personnel.

In order to grow our business, we must attract and retain highly qualified agents and other personnel. In particular, we compete with both national and local real estate brokerages for qualified agents who manage our operations in each state and who are our on-the-ground representatives. With the evolving real estate brokerage market, we must find ways to attract and retain these people. And with the change in the way people work that has been accelerated by the Covid-19 pandemic, finding qualified agents and employees has become more difficult. We might have difficulty in finding, hiring and retaining highly skilled personnel with appropriate qualifications. Many of the companies with whom we compete for experienced personnel have greater resources than we do. In addition, in making decisions about where to work, in addition to cash compensation, people often consider the value of the stock options or other equity incentives they receive. We currently have an equity incentive plan to offer stock incentives to our employees and our agents that we believe is competitive with plans offered by other publicly traded real estate brokerage companies. However, if those plans fail to encourage new hires or to motivate our existing staff, we may fail to attract new personnel or fail to retain our current personnel which would severely harm our growth prospects.

Competition in the residential real estate franchising business is intense and may adversely affect our financial performance.

We compete against national and international real estate brokerage franchisors as well as smaller franchisors. Our products are the brands we sell and their reputation in the marketplace. Potential franchisees, when shopping for a brand, look to see the level of support that they can receive compared to the fees and dues that they will have to pay. This is our value proposition. While the national and international brands far exceed us in financial resources, geographic coverage, marketing ability and infrastructure, we believe that our “family-oriented” style of business, based on our “three pillars” philosophy, is a strong selling point. So, while competing franchisors may offer franchisees monthly ongoing fees that are lower than those we charge, or that are more attractive in particular market environments, we believe that our “high touch” approach is able to overcome many of the factors that competitors sell. Corporate-owned competitors compete primarily on the basis of commission payments to their agents. While we believe that we are competitive in that market, our brand is not as strong as competitors who have been in the market longer and have the financial wherewithal to promote themselves in the media. Our largest competitors in this industry in the U.S. include RE/MAX Holdings, Inc., Keller Williams Realty, Inc., HomeSmart, Realogy Holdings, Corp., which franchises the Coldwell Banker and Century 21 brands, Berkshire Hathaway Homes, among others. See “Prospectus Summary- Competition” and “Business – Competition.” 

Our Company owned brokerage business is subject to competitive pressures.

Our Company owned brokerage business, like that of our franchisees, is generally subject to intense competition. We compete with other national and independent real estate organizations including our franchisees and those of other national real estate franchisors, franchisees of local and regional real estate franchisors, regional independent real estate organizations, discount brokerages, internet-based brokerages and smaller niche companies competing in local areas. Competition is particularly intense in the densely populated metropolitan areas in which we operate. In addition, in the real estate brokerage industry, new participants face minimal barriers to entry into the market. We also compete for the services of qualified licensed agents as well as franchisees. The ability of our Company owned brokerage offices to retain agents is generally subject to numerous factors, including the sales commissions, the training and coaching and technological support that they receive and their perception of our brand value. Our largest competitors in the corporate-owned space include Compass Holdings, Inc. and Fathom Holdings, Inc.

Our financial results are affected directly by the operating results of franchisees and agents, over whom we do not have direct control.

Our real estate franchises generate revenue in the form of monthly ongoing royalties and fees, including monthly broker fees tied to gross commissions, training and technology fees charged to our franchisees. Our agents pay us dues out of their income from real estate transactions and new agents split their transaction-based commissions with us. Accordingly, our financial results depend upon the operational and financial success of our franchisees and their agents and our corporate agents, all of whom are independent contractors that we do not control. If industry trends or economic conditions are not sustained or do not continue to improve, our franchisees’ and our agents’ financial results could worsen, and our revenue may decline. We may also have to terminate franchisees more frequently in the future due to non-reporting and non-payment. Further, if franchisees fail to renew their franchise agreements our revenue from ongoing monthly fees may decrease, and profitability may be lower than in the past due to reduced ongoing monthly fees.

We are dependent upon the truthfulness of our franchisees to provide accurate reports and accounting to us.

While we have significant insight into the business activity of our domestic and international regional franchisees and are able to observe their books and records in real time, the franchisees self-report their agent counts, agent commissions and fees due to us. Our tools to validate or verify these reports are not equipped to ferret out under or erroneous reporting, even if unintentional or intentional fraud. If any of those circumstances occur, we may not receive all of the annual agent dues or monthly ongoing fees due to us. In addition, to the extent that we are underpaid, we may not have a definitive method for determining such underpayment. If a material number of our franchisees were to under report or erroneously report their agent counts, agent commissions or fees due to us, it could have a material adverse effect on our financial performance and results of operations.

Our franchise operations are subject to additional business risks.

Our franchise business is exposed to other business risks which may impact our ability to collect recurring, contractual fees and dues from our franchisees, may harm the goodwill associated with our brand, and/or may materially and adversely impact our business, results of operations, financial condition and prospects. One such risk is that one of our franchisees could declare bankruptcy which could have a substantial negative impact on our ability to collect fees and dues owed under such franchisee’s franchise arrangements. In a franchisee bankruptcy, the bankruptcy trustee may reject its franchise contract pursuant to Section 365 under the U.S. Bankruptcy Code, in which case there would be no further payments for fees and dues from such franchisee. Other risks include the risk that our franchisees may be uninsured or underinsured against certain business hazards or that insurance may be unavailable, as was hurricane insurance in Florida for a number of years. Any casualty loss happening to our franchisees could put their entire business at risk and potentially result in its failure and the termination of our franchise agreement. Any such loss or delay in an insurance payment could have a material and adverse effect on a franchisee’s ability to satisfy its obligations under its franchise agreement with us, including its ability to make payments for contractual fees and dues or to indemnify us. Each franchise agreement is subject to termination by us in the event that the franchisee breaches its contract, generally after expiration of applicable cure periods, although under certain circumstances a franchise agreement may be terminated by us upon notice without an opportunity to cure. The default provisions under the franchise arrangements are drafted broadly and include, among other things, any failure to meet operating standards and actions that may threaten our brands. In addition, each franchise agreement eventually expires and upon expiration, we or the franchisee may or may not elect to renew the franchise arrangement. If our agreement is renewed, such renewal is generally contingent on the franchisee’s execution of the then-current form of franchise contract (which may include terms the franchisee deems to be more onerous than the prior franchise agreement), the satisfaction of certain conditions and the payment of a renewal fee. If a franchisee is unable or unwilling to satisfy any of the foregoing conditions, the expiring franchise agreement will terminate upon expiration of the term of the franchise arrangement.

Our operating results are subject to seasonality and vary significantly among quarters during each calendar year, making meaningful comparisons of successive quarters difficult.

The residential real estate industry is subject to seasonality. Sales activity is typically stronger in the spring and summer months when school is not in session compared to the fall and winter seasons. This is true even in the Southeastern U.S. where weather patterns do not change significantly with the seasons. However, extreme weather does affect our business by keeping people focused on matters other than home buying. We have historically experienced lower revenues during the fall and winter seasons, as well as during periods of unseasonable weather, which reduces our operating income, net income, operating margins and cash flow. Real estate listings precede sales, and a period of poor listings activity will negatively impact revenue. Our revenue and operating margins each quarter will remain subject to seasonal fluctuations, which may make it difficult to compare or analyze our financial performance effectively across successive quarters.

A significant increase in private sales of residential property, including through the internet, could have a material adverse effect on our business, prospects and results of operations.

As of 2022, NAR estimated that nine in ten home sellers worked with a real estate agent to sell their home, which was consistent across all age groups and 4.02 million existing homes were sold in in 2022, down 34% from 6.09 million in 2021. Although the NAR survey indicates that the percentage of sales using agents has increased in recent years, a significant increase in the volume of private sales due to, for example, increased access to the internet and the proliferation of websites that facilitate such sales, and a corresponding decrease in the volume of sales through real estate agents could have a material adverse effect on our business, prospects and results of operations.

The real estate brokerage business is highly regulated and any failure to comply with such regulations or any changes in such regulations could adversely affect our business.

Our Company owned real estate brokerage business and our franchising business are highly regulated and must comply with Federal and state requirements governing the licensing and conduct of real estate brokerage and brokerage-related businesses and franchising in the jurisdictions in which we and they do business. These laws and regulations contain general standards for and prohibitions on the conduct of real estate brokers and agents, including those relating to licensing of brokers and agents, fiduciary and agency duties, administration of trust funds, collection of commissions, advertising and consumer and franchising disclosures. Under state law, the franchisees and our real estate brokers have certain duties to supervise and are responsible for the conduct of their brokerage business.

Our Company owned real estate brokerage business and our franchisees (excluding commercial brokerage transactions) must comply with the Real Estate Settlement Procedures Act (“RESPA”). RESPA and comparable state statutes, among other things, restrict payments which real estate brokers, agents and other settlement service providers may receive for the referral of business to other settlement service providers in connection with the closing of real estate transactions. Such laws may to some extent restrict preferred vendor arrangements involving our franchisees and our Company owned brokerage business. RESPA and similar state laws also require timely disclosure of certain relationships or financial interests that a broker has with providers of real estate settlement services. In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd Frank Act”) contains the Mortgage Reform and Anti-Predatory Lending Act (the “Mortgage Act”), which imposes a number of additional requirements on lenders and servicers of residential mortgage loans, by amending certain existing provisions and adding new sections to RESPA and other federal laws.

We are also subject to various other rules and regulations such as:

Federal, state and local regulatory authorities also have relatively broad discretion to grant, renew and revoke licenses and approvals and to implement regulations. Accordingly, such regulatory authorities could prevent or temporarily suspend our Company owned brokerages or our franchisees from carrying on some or all of our activities or otherwise penalize them if their financial condition or our practices were found not to comply with the then current regulatory or licensing requirements or any interpretation of such requirements by the regulatory authority. Our failure to comply with any of these requirements or interpretations could limit our ability to renew current franchisees or sign new franchisees or otherwise have a material adverse effect on our operations.

We might not be aware of all the laws, rules and regulations that govern our business, or be able to comply with all of them, given the rate of regulatory changes, ambiguities in regulations, contradictions in laws and regulations between jurisdictions, and the difficulties in achieving both Company-wide and region-specific knowledge and compliance. If we fail, or we have been alleged to have failed, to comply with any existing or future applicable laws, rules and regulations, we could be subject to lawsuits and administrative complaints and proceedings, as well as criminal proceedings. Our noncompliance could result in significant defense costs, settlement costs, damages and penalties.

Climate change and environmental risks could increase our costs and subject us to liability.

Our operations are affected by Federal, state and/or local environmental laws in the countries in which we operate, and we may face liability with respect to environmental issues occurring at properties we manage or occupy. We may face costs or liabilities under these laws as a brokerage company if our agents violate applicable disclosure laws and regulations or as a result of our agents’ role as a property manager. The impact of climate change presents a significant risk. Damage to assets caused by extreme weather events linked to climate change is becoming more evident, highlighting the fragility of global infrastructure. We believe that the effects of climate change will increasingly impact our own operations and those of properties we manage, especially when they are in coastal cities. The impact includes the relative desirability of locations and the cost of operating and insuring acquired properties. Due to residential property damages resulting from hurricanes in the past several years, many insurers have either raised premiums above the national average or ceased doing business in Florida, our main market area. We also may face several layers of national and regional regulations. The risks may not be limited to fines and the costs of remediation. We continue to monitor the effects of climate change and the changes in law, regulation and policies of other companies, especially insurance companies and intend to adjust our business accordingly in the future.

If we re-commence activities abroad, we will be subject to risks of operating in foreign countries.

We had a franchisee located in Peru that closed in 2022 but we may franchise other international locations in the future. For the years ended December 31, 2022 and 2021, revenue from these operations represented less than one percent (1.0%) of our total revenue. If we re-commence activities abroad, our international operations will be subject to risks that are different from those of our U.S. operations that could result in losses against which we are not insured and therefore negatively affect our profitability. Those international risks include:

We depend substantially on our Founder, Joseph La Rosa, and the loss of any our senior management or other key employees or the inability to hire additional qualified personnel could adversely affect our operations, our brand and our financial performance.

Our future success is largely dependent on the efforts and abilities of our Founder, Chief Executive Officer, President and Chairman, Joseph La Rosa, our senior management and other key employees. The loss of the services of Mr. La Rosa and other senior management would have a significant detrimental effect on the Company as its brand is tied to his name, image and personality. We do not maintain key employee life insurance policies on Mr. La Rosa or our other senior management and therefore their loss could make it more difficult to successfully operate our business and achieve our business goals. As a result, we may not be able to cover the financial loss we may incur in losing the services of any of these individuals.

Our ability to retain our employees is generally subject to numerous factors, including the compensation and benefits we pay, the mix between the fixed and variable compensation we pay our employees and prevailing compensation rates. As such, we could suffer significant attrition among our current key employees. Competition for qualified employees in the real estate brokerage and franchising industry is intense. We may be unable to retain existing employees that are important to our business or hire additional qualified employees. The process of locating employees with the combination of skills and attributes required to carry out our goals is often lengthy. We cannot assure you that we will be successful in attracting and retaining qualified employees.

Concentration of ownership of our voting stock by Mr. La Rosa will prevent new investors from influencing significant corporate decisions.

Based on our Common Stock outstanding as of October 9, 2023 and including the shares to be sold in this Offering, upon the closing of this Offering, Mr. La Rosa will, in the aggregate, beneficially own approximately 55.2% of our outstanding Common Stock (assuming the conversion of the Series A Preferred Stock and no exercise of the underwriters’ option to purchase additional shares of Common Stock) and all 2,000 shares of our Series X Super Voting Preferred Stock that provides for 10,000 votes per share when voting with the Common Stock, representing 83.2% of the total voting power of our capital stock. Thus, Mr. La Rosa, our President and Chief Executive Officer, Chairman of the board, and majority stockholder, will be able to control all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions. The interests of Mr. La Rosa may not coincide with the interests of other stockholders.

Mr. La Rosa may have interests different than yours and may vote in a way with which you disagree and that may be adverse to your interests. In addition, Mr. La Rosa’s concentration of ownership could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which could cause the market price of our Common Stock to decline or prevent our stockholders from realizing a premium over the market price for their Common Stock. In addition, he may want the Company to pursue strategies that deviate from the interests of other stockholders. Investors should consider that the interests of the Mr. La Rosa may differ from their interests in material respects.

Mr. La Rosa will control all matters that come before the stockholders for a vote and thus we are a “controlled company” within the meaning of the Nasdaq listing requirements and, as a result, the Company will qualify for exemptions from certain corporate governance requirements. If we take advantage of such exemptions, you will not have the same protections afforded to stockholders of companies that are subject to such corporate governance requirements.

Following the completion of this Offering, Mr. Joseph La Rosa will have voting control with respect to director elections and all other matters. Subject to any fiduciary duties owed to other stockholders under Nevada law, Mr. La Rosa will be able to control all matters requiring approval by our stockholders, including the election and removal of directors and any proposed merger, acquisition, consolidation or sale of all or substantially all of our assets. In addition, due to his significant ownership stake and his service as our Chairman of the board of directors and Chief Executive Officer, Mr. La Rosa controls the management of our business and affairs. Mr. La Rosa may have interests that are different than yours and may support proposals and actions with which you may disagree. This concentration of ownership could have the effect of delaying, deferring or preventing a change in control, or impeding a merger or consolidation, takeover or other business combination that could be favorable to our other stockholders and adversely affecting the market price of our Common Stock.

Because Mr. La Rosa will control 83.2% of the total voting power of our capital stock, we are considered a “controlled company” for the purposes of the listing requirements of the Nasdaq Capital Market. A controlled company is not required to have a majority of independent directors or form an independent compensation or nominating and corporate governance committee. Nevertheless, we have a majority of independent directors who will serve on our audit, compensation and nominating and corporate governance committees. However, although we have no current plans to do so, for as long as we remain a controlled company, we could take advantage of such exemptions in the future.

Infringement, misappropriation, or dilution of our intellectual property could harm our business.

We regard our La Rosa Realty trademark and the “LR” logo that we own, as well as the Better Homes trademark and logo that we license, as having significant value and as being important factors in the marketing of our brands. We believe that this and other intellectual property are valuable assets that are critical to our success. We rely on a combination of protections provided by contracts, as well as copyright, trademark, trade secret and other laws, to protect our intellectual property from infringement, misappropriation, or dilution. We have registered certain trademarks and service marks and have other trademark and service mark registration applications pending in the U.S. and foreign jurisdictions. However, not all trademarks or service marks that we currently use have been registered in all of the countries in which we may do business in the future, and they may never be registered in all of those countries. Although we monitor trademark portfolios internally and impose an obligation on franchisees to notify us upon learning of potential infringement, there can be no assurance that we will be able to adequately maintain, enforce and protect our trademarks or other intellectual property rights.

We are not aware of any challenges to our right to use any of our brand names or trademarks. We are vigilant in enforcing our intellectual property and protecting our brands. Unauthorized uses or other infringement of our trademarks or service marks, including ones that are currently unknown to us, could diminish the value of our brands and may adversely affect our business. Effective intellectual property protection may not be available in every market in which we have franchised or intend to franchise. Failure to adequately protect our intellectual property rights could damage our brands and impair our ability to compete effectively. Even where we have effectively secured statutory protection for our trademarks and other intellectual property, our competitors may misappropriate our intellectual property. Defending or enforcing our trademark rights, branding practices and other intellectual property, and seeking an injunction and/or compensation for misappropriation of confidential information, could result in the expenditure of significant resources and divert the attention of management, which in turn may materially and adversely affect our business and operating results.

Although we monitor and restrict our franchisees’ activities through our franchise agreements, franchisees may refer to our brands improperly in writings or conversations, resulting in the dilution of our intellectual property. Franchisee noncompliance with the terms and conditions of our franchise agreements and our brand standards may reduce the overall goodwill of our brands, whether through the failure to meet the FTC guidelines or applicable state laws, or through the participation in improper or objectionable business practices. Moreover, unauthorized third parties may use our intellectual property to trade on the goodwill of our brand, resulting in consumer confusion or dilution. Any reduction of our brand’s goodwill, consumer confusion, or dilution is likely to impact sales, and could materially and adversely impact our business and operating results.

We are subject to certain risks related to litigation filed by or against us, and adverse results may harm our business and financial condition.

The real estate industry often involves litigation, ranging from individual lawsuits by brokerage clients, sales associates, employees and franchisees to large class actions and government investigations. We often are involved in various lawsuits and legal proceedings that arise in the ordinary course of business. Such litigation and other proceedings has included, and may in the future include, but are not limited to, actions relating to breach of contract, employment matters, sales agent commissions, intellectual property, commercial arrangements, negligence and fiduciary duty claims arising from our brokerage operations, fraud or failure to disclose matters in our franchise documents or agreements, standard brokerage disputes like the failure to disclose hidden defects in a property such as mold, vicarious liability based upon conduct of individuals or entities outside of our control, including our agents, third-party service or product providers, antitrust claims, general fraud claims, employment law claims, including claims challenging the classification of our agents as independent contractors and compliance with wage and hour regulations, and claims alleging violations of the Real Estate Settlement Procedures Act or state consumer fraud statutes.

Each lawsuit filed against or by us has factors that are unpredictable, including but not limited to, legal fees, insurance coverage, or the ultimate outcome of litigation and remedies or damage awards. Adverse results in such litigation and other proceedings may harm our business, our brands and our financial condition.

We have general liability and an errors and omissions insurance policy to help protect us against claims of inadequate work or negligent action. This insurance might not continue to be available to us on commercially reasonable terms or at all, or a claim otherwise covered by our insurance may exceed our coverage limits, or a claim might not be covered at all. We may be subject to errors or omissions claims that could have an adverse effect on us. Moreover, defending a suit, regardless of its merits, could entail substantial expense and require the time and attention of our senior management. Substantial financial judgments against us would have a material adverse effect on our business, brands, results of operations, financial condition and prospects.

Security breaches, interruptions, delays and failures in our systems and operations could materially harm our business.

The performance and reliability of our systems and operations and third-party applications are critical to our reputation and ability to attract franchisees and agents to join us. Our systems and operations, as well as the third-party applications that we license are vulnerable to security breaches, interruption or malfunction due to certain events beyond our control, including natural disasters, such as earthquakes, fire and flood, power loss, telecommunication failures, break-ins, sabotage, computer viruses, intentional acts of vandalism and similar events. In addition, we rely on third-party vendors to provide the website platforms and additional systems and related support. If we cannot continue to retain these services on acceptable terms, our access to these systems and services could be interrupted. Any security breach, interruption, delay or failure in our systems and operations could substantially harm our franchisees and agents by interfering with their daily business routines, reducing their transaction volume, impairing the quality of the services we provide, increasing our costs, prompting litigation and other claims, and damaging our reputation, any of which could substantially harm our results of operations, financial condition and prospects.

If we fail to protect the privacy of employees, independent contractors, or consumers or personal information that they share with us, our reputation and business could be significantly harmed.

Consumers, agents, independent contractors, and employees have shared personal information with us during the normal course of our business processing residential real estate transactions. This includes, but is not limited to, social security numbers, annual income amounts and sources, names, addresses, telephone and cell phone numbers, and email addresses.

The application, disclosure and safeguarding of this information is regulated by federal and state privacy laws. To comply with privacy laws, we invested resources and adopted a privacy policy outlining policies and procedures for the use of safeguarding personal information. This policy includes informing consumers, independent contractors and employees that we will not share their personal information with third parties without their consent unless required by law.

Privacy policies and compliance with federal and state privacy laws presents risk and we could incur legal liability for failing to maintain compliance. We might not become aware of all privacy laws, changes to privacy laws, or third-party privacy regulations governing the real estate business or be unable to comply with all of these regulations, given the rate of regulatory changes, ambiguities in regulations, contradictions in regulations between jurisdictions, and the difficulties in achieving both Company-wide and region-specific knowledge and compliance.

Our policy and safeguards could be deemed insufficient if third parties with whom we have shared personal information fail to protect the privacy of that information. Our legal liability could include significant defense costs, settlement costs, damages, and penalties, plus, damage our reputation with consumers, which could significantly damage our ability to attract and maintain customers. Any or all of these consequences would result in meaningful unfavorable impact on our brand, business model, revenue, expenses, income, and margins.

Cybersecurity incidents could disrupt our business operations, result in the loss of critical and confidential information, adversely impact our reputation and harm our business.

Cybersecurity threats and incidents directed at us could range from uncoordinated individual attempts to gain unauthorized access to information technology systems to sophisticated and targeted measures aimed at disrupting our business or gathering personal data of our customers. In the ordinary course of our business, we collect and store sensitive data, including proprietary business information and personal information about our customers. Our business, and particularly our cloud-based platform, is reliant on the uninterrupted functioning of our information technology systems. The secure processing, maintenance, and transmission of information are critical to our operations, especially the processing and closing of real estate transactions. Although we employ measures designed to prevent, detect, address, and mitigate these threats (including access controls, data encryption, vulnerability assessments, and maintenance of backup and protective systems), cybersecurity incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption, or unavailability of critical data and confidential or proprietary information (our own or that of third parties, including potentially sensitive personal information of our customers) and the disruption of business operations. Any such compromises to our security could cause harm to our reputation, which could cause customers to lose trust and confidence in us or could cause agents to stop working for us. In addition, we may incur significant costs for remediation that may include liability for stolen assets or information, repair of system damage, and compensation to customers and business partners. We may also be subject to legal claims, government investigation, and additional state and federal statutory requirements.

The potential consequences of a material cybersecurity incident include regulatory violations of applicable U.S. and international privacy and other laws, reputational damage, loss of market value, litigation with third parties (which could result in our exposure to material civil or criminal liability), diminution in the value of the services we provide to our customers, and increased cybersecurity protection and remediation costs (that may include liability for stolen assets or information), which in turn could have a material adverse effect on our competitiveness and results of operations. 

If we attempt to, or acquire other complementary businesses, we will face certain risks inherent with such activities.

Subsequent to the closing of this Offering, we may seek to acquire, and acquire, certain complementary businesses, including one or more of our affiliates. Any future growth through acquisitions will depend in part on the availability of suitable acquisition targets at favorable prices and with advantageous terms and conditions, which may not be available to us. In addition, we may take on debt to finance these acquisitions which will create new financial risks, or use our Common Stock as currency, which could dilute our then current stockholders. Acquisitions subject us to several significant risks, any of which may prevent us from realizing the anticipated benefits or synergies of the acquisition. The integration of companies is a complex and time-consuming process that could significantly disrupt our businesses and the business of the acquired company, including the diversion of management attention, failure to identify certain liabilities and issues during the due diligence process, the inability to retain personnel and clients of the acquired business and litigation. Any negative outcomes from acquisitions or attempted acquisitions could result in a material adverse effect on our financial condition, results of operations and prospects.

If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”) as a result of our ownership of our subsidiaries, applicable restrictions could make it impractical for us to continue our business as contemplated and could have an adverse effect on our business.

Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if: (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act and intend to conduct our operations so that we will not be deemed an investment company. However, if we were to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business and prospects.

Risks Related to this Offering

Our management will have broad discretion over the use of any net proceeds from this Offering and you may not agree with how we use the proceeds, and the proceeds may not be invested successfully.

Our management will have broad discretion as to the use of any net proceeds from this Offering and could use them for purposes other than those contemplated at the time of this Offering. Accordingly, you will be relying on the judgment of our management with regard to the use of any proceeds from the sale of our Securities in this Offering and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that the proceeds will be invested in a way that does not yield a favorable, or any, return for you.

You will experience immediate and substantial dilution.

The initial public offering price will be substantially higher than the net tangible book value of each outstanding share of Common Stock immediately after this Offering. If you purchase Common Stock in this Offering, you will suffer immediate and substantial dilution. At an initial public offering price of $5.00 per share with net proceeds to us of  approximately $2,485,000, after deducting estimated underwriting discounts and commissions and estimated offering expenses, investors who purchase our Common Stock in this Offering will have contributed approximately 50% of the total amount of equity funding we have received to date, but will only hold less than 5% of the total voting rights (based on the number of shares of Common Stock purchased). The dilution will be $4.82 per share in the net tangible book value of the Common Stock from the initial public offering price. In addition, if shares exercisable or convertible into our Common Stock are exercised and converted, and if options to purchase shares of our Common Stock under our 2022 Equity Incentive Plan are granted and exercised, there could be further dilution. For more information refer to “Dilution.”

Future sales and issuances of our capital stock or rights to purchase our capital stock could result in additional dilution of the percentage ownership of our stockholders and could cause the price of our Common Stock to decline.

We may issue additional securities following the closing of this Offering. Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders. We may sell Common Stock, preferred stock, convertible securities, and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time, or we may use our Common Stock as currency in an acquisition or acquisitions. If we issue any such securities in subsequent transactions, investors may be materially diluted. New investors in such subsequent transactions could gain rights, preferences, and privileges senior to those of holders of our Common Stock.

Sales of a significant number of shares of our Common Stock in the public markets, or the perception that such sales could occur, could depress the market price of our Common Stock.

Sales of a substantial number of shares of our Common Stock in the public markets after this offering (assuming no exercise of the underwriters’ Over-Allotment Option), including sales by the Selling Stockholders, could depress the market price of our Common Stock and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that future sales of our Common Stock would have on the market price of our Common Stock. Based upon the number of shares of Common Stock outstanding as of the date of this prospectus, up to 3,190,707 shares of Common Stock will be immediately eligible for sale in the public market. None of these additional shares include shares sold in this Offering, shares held by our directors and executive officers or shares subject to conversion pursuant to the terms of our convertible debt instruments or shares subject to exercise pursuant to the terms of our outstanding warrants, all of which may become eligible for sale at some time in the future. Moreover, shares of Common Stock that are either subject to employment agreements or reserved for future issuance under our existing equity compensation plan will also become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, the lock-up agreements, and Rule 144 and Rule 701 under the Securities Act. If these additional shares of Common Stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our Common Stock could decline.

After this Offering, other than the Selling Stockholders and Alexander Capital, L.P. (with respect to the Representative’s Warrant) who hold our Common Stock or securities convertible or exercisable for our Common Stock and that are being registered in the registration statement of which this prospectus is a part and except for Emmis Capital, no holders of our Common Stock or any securities convertible into or exercisable for our Common Stock have the right to have their shares registered under the Securities Act. Should any such shares be registered under the Securities Act, such registration would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by affiliates, as defined in Rule 144 under the Securities Act. Any sale of securities by such securityholders, the Selling Stockholders, Alexander Capital, L.P. or Emmis Capital, could have a material adverse effect on the trading price of our Common Stock.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our Common Stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. As of the date of this prospectus, no analysts cover our stock. If we do not obtain analyst coverage or if one or more of those analysts downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of our Company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

Risks Relating to Ownership of Our Common Stock

There was no market for our securities prior to this Offering and a market for our securities may not develop, which would adversely affect the liquidity and price of our securities.

Prior to this Offering, there was no market for our securities. Stockholders therefore have no access to information about prior market history on which to base their investment decision. Following this Offering, the price of our Securities may vary significantly due to one or more potential business combinations and general market or economic conditions. Furthermore, an active trading market for our Securities may never develop or, if developed, it may not be sustained. You may be unable to sell your Securities unless a market can be established and sustained.

We may not be able to satisfy listing requirements of Nasdaq to maintain a listing of our Common Stock.

Our Common Stock has been approved for listing on Nasdaq, but we must meet certain financial and liquidity criteria to maintain such listings. If we violate the maintenance requirements for continued listing of our Common Stock, our Common Stock may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our Common Stock from Nasdaq may materially impair our stockholders’ ability to buy and sell our Common Stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our Common Stock. In addition, the delisting of our Common Stock could significantly impair our ability to raise capital.

The market price for our Common Stock may be particularly volatile given our status as a relatively unknown company with a small and thinly traded public float, and minimal profits, which could lead to wide fluctuations in our share price.

The initial public offering price for our Common Stock will be determined by negotiations between us and the underwriters and may not be indicative of prices for our Common Stock that will prevail in the open market following this Offering. The market for our Common Stock will be characterized by significant price volatility when compared to the shares of larger, more established companies that have large public floats, and we expect that our share prices will be more volatile than the shares of such larger, more established companies for the indefinite future, although such fluctuations may not reflect a material change to our financial condition or operations during any such period. Such volatility can be attributable to a number of factors. First, as noted above, our Common Stock will, compared to the shares of such larger, more established companies, likely be sporadically and thinly traded. The price for our Common Stock could, for example, decline precipitously in the event that a large number of our shares are sold on the market without commensurate demand. Secondly, we are a speculative or “risky” investment due to our minimal profits to date. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a larger, more established company that has a large public float. Many of these factors are beyond our control and may decrease the market price of our Common Stock regardless of our operating performance.

In addition to being highly volatile, our Common Stock could be subject to rapid and substantial price volatility in response to a number of factors that are beyond our control, including, but not limited to:

There have recently been recent instances of extreme stock price run-ups followed by rapid price declines and stock price volatility seemingly unrelated to company performance following a number of recent initial public offerings, particularly among companies, like ours, that have had relatively smaller public floats. Such volatility, including any stock run-up, may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our Common Stock.

If, for example, the market for real estate related stocks or the stock market in general experiences loss of investor confidence, the trading price of our Common Stock could decline for reasons unrelated to our business, financial condition or operating results. The trading price of our shares might also decline in reaction to events that affect other companies in our industry, even if these events do not directly affect us. Each of these factors, among others, could harm the value of our Common Stock.

Further, in the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, operating results and financial condition.

Future issuances of debt securities, which would rank senior to our Common Stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior to our Common Stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our Securities. 

In the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our Common Stock. Moreover, if we issue preferred stock, the holders of such preferred stock could be entitled to preferences over holders of Common Stock in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to issue debt or preferred stock in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of our Securities must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our Securities. 

We are authorized to issue “blank check” preferred stock without stockholder approval, which could adversely impact the rights of holders of our securities.

Our articles of incorporation authorize us to issue up to 50,000,000 shares of blank check preferred stock of which 13,000 shares are currently authorized for issuance. Any preferred stock that we issue in the future may rank ahead of our other securities in terms of dividend priority or liquidation premiums and may have greater voting rights than our Common Stock. In addition, such preferred stock may contain provisions allowing those shares to be converted into shares of Common Stock, which could dilute the value of our Common Stock to current stockholders and could adversely affect the market price, if any, of our Common Stock. In addition, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our Company. We have issued: (i) 2,000 shares of our Series X Super Voting Preferred Stock to our Founder, Mr. Joseph La Rosa, that provides him with 10,000 votes per share when voting with the Common Stock; and 3,436 shares of our Series A Preferred Stock that will automatically convert to 981,676 shares of our Common Stock (based on an offering price of $5.00 per share in this offering) upon the closing of this Offering at a 30% discount to the per share price. Although we have no present intention to issue any additional shares of authorized preferred stock, there can be no assurance that we will not do so in the future.

If our securities become subject to the penny stock rules, it would become more difficult to trade our shares.

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 per share, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not retain a listing on Nasdaq or another national securities exchange and if the price of our securities is less than $5.00, our securities could be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our Common Stock, and therefore shareholders may have difficulty selling their Common Stock.

We are an “emerging growth company” and a “smaller reporting company” within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.

We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor internal controls attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our shares held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second quarter, in which case we would no longer be an emerging growth company as of the following fiscal year end. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected to avail ourselves of the extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K promulgated by the SEC. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our shares held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our shares held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

Our status as an “emerging growth company” under the JOBS Act may make it more difficult to raise capital as and when we need it.

Because of the exemptions from various reporting requirements provided to us as an “emerging growth company” and because we will have an extended transition period for complying with new or revised financial accounting standards, we may be less attractive to investors, and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.

Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. As defined in Rule 13a-15(f) of the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by our board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Our internal controls may be inadequate or ineffective, which could cause financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision.

Failure to achieve and maintain an effective internal control environment could cause us to face regulatory action and also cause investors to lose confidence in our reported financial information, either of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

We do not expect to pay dividends in the future, and any return on investment may be limited to the value of our stock.

We currently intend to retain any future earnings to support the development of our business and do not anticipate paying cash dividends on our Common Stock in the foreseeable future. Our payment of any future dividends will be at the discretion of our board of directors after taking into account various factors, including, but not limited to, our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. In addition, our ability to pay dividends on our Common Stock may be limited by Nevada state law or any financial covenants to which we are bound by our debt obligations. Accordingly, investors must rely on sales of their Common Stock after price appreciation, which may never occur, as the only way to realize a return on their investment. Investors seeking cash dividends should not purchase our Common Stock.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful stockholder claims against us and may reduce the amount of money available to us.

As permitted by Section 78.7502 of Chapter 78 of the Nevada Revised Statutes (the “NRS”), our amended and restated articles of incorporation limit the liability of our directors to the fullest extent permitted by law. In addition, as permitted by Section 78.7502 of the NRS, our amended and restated articles of incorporation and amended and restated bylaws provide that we shall indemnify, to the fullest extent authorized by the NRS, any person who is involved in any litigation or other proceeding because such person is or was a director or officer of ours or is or was serving as an officer or director of another entity at our request, against all expense, loss, or liability reasonably incurred or suffered in connection therewith. Our amended and restated articles of incorporation provide that indemnification includes the right to be paid expenses incurred in defending any proceeding in advance of its final disposition; provided, however, that such advance payment will only be made upon delivery to us of an undertaking, by or on behalf of the director or officer, to repay all amounts so advanced if it is ultimately determined that such director or officer is not entitled to indemnification.

Section 78.7502 of the NRS permits a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, except an action by or in the right of us, by reason of the fact that the person is or was a director, officer, employee, or agent of ours, or is or was serving at our request as a director, officer, employee, or agent of another company, partnership, joint venture, trust, or other enterprise, against expenses, including attorneys’ fees, judgment, fines, and amounts paid in settlement actually and reasonably incurred by the person in connection with the action, suit, or proceeding if the person is not liable under Section 78.138 of the NRS, or acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful.

The above limitations on liability and our indemnification obligations limit the personal liability of our directors and officers for monetary damages for breach of their fiduciary duty as directors by shifting the burden of such losses and expenses to us. Certain liabilities or expenses covered by our indemnification obligations may not be covered by our directors’ and officers’ insurance policy or the coverage limitation amounts may be exceeded. As a result, we may need to use a significant amount of our funds to satisfy our indemnification obligations, which could severely harm our business and financial condition and limit the funds available to stockholders who may choose to bring a claim against us.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to provisions of Nevada law, the Company has been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in that Act and is, therefore, unenforceable.

Anti-takeover provisions in our amended and restated articles of incorporation and bylaws, as well as provisions in Nevada law, might discourage, delay or prevent a change of control of our Company or changes in our management and, therefore, depress the trading price of our Securities.

Our amended and restated articles of incorporation, bylaws and Nevada law contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our board of directors. Our corporate governance documents include provisions:

These provisions, alone or together, could delay hostile takeovers and changes in control or changes in our management.

As a Nevada corporation, we are also subject to provisions of Nevada corporate law, including NRS Section 78.411, et seq., which prohibits a publicly-held Nevada corporation from engaging in a business combination with an interested stockholder, generally a person who together with its affiliates owns, or within the last two years has owned, 10% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our Common Stock. They could also deter potential acquirers of our Company, thereby reducing the likelihood that our stockholders could receive a premium for their Common Stock in an acquisition.

You should consult your own independent tax advisor regarding any tax matters arising with respect to the securities offered in connection with this Offering.

Participation in this Offering could result in various tax-related consequences for investors. All prospective purchasers of our Securities are advised to consult their own independent tax advisors regarding the U.S. federal, state, local and non-U.S. tax consequences relevant to the purchase, ownership and disposition of the resold securities in their particular situations.

IRS CIRCULAR 230 DISCLOSURE: TO ENSURE COMPLIANCE WITH REQUIREMENTS IMPOSED BY THE INTERNAL REVENUE SERVICE, WE INFORM YOU THAT ANY U.S. TAX ADVICE CONTAINED HEREIN (INCLUDING ANY ATTACHMENTS) IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING PENALTIES UNDER THE INTERNAL REVENUE CODE. IN ADDITION, ANY U.S. TAX ADVICE CONTAINED HEREIN (INCLUDING ANY ATTACHMENTS) IS WRITTEN TO SUPPORT THE “PROMOTION OR MARKETING” OF THE MATTER(S) ADDRESSED HEREIN. YOU SHOULD SEEK ADVICE BASED ON YOUR PARTICULAR CIRCUMSTANCES FROM YOUR OWN INDEPENDENT TAX ADVISOR. YOU SHOULD NOTE THAT NONE OF THE INFORMATION RELATING TO TAX CONSEQUENCES IS MEANT TO BE “TAX ADVICE” FROM THE COMPANY.

IN ADDITION TO THE ABOVE RISKS, BUSINESSES ARE OFTEN SUBJECT TO RISKS NOT FORESEEN OR FULLY APPRECIATED BY MANAGEMENT. IN REVIEWING THIS PROSPECTUS, POTENTIAL INVESTORS SHOULD KEEP IN MIND THAT OTHER POSSIBLE RISKS MAY ADVERSELY IMPACT THE COMPANY’S BUSINESS OPERATIONS AND THE VALUE OF THE COMPANY’S SECURITIES.

USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of the Common Stock offered by us will be approximately $2,485,000 based on an initial public offering price of $5.00 per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses. If the underwriter’s option to purchase additional shares of Common Stock in this Offering is exercised in full, we estimate that our net proceeds will be approximately $3,167,500. We will not receive any of the proceeds from the sale of our Common Stock by the Selling Stockholders or the Representative with respect to the Common Stock issuable upon exercise of the Representative’s Warrant. However, upon any exercise of the Representative’s Warrant, we will receive cash proceeds per share equal to the exercise price of the Representative’s Warrant which is $5.50 per share (110% of the public offering price per share). If all 50,000 shares of Common Stock exercisable under the Representative’s Warrant are exercised, the aggregate gross proceeds from the exercise of those warrants would be approximately $275,000 (or $316,250 if the Representative exercises the over-allotment option in full).  

We intend to use the net proceeds we receive from this Offering for general corporate purposes, which may include financing our growth by acquiring more agents at a faster pace (10%), repayment of certain promissory notes issued by the Company (excluding those notes issued to Mr. Joseph La Rosa) (19%), developing new services (10%), acquisitions of controlling interest in a number of our franchisees (16%), the acquisition of other independent real estate brokerages, title insurance agencies, mortgage brokerages and other complementary businesses (10%), general operating expenses (25%) and the purchase and acquisition of proprietary technology (10%).

We have signed purchase agreements with two of our franchisees to acquire a majority interest in their real estate brokerage businesses concurrently with the closing of this Offering on terms as follows:

Each of the sellers of the above franchisees have signed: (i) a Leak Out Agreement pursuant to which the sellers have agreed not to sell the shares of Common Stock received in the buyout transaction until the 181^st day after the closing date of this Offering, and for the period ending one year from that date, to sell only one-twelfth of the shares received per calendar month, subject to applicable securities laws as such shares are “restricted securities” under the Securities Act; (ii) a Proxy Agreement which grants to Mr. Joseph La Rosa or his successor, in his capacity as the CEO, the seller’s irrevocable proxy to vote all of the shares of Common Stock received by the sellers in the acquisition transaction; and (iii) an employment agreement to serve as the president of such company commencing immediately after the closing of the acquisition, reporting to Mr. Joseph La Rosa, with a salary that can be adjusted if that company’s net profitability changes by more than 5% in any one month. The sellers have agreed to certain confidentiality, work product, non-competition, non-solicitation and non-disparagement terms.

This expected use of the net proceeds from this Offering represents our intentions based upon our current plans and prevailing business conditions, which could change in the future as such plans and conditions evolve. Predicting the costs to engage more agents, develop new services, and make acquisitions can be difficult, and the amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the progress of our expansion, any agreements that we may enter into with third parties, and any unforeseen cash needs. As a result, we will retain broad discretion over the allocation of the net proceeds from this Offering and the actual use of the net proceeds could vary substantially from the estimated uses set forth above.

Pending the uses described above, we intend to invest the net proceeds of this Offering in short-term, interest-bearing, investment-grade securities such as money market funds, certificates of deposit, commercial paper, and guaranteed obligations of the U.S. government. We cannot predict whether the proceeds will yield a favorable return.

Based on our current plans, we believe that our existing cash, together with the anticipated net proceeds from this Offering, will enable us to fund our operating expenses and capital expenditure requirements through 2023.

CAPITALIZATION

The following table sets forth our cash and our capitalization as of June 30, 2023:

The following information of our cash and capitalization following the completion of this Offering is illustrative only and will change based on the actual public offering price, the actual number of shares offered, and other terms of this Offering determined at pricing. You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes appearing elsewhere in this prospectus. 

The share and per share amounts for all periods set forth in this prospectus reflect the completion of the Reverse Stock Split, which was effective on March 21, 2022, and the Forward Stock Split which was effective on April 17, 2023. The number of shares of our Common Stock outstanding in the table above excludes 5,000,000 shares of Common Stock available for future issuance under our 2022 Equity Incentive Plan as of the date of this prospectus.

DILUTION

If you invest in our Common Stock in this Offering, your interest in our Common Stock will be diluted to the extent of the difference between the initial public offering price per share of our Common Stock (calculated for purposes of this discussion to be the initial public offering price of one share) and the pro forma as adjusted net tangible book value per share of our Common Stock after this Offering. We calculate net tangible book value per share by dividing the net tangible book value (tangible assets less total liabilities) by the number of outstanding shares of our Common Stock.

Our historical net tangible book value (deficit) as of June 30, 2023 is ($3,191,047) or ($0.53) per share of Common Stock, based on 6,004,000 shares of our Common Stock outstanding after the 2-for-1 forward stock split effective April 17, 2023.

After giving effect to (1) our sale of 1,000,000 shares of our Common Stock by us in this Offering at an initial public offering price of $5.00 per share, less the estimated underwriting discounts and commissions and the estimated offering expenses, and (2) the issuance of Series A Preferred Stock after June 30, 2023 ($600,000); the mandatory conversion of the remaining convertible note including accrued interest of $1,071 ($26,071); and the elimination of the derivative liability ($587,006), our pro forma as adjusted net tangible book value as of June 30, 2023 would be $2,150,542 or $0.18 per share, based on 11,970,576 shares of our Common Stock outstanding. This represents an immediate increase in the pro forma as adjusted net tangible book value of $0.71 per share to existing stockholders and an immediate dilution of $4.82 per share to investors purchasing shares in this Offering.

The following table illustrates the per share dilution ⁽¹⁾:

The share and per share amounts for all periods reflect the completion of the 1-for-10 Reverse Stock Split, which was effective on March 21, 2022 and the 2-for-1 Forward Stock Split of our Common Stock issued and outstanding (including adjustments for fractional shares), which was effective on April 17, 2023.

If the underwriters exercise their over-allotment option in full, the pro forma as adjusted net tangible book value per share as of June 30, 2023, after giving effect to this Offering, would be $0.23 per share, and the dilution in net tangible book value per share to investors in this Offering would be $4.77 per share.  

The following table shows, as of June 30, 2023, the difference between the number of shares of Common Stock purchased from us, the total consideration paid to us for the shares, and the average price paid per share by existing stockholders and by investors purchasing our Common Stock in this Offering:

Assuming the underwriters’ over-allotment option is exercised in full, sales by us in this Offering will reduce the percentage of shares held by existing stockholders to 84% and will increase the number of shares held by new investors to 16%.

DIVIDEND POLICY

In 2020, we paid dividends to the members of Coaching, CRE, Franchising, Property Management and Realty in the amount of $559,928.

In 2021, we paid dividends to the members of Coaching, CRE, Franchising, Property Management and Realty until our reorganization in August 2021 and then to the stockholders of the Company in the amount of $610,379.

For the period ended December 31, 2022, we paid dividends to the stockholders of the Company in the amount of $229,528 to stockholders of record on or prior to November 14, 2022.

No dividends have been paid for the six-month period ending June 30, 2023 nor through the date of this Offering.

After the closing of this Offering, our board of directors intends to retain all earnings, if any, for use in our operations and not pay dividends to our stockholders for the foreseeable future. We are organized under the Nevada Revised Statutes, which prohibits the payment of a dividend if, after giving it effect, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of our total liabilities plus the amount that would be needed, if we were to be dissolved, to satisfy the preferential rights upon dissolution of any preferred stockholders. Any determination by our board to pay dividends in the future to stockholders will be dependent upon our operational results, financial condition, capital requirements, business projections, general business conditions, any debt related financial covenants, statutory and regulatory restrictions and any other factors deemed appropriate by our board.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Prior to this Offering, our Common Stock has not been listed on any stock exchange or quoted on any over-the-counter market or quotation system and there has been no public market for our Common Stock. Our Common Stock has been listed on the Nasdaq Capital Market, under the symbol “LRHC.”

As of October 9, 2023, 6,284,168 shares of Common Stock were issued and outstanding and held by six stockholders of record.

We also have outstanding 2,000 shares of Series X Super Voting Preferred Stock held by Mr. La Rosa, our principal executive officer, that provides to Mr. La Rosa 10,000 votes per share when voting with the Common Stock and 3,436 shares of our Series A Preferred Stock that will automatically convert into 981,676 shares of our Common Stock (based on an offering price of $5.00 per share in this offering) on the closing date of this Offering at a 30% discount to the per share price. See “Description of the Securities.”

Securities Authorized for Issuance under Equity Incentive Plan  

We have adopted the 2022 Equity Incentive Plan (the “2022 Plan”) which became effective as of March 25, 2022. The 2022 Plan allows the compensation committee to make equity-based and cash-based incentive awards to our officers, employees, directors and other key persons (including consultants). The types of awards permitted under the Plan include nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other awards.

We have reserved 5,000,000 shares of Common Stock issuable under the 2022 Plan (as adjusted for the 1 for 10 Reverse Stock Split on March 21, 2022 and for the 2-for-1 Forward Stock Split on April 17, 2023). This number is subject to adjustment in the event of a sub-division, consolidation, share dividend or other change in our capitalization.

The board of directors has the power to amend, suspend or terminate the 2022 Plan without stockholder approval or ratification at any time or from time to time. No change may be made that increases the total number of shares of our Common Stock reserved for issuance pursuant to incentive awards or reduces the minimum exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders within one year.

The shares underlying any awards that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by us prior to vesting, satisfied without any issuance of shares, expire or are otherwise terminated (other than by exercise) under the 2022 Plan will be added back to the shares available for issuance under the 2022 Plan. 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our “Selected Consolidated Financial Data” and our consolidated financial statements, the accompanying notes, and other financial information included elsewhere in this prospectus. The share and per share amounts for all periods reflect the completion of the Reverse Stock Split, which was effective on March 21, 2022 and the 2-for-1 Forward Stock Split which was effective on April 17, 2023. This discussion contains forward-looking statements that involve risks and uncertainties, such as our plans, estimates, and beliefs. Our actual results could differ materially from those forward-looking statements below. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed under “Risk Factors” included elsewhere in this prospectus.

Overview

We are the holding company for five agent-centric, technology-integrated, cloud-based, multi-service real estate companies. Our primary business, La Rosa Realty, LLC, has been listed in the “Top 75 Residential Real Estate Firms in the United States” from 2016 through 2020 by the National Association of Realtors, the leading real estate industry trade association in the United States.

In addition to providing person-to-person residential and commercial real estate brokerage services to the public, we cross sell ancillary technology-based products and services primarily to our sales agents and the sales agents associated with our franchisees. Our business is organized based on the services we provide internally to our agents and to the public, which are residential and commercial real estate brokerage, franchising, real estate brokerage education and coaching, and property management. Our real estate brokerage business operates primarily under the trade name La Rosa Realty, which we own, and, to a lesser extent, under the trade name Better Homes Realty which we license. We have five La Rosa Realty corporate real estate brokerage offices located in Florida, 24 La Rosa Realty franchised real estate brokerage offices and four affiliated real estate brokerage offices that pay us fees in five states in the United States and Puerto Rico. Our real estate brokerage offices, both corporate and franchised, are staffed with approximately 2,450 licensed real estate brokers and sales associates.

La Rosa Holdings Corp. was organized in June 2021 by its founder, Mr. Joseph La Rosa, to become the holding company for five Florida limited liability companies in which Mr. La Rosa held or controlled a one hundred percent ownership interest: (i) La Rosa Coaching, LLC; (ii) La Rosa CRE, LLC; (iii) La Rosa Franchising, LLC; (iv) La Rosa Property Management, LLC; and (v) La Rosa Realty, LLC. Those companies became direct, wholly owned subsidiaries of the Company as a result of the closing of the Reorganization Agreement and Plan of Share Exchange, dated July 22, 2021, a copy of which is included as an exhibit to the registration statement of which this prospectus is a part.

As part of the reorganization, we amended and restated our Articles of Incorporation on July 29, 2021, such that: (i) we increased our total authorized capital stock to 300,000,000 shares, of which 50,000,000 shares were designated preferred stock and 250,000,000 shares were designated Common Stock; and (ii) authorized 2,000 shares of Series X Super Voting Preferred Stock that has 10,000 votes per share and votes together as a class with our Common Stock. At that time, we issued 6,000,000 shares of our Common Stock, reflective of the 2-for-1 forward stock split effective April 17, 2023, and all 2,000 shares of the Series X Super Voting Preferred Stock to Mr. La Rosa in consideration of his past services to the combined entities. We refer to this reorganization as the Exchange Transactions. The Exchange Transactions did not affect our operations, which we continue to conduct through our operating subsidiaries.

Prior to and through the date of the Exchange Transactions, Mr. La Rosa was the majority member in each of Coaching, CRE, Franchising, Property Management and Realty. Therefore, the Exchange Transactions have been accounted for as acquisitions under common control and due to the similar nature of the entities’ business, the financial statements for the years ended December 31, 2022 and 2021 and interim periods ending June 30, 2023 and June 30, 2022 have been presented on a consolidated basis.

Historical results are not necessarily indicative of results we expect in future periods, and results of interim periods are not necessarily indicative of results for the entire year. The data presented should be read in conjunction with, and are qualified in their entirety by reference to, “Risk Factors,” “Special Note Regarding Forward-Looking Statements,” and our consolidated financial statements and the notes thereto included elsewhere in this prospectus. The Risk Factors and Special Note Regarding Forward-Looking Statements describes the circumstances that management believes could impact market conditions, future earnings, and cash flows.

High demand, low housing inventory and low interest rates created a strong sellers’ market leading to escalating home sale prices during 2021. Home prices continued to climb through 2022 as the demand for housing continued to be stronger than usual. Rising mortgage rates have negatively impacted existing home sales. In 2022, the 30 year fixed mortgage rate doubled from 2021 and reached over 7.0% in 2023. Housing starts declined as a result of the rising mortgage interest rates and affordability fell for the average home owner. Despite mortgage rate increases according to the latest data from Florida Realtors, the state wide median sale price for single-family homes in July 2023 (the most recent data available) was $415,000, a 0.7% increase over the prior year and median price for condo-townhouse units was $319,000 up 4.6 % over the year-ago figure. The median is the midpoint; half the homes sold for more, half for less. While real estate appreciation has slowed nationally, real estate appreciation in Florida remains among the highest rates in the country. However, the housing market in Florida is experiencing a slow down like the rest of the country. Closed sales of single-family homes state wide in July 2023 totaled 22,198 down 6.4% year-over-year, while existing condo-townhouse sales totaled 8,463, also down 9.4% from July 2022. State wide Florida inventory decreased slightly in July 2023 from a year ago for existing single-family homes by -0.3%, while increasing by 27.6% for condo-townhouse units. The supply (inventory) of single-family existing homes increased by 27.3% in July 2023 to a 2.8-months’ supply over the same month last year, while existing condo-townhouse properties increased to a 3.6-months’ supply in July 2023, a 71.4% increase over the same month last year.

As we have during similar historical market environments, we expect to experience a substantial agent migration to our 100% commission model as agents look to maximize revenue and cut their expenses. While transactions per agent may decrease, we expect to see a proportional increase in agent count which could assist the Company to capitalize on growth and expansion goals.

We have expanded training and education specific to this trending market shift to better prepare existing and incoming agents to maximize their revenue in the anticipated near term market. Additionally, the Company’s property management segment could experience growth as rental rates and percentages increase due to the homeownership affordability challenges in the market. We have also automated and systematized many of our transactional and educational processes with the development of our own proprietary software suite in anticipation of the agent growth and training needs.

We continue to evaluate opportunities to drive our near-term and long-term growth. We are currently in the process of developing and deploying our own proprietary technology which will further decrease our overall expenses as we eliminate the need for outside technology services.

Description of Our Revenues

Our financial results are 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, and the number of agents who work with our franchisees. We grew our total agent count from our founding in 2004 to approximately 2,450 agents as of the date of this prospectus.

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 franchisee’s agents, royalties paid by our franchisees, dues and technology fees paid by our sales agents and 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.

Our major revenue streams are illustrated in the following table:

*Less than 1% 

Various factors affected our results for the periods presented in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The majority of our revenue is derived from fees and dues based on the number of agents working under the La Rosa Realty brand. Due to the low fixed cost structure of both our Company and franchise models, the addition of new sales agents generally requires little incremental investment in capital or infrastructure. Accordingly, the number of commissions producing sales agents in our Company and our franchisees is the most important factor affecting our results of operations and the addition of new agents can favorably impact our revenue and our earnings before interest, taxes, depreciation and amortization (“EBITDA”). Historically, the number of agents in the residential real estate industry has been highly correlated with overall home sale transaction activity. We believe that the number of agents and those that produce commissions in our network is the primary statistic that drives our revenue. Another major factor is the cyclicality of the real estate industry that has peaks and valleys depending on macroeconomic conditions that we cannot control. And finally, our revenues fluctuate based on the changes in the aggregate fee revenue per sales agent as a significant portion of our revenue is tied to various fees that are ultimately tied to the number of agents, including annual dues, continuing franchise fees and certain transaction or service-based fees. Our revenue per agent also increases in other ways including when transaction sides and transaction sizes increase since a portion of our revenue comes from fees tied to the number and size of real estate transactions closed by our agents. Given the low fixed cost structure of our franchise model, modest increases in revenue per sales agent can have a significant impact on our profitability. Our annual fee revenue per sales agent was $100 for the six months ended June 30, 2023 and 2022 and the years ended December 31, 2022 and 2021. Effective September 1, 2023, the annual revenue fee was increased to $149.

Description of Our Expenses

Operating Expenses

Operating expenses include cost of revenue, selling, operating and administrative expenses, depreciation and amortization and the gains and losses on sales of assets. Set forth below is a brief discussion of some of the key operating expenses that impact our results of operations:

In connection with the completion of this Offering, we may recognize certain compensation expenses including compensation expense of approximately $6,296,000 related the granting of restricted stock awards with respect to 1,259,000 shares of our Common Stock to our senior executive officers, as described in “Security Ownership Of Certain Beneficial Owners And Management”. In addition, we expect to grant 391,972 restricted stock units (based on an offering price of $5.00 per share in this offering) representing shares of our Common Stock to our employees, contractors, and directors in connection with the completion of this Offering under our 2022 Equity Incentive Plan and will incur a charge of $1,960,000 related to stock-based compensation in 2023. We will incur additional charges in the future related to additional equity grants under our 2022 Equity Incentive Plan. We also expect our selling, operating and administrative expenses to increase in the near-term as we add additional personnel and incur additional expenses that we did not incur as a private company, including costs related to becoming a public company and compliance with related governance and disclosure requirements.

More specifically, we expect our selling, operating and administrative expenses to increase related to obligations associated with becoming a public company including compliance with the Sarbanes-Oxley Act, as well as legal, accounting, tax and other expenses that we did not incur as a private company.

Other Income (Expenses), Net

Other income (expenses), net includes interest expense, interest income, amortization of deferred financing fees, gains on the forgiveness of debt, and changes in the fair value of derivatives.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

The following discussion relates to critical accounting policies for our Company. The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements:

Revenue Recognition

The Company applies the provision of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). The Company measures revenue within the scope of ASC 606 by applying the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. At contract inception, the Company assesses the goods or services promised within each contract that falls under the scope of ASC 606, determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied. The application of these five steps necessitates the development of assumptions that require judgment.

The Company records revenue based upon the consideration specified in the client arrangement, and revenue is recognized when the performance obligations in the client arrangement are satisfied. A performance obligation is a contractual promise to transfer a distinct good or service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.

Real Estate Brokerage Services (Residential)

The Company serves as a licensed broker in the areas in which it operates for the purpose of processing residential real estate transactions. Revenue from real estate brokerage services (residential) mainly consists of commissions generated from real estate brokerage services. The Company is contractually obligated to provide for the fulfilment of transfers of real estate between buyers and sellers. The Company provides these services itself and controls the services of its agents necessary to legally transfer the real estate. Consequently, the Company is defined as the principal in the transaction. The Company, as principal, satisfies its obligation upon the closing of a real estate transaction. The Company has concluded that agents are not employees of the Company, rather deemed to be independent contractors. Upon satisfaction of its obligation, the Company recognizes revenue in the gross amount of consideration it is entitled to receive. The transaction price is calculated by applying the Company’s portion of the agreed-upon commission rate to the property’s selling price. The Company may provide services to the buyer, seller, or both parties to a transaction. Commissions revenue contains a single performance obligation that is satisfied upon the closing of a real estate transaction, at which point the entire transaction price is earned. The Company’s customers remit payment for the Company’s services to the title company or attorney closing the sale of property at the time of closing. The Company receives payment upon close of property within days of the closing of a transaction. The Company is not entitled to any commission until the performance obligation is satisfied and is not owed any commission for unsuccessful transactions, even if services have been provided. In addition to commission, revenue from real estate brokerage services (residential) consists of annual and monthly dues charged to our agents for providing systems, accounting, marketing tools and compliance services. The annual and monthly dues are recognized each month as services are provided.

Franchising Services

The Company’s franchise agreements offer the following benefits to the franchisee: common use and promotion of the La Rosa Realty trademark; distinctive sales and promotional materials; access to technology and training; and recommended procedures for operation of La Rosa Realty franchises. The Company concluded that these benefits are highly related and part of one performance obligation for each franchise agreement, a license of symbolic intellectual property that is billed through a variety of fees including (i) initial franchise fees, (ii) annual dues and (iii) royalty fees. Initial franchise fees consist of a fixed fee payable upon signing the franchise agreement. Annual dues are calculated at a fixed fee per agent (prorated for any partial year) payable annually before the 10th day of January or within 10 days after each agent commences their association with the franchise. Royalty fees are calculated as the greater of: (a) fixed percentage of gross commission income for the period which is made up of all commissions, transaction fees, property management fees, and monthly fees collected or receivable by the franchisee and the franchisee’s independent sales associates, agents, representatives, contractors, employees, partners, directors, officers, owners, or affiliates, regardless of whether or not such individuals or affiliates are entitled to retain all or part of such gross commission income, or (b) a fixed monthly fee. Royalty fees are payable monthly on or before the 10th of each month. Revenue is recognized over the period of the annual dues or the duration of the franchisee agreement.

Coaching Services

The Company provides mandatory training and guidance to newly licensed agents for their first three sales transactions. Revenue is recognized based on 10% of the commission earned on these transactions payable upon the closing of the transaction. Coaches also provide optional special education services throughout the year to agents. Revenue is recognized as each event occurs.

Property Management

We provide property management services on a contractual basis for owners of and investors in residential, office, industrial and retail properties. These services include managing daily operations of the property, tenant background screening, overseeing the tenant application process, and accounting services. We are compensated for our services through a flat monthly management fee. We are also sometimes reimbursed for our repair costs directly attributable to the properties under management. These costs are not included in the transaction price as the customer is the party receiving these services. Property management services represent a series of distinct daily services rendered over time. Consistent with the transfer of control for distinct, daily services to the customer, revenue is recognized at the end of each period for the fees associated with the services performed. The amount of revenue recognized is presented gross for any services provided by our employees, as we control them. We generally do not control third-party services delivered to property management clients. As such, we generally report revenues net of third-party reimbursements.

The amount of revenue recognized is presented gross for any services provided by our employees, as we control them. This is evidenced by our obligation for their performance and our ability to direct and redirect their work, as well as negotiate the value of such services. The amount of revenue recognized related to certain project management arrangements is presented gross (with offsetting expense recorded in cost of revenue) for reimbursements of costs of third-party services because we control those services that are delivered to the client. In the instances where we do not control third-party services delivered to the client, we report revenues net of the third-party reimbursements.

Real Estate Brokerage Services (Commercial)

The Company serves as a licensed broker in the areas in which it operates for the purpose of processing commercial real estate transactions. This portion of revenue consists of commissions generated from real estate brokerage services. The Company is contractually obligated to provide for the fulfilment of transfers of real estate between buyers and sellers. The Company provides these services itself and controls the services of its agents necessary to legally transfer the real estate. Correspondingly, the Company is defined as the principal. The Company, as principal, satisfies its obligation upon the closing of a real estate transaction. The Company has concluded that agents are not employees of the Company, rather deemed to be independent contractors. Upon satisfaction of its obligation, the Company recognizes revenue in the gross amount of consideration it is entitled to receive. The transaction price is calculated by applying the Company’s portion of the agreed-upon commission rate to the property’s selling price. The Company may provide services to the buyer, seller, or both parties to a transaction. Commissions revenue contains a single performance obligation that is satisfied upon the closing of a real estate transaction, at which point the entire transaction price is earned. The Company’s customers remit payment for the Company’s services to the title company or attorney closing the sale of property at the time of closing. The Company receives payment upon close of property within days of the closing of a transaction at a rate of 10% of the gross commission income. The Company is not entitled to any commission until the performance obligation is satisfied and is not owed any commission for unsuccessful transactions, even if services have been provided. The Company also charges customers a fixed monthly membership fee.

Recently Adopted Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets and certain other instruments. For receivables, loans and other instruments, entities will be required to use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowance for losses. In addition, an entity will have to disclose significantly more information about allowances and credit quality indicators. The new standard is effective for the Company for fiscal years beginning after December 15, 2022. The Company adopted the standard beginning in fiscal year 2023. The adoption did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made certain disclosure amendments to improve the information provided to users. In addition, the FASB amended the derivative guidance for the “own stock” scope exception and certain aspects of the EPS guidance. As the Company expects to qualify for the smaller reporting company determination, the effective date for this ASU is for our fiscal year beginning after December 15, 2023, and the Company does not believe the standard will have a material impact on the Company’s consolidated financial statements.

JOBS Act Transition Period

Section 107 of the JOBS Act, which was enacted in April 2012, provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourself of the extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.

We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation, from the requirements of:  (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier to occur of : (1) the last day of the fiscal year (a) following the fifth anniversary of the effectiveness of this registration statement, (b) in which we have total annual gross revenues of at least $1.235 billion, or (c) in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the prior December 31st, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

Results of Operations

Six months ended June 30, 2023 compared to the six months ended June 30, 2022

Our unaudited statements of operations for the six months ended June 30, 2023 and 2022 as discussed herein are presented below.

Fiscal year ended December 31, 2022 compared to the fiscal year ended December 31, 2021

Our statements of operations for the year ended December 31, 2022 and 2021 as discussed herein are presented below.