Real-time Form 4 intelligence. Smarter insider tracking.
YoY shift: Lean -
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.34pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.14pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.53pp
Lean -
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adverse+12
adversely+12
litigation+10
restatement+10
loss+8
Positive rising
effective+3
able+2
successful+2
greater+2
adequately+2
Risk Factors (Item 1A)
20,102 words
Item 1A. 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 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 report including our financial statements and related notes, before making an investment decision. The statements contained in this report 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 all or part of their investment.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
declined+8
against+6
defendants+4
restatement+3
adverse+1
Positive rising
satisfy+2
resolve+2
gain+2
success+1
favorable+1
MD&A (Item 7)
6,510 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Prospective investors should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this annual report. Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements and Industry Data . ” This discussion should be read in conjunction with our audited consolidated financial statements and the notes thereto included elsewhere in this report.
The discussion in this section has been impacted by the restatement described in the Explanatory Note at the beginning of this Comprehensive Form 10-K and in Note 2 and Note 3 of the consolidated financial statements of this Comprehensive Form 10-K. Certain of the financial and other information provided in this Management’s Discussion and Analysis of our Financial Condition and Results of Operations has been updated to reflect the restatement adjustments.
Business Overview
We operate primarily in the United States residential real estate market. Our agent-centric commission model our sales agents to obtain higher net commissions than they would otherwise receive from many of our competitors in our local markets. Moreover, we believe that our proprietary technology, training, and the support we provide to our agents at a minimal cost to them is one of the offered in the industry. 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.
Our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern.”
The Company has incurred recurring net losses, including a net loss of $30,410,422 for the year ended December 31, 2025, compared to $14,349,996 for the year ended December 31, 2024 and the Company’s operations have not provided net positive cash flows in the year ended December 31, 2025. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate positive cash flows from operations and to secure additional sources of equity and/or debt financing. Despite the Company’s intent to fund operations through equity and debt financing arrangements, there is no assurance that such financing will be available on terms acceptable to the Company, if at all.
Our independent auditors have included an explanatory paragraph in their audit report, included in this Comprehensive Form 10-K, regarding the Company’s ability to continue as a going concern. This going concern risk may materially limit our ability to raise additional funds through the issuance of new debt or equity or may adversely affect the terms upon which such capital may be available. The inability to obtain sufficient financing on acceptable terms could have a material adverse effect on the Company’s financial condition, results of operations, and business prospects.
The Company is actively pursuing strategies to mitigate these risks, focusing on expansion through acquisitions, which can help achieve future profitability and growing its customer base. However, there can be no assurance that these efforts will prove successful or that the Company will achieve its intended financial stability. The failure to successfully address these going concern risks may materially and adversely affect the Company’s business, financial condition, and results of operations. Investors should consider the substantial risks and uncertainties inherent in the Company’s business before investing in the Company’s securities.
We have a limited operating history with financial results that may not be indicative of future performance, and our revenue growth rate is likely to slow down as our business matures and may slow down due to the recent antitrustlitigation.
We began operations in 2021. As a result of our limited operating history, we have limited financial data that can be used to evaluate our current business, and such data may not be indicative of future performance. We have encountered, and expect to continue to encounter, risks and difficulties frequently experienced by growing companies, including challenges in financial forecasting accuracy, hiring of experienced personnel, hiring of technology employees, determining appropriate investments, developing new products and features, assessing legal and regulatory risks, among others. Any evaluation of our business and prospects should be considered in light of our limited operating history, and the risks and uncertainties inherent in investing in early-stage companies. In addition, recent settlements of litigation based on allegedviolations of federal and state antitrust laws may have an adverse impact on our potential growth. See “Risk Factors - Adverse outcomes in litigation and regulatory actions against the NAR, other real estate brokerage companies and agents in our industry could adversely impact our financial results,” below.
Impairment of goodwill and intangible assets may adversely impact future results of operations.
An impairment in the carrying value of goodwill, trade names and other long-lived assets could negatively affect our consolidated results of operations and net worth.
Goodwill and indefinite-lived intangible assets, such as trade names, are recorded at fair value at the time of acquisition and are not amortized, but are reviewed for impairment at least annually or more frequently if impairment indicators arise. In evaluating the potential for impairment of goodwill and trade names, we make assumptions regarding future operating performance, business trends and market and economic conditions. Such analyses further require us to make certain assumptions about our sales, operating margins, growth rates and discount rates. There are inherent uncertainties related to these factors and in applying these factors to the assessment of goodwill and trade name recoverability. Goodwill reviews are prepared using estimates of the fair value of reporting units based on the estimated present value of future discounted cash flows. We could be required to evaluate the recoverability of goodwill or trade names prior to the annual assessment if we experience disruptions to the business, unexpected significant declines in operating results, a divestiture of a significant component of our business or market capitalization declines. For the year ended December 31, 2025, we conducted such a review and recorded an impairment of $6,911,770 related to goodwill and intangible assets.
We also continually evaluate whether events or circumstances have occurred that indicate the remaining estimated useful lives of our definite-lived intangible assets, such as franchise agreements, agent relationships, real estate listings, and non-compete agreements, and other long-lived assets may warrant revision or whether the remaining balance of such assets may not be recoverable. We use an estimate of the related undiscounted cash flow over the remaining life of the asset in measuring whether the asset is recoverable.
If we fail to raise additional capital, our ability to implement our business model and strategy could be compromised.
We have limited capital resources and operations. From time to time, we may seek additional financing to provide the capital required to expand the production of our business operation and development initiatives and/or working capital, as well as to repay outstanding loans if cash flow from operations is insufficient to do so. We cannot predict with certainty the timing or amount of any such capital requirements.
If we do not raise sufficient capital to fund our ongoing development activities, it is likely that we will be unable to carry out our business plans. We may not be able to obtain additional financing on terms acceptable, or at all. Even if we obtain financing for near-term operations, we may require additional capital beyond the near term. If we are unable to raise capital when needed, our business, financial condition and results of operations would be materially adversely affected, and we could be forced to reduce or discontinue our operations.
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 2022-2025 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 2000s.
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:
a continued rise in inflation;
a period of slow economic growth or recessionary conditions;
a continued increase in mortgage interest rates;
a tightening of credit standards by financial institutions;
legislative, tax or regulatory changes that would adversely impact the residential real estate market, including but not limited to those relating to mortgage financing, restrictions imposed on mortgage originators as well as retention levels required to be maintained by sponsors to securitize certain mortgages, the elimination of the deductibility of certain mortgage interest expense, the application of the alternative minimum tax, and real property taxes and employee relocation expense;
insufficient home inventory levels in our markets;
a continued increase in the acquisition of single-family homes by corporate buyers for rental purposes;
a decrease in the affordability of homes;
a decrease in consumer confidence;
increase in the cost of premiums for home insurance due to recent hurricanes; and
natural disasters, such as hurricanes, earthquakes and other disasters that disrupt local or regional real estate markets.
The lack of financing for homebuyers in the U.S. residential real estate market at favorable rates and on favorable terms has had 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 0.3 percent in February 2026 seasonally adjusted, and rose 2.4 percent over the last 12 months ending January 2026, not seasonally adjusted. 1 This increase was above the Federal Reserve System’s (the “Fed”) targeted inflation rate of 2.0%, The 2025 federal funds interest rate in late December decreased to a range of 3.50 to 3.75 primarily due to stubborn inflation and signs of a weakening labor market. 2 Inflation continues to decline after a period of rising prices, which contributed to the decision. The Fed aims to provide financial relief to borrowers and continue to cool down an overheated economy. Fed funds rates impact interest rates on government bonds that have a correlated effect on mortgage interest rates, which, as of March 26, 2026, the average rate for a 30-year fixed rate mortgage was 6.38 according to Freddie Mac, the federally chartered home mortgage loan securitizer. 3 Mortgage interest rates have continued to have an effect on the sale of existing homes, that include single-family homes, townhomes, condominiums and co-ops, with a year over year decrease of 1.4% in February 2026 to a seasonally adjusted annual rate of 4.09 million. 4 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. 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, 2025. Thus, we expect these trends to continue to adversely affect our revenues in 2026. 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 slowed the housing market substantially in 2025. Tight inventory was reflected by the sustained high national median existing home sale price in February 2026 of $398,000, a slight increase of 0.3% from a year earlier. Homes usually go under contract a month or two before they close, so the February data is based on purchase decisions made in December 2025 and January 2026. The average rate for a 30-year fixed mortgage was 6.38% as of March 26, 2026, down from 6.65% during the most recent 52-week period, 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. Total housing inventory at the end of February 2026 was 1.29 million units, up 3.1% from January and up 7.9% from one year ago (1.24 million). There was an unsold inventory supply of 3.8-months at the current sales pace, 2.4% higher than January 2026 but only up from 0.1 month from February 2025. Management expects the housing-market slowdown to persist throughout 2025 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:
our ability to discover and recruit independent brokerage firms in new markets and being able to acquire them;
our ability to increase our brand awareness in new markets in order to penetrate them with our brokerages;
our ability to effectively train and mentor a larger number of new agents and franchisees;
our ability to continually improve the performance, features and reliability of our technological developments in response to both evolving demands of the marketplace and competitive product offerings;
our ability to scale our business services and support quickly enough to meet the growing needs of our real estate agents by improving our internal systems, integrating with third-party systems, and maintaining infrastructure performance;
our ability to attract and retain senior management to operate and control the expansion of our business, organically and potentially, through acquisitions; and
our ability to enhance our financial reporting, internal control, human resources, legal and other administrative areas to effectively manage the growth of our Company.
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 severelyharm our growth prospects. Moreover, the forthcoming changes in the way real estate brokers will be compensated brought about by the recent antitrustlitigation settlements will likely diminish the revenues earned by lesser producing agents and agents that represent home buyers. This decrease in earnings is likely to result in many agents leaving the industry, increasing competition for high performing agents.
A significant adoption by consumers of alternatives to full-service agents or loan originators could have a material adverse effect on our business, prospects and results of operations.
A significant increase in consumer use of technology that eliminates or minimizes the role of the real estate agent could have a materially adverse effect on our business, prospects and results of operations. These options include cloud-based competitors such as direct-buyer companies that purchase directly from the seller, and online discounters who reduce the role of the agent in order to offer sellers a low commission or a flat fee while giving rebates to buyers. How consumers want to buy or sell houses will determine if these models reduce or replace the long-standing preference for full-service agents. In addition, advances in AI and related technology may accelerate the development of tools that diminish the perceived value of full-service real estate agents.
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., Realogy Holdings, Corp. (which operates several brands including the Coldwell Banker and Century 21 brands), Fathom Holdings Inc., eXp World Holdings Inc., Real Brokerage Inc., among others.
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 intentionalfraud. 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.
Failing to develop and maintain a positive relationship with our franchisees, agents and loan originators could compromise our ability to maintain or expand or franchisee network.
Although we believe our relationships with our franchisees and their agents are strong, the nature of such relationships can give rise to conflict. For example, franchisees, or agents may become dissatisfied with the fees and dues owed to us, particularly in a period of economic downturn and uncertainty or in the event that we increase fees and dues. Affiliates may also disagree with certain network-wide policies and procedures, including policies dictating brand standards or affecting their marketing efforts. They may also be disappointed with other aspects of our value proposition including our marketing initiatives, technology offerings, or educational content. If we experience any conflicts with our franchisees on a large scale, our franchisees may decide not to renew their franchise agreements upon expiration or seek to disaffiliate with us, which could result in litigation. These events may, in turn, materially and adversely affect our business and operating results.
An organized franchisee association could also pose risks to our ability to set the terms of our franchise agreements and our pricing.
Our franchise model can be subject to particular litigation risks.
Litigationagainst a franchisee or its affiliated agents or loan originators, whether in the ordinary course of business or otherwise, may also include claimsagainst us for liability by virtue of the franchise relationship. Franchisees may fail to obtain insurance that is required pursuant to the terms of our franchise agreements, naming the Company as an additional insured on such claims. Claimsagainst us (including vicarious liability claims) could result in substantial costs, divert our management resources and could cause adverse publicity, which may materially and adversely affect us and our brand, regardless of whether such allegations are valid or whether we are liable.
In addition to claims over individual or isolated franchisee actions, third parties could attempt to hold us responsible for actions of our franchisees and their agents or loan originators in the aggregate. Our franchised business model is unlike a traditional, integrated corporation where company-owned outlets provide goods or services to consumers and the corporation has direct responsibility for operations at those outlets. Our franchised business model is also unlike many franchisors in other industries—such as the restaurant and hospitality industries—where franchisors may dictate many operational details of the franchisees’ businesses and the delivery of goods and services to consumers and thereby have some of the liability for those or other aspects of the franchisees’ operations. Because we franchise in professional service fields where licensure is required—real estate and mortgage brokerage—we do not dictate or control the day-to-day operations, or the advice provided by our franchisees or their affiliated agents or loan originators. Nonetheless, third parties may try to hold us liable for actions of our franchisees and their agents or loan originators, even when we have no involvement with those actions and they are beyond our control and, we believe, should not result in liability to us. As a franchisor, unlike an integrated corporation, we obtain only a small portion of the revenue of our franchisees, and as a result our capital is limited in comparison with the size of our entire franchise networks. Therefore, if third parties were successful in asserting liability for practices of our franchise network in its entirety, and in holding us vicariously responsible for that liability, the resulting damages could exceed our available capital, could materially affect our earnings, or even render us insolvent.
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 underinsuredagainst 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.
Although, as of 2025, NAR estimated that almost nine in ten home sellers worked with a real estate agent to sell their home, 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:
the Gramm-Leach-Bliley Act which governs the disclosure and safeguarding of consumer financial information;
the Sherman Antitrust Act which governs anti-competitive practices in the marketplace;
various state and federal privacy laws protecting consumer data;
the USA PATRIOT Act;
the sale of franchises is regulated by various state laws as well as by the Federal Trade Commission (the “FTC”) that generally require that franchisors make extensive disclosure to prospective franchisees and several states have “franchise relationship laws” or “business opportunity laws” that limit the ability of franchisors to terminate franchise agreements or to withhold consent to the renewal or transfer of these agreement;
restrictions on transactions with persons on the Specially Designated Nationals and Blocked Persons list promulgated by the Office of Foreign Assets Control of the Department of the Treasury;
the Fair Housing Act;
state and federal employment laws and regulations, including any changes that would require classification of independent contractors to employee status, and wage and hour regulations;
federal and state, “Do Not Call,” “Do Not Fax,” and “Do Not E-Mail” laws;
laws and regulations in jurisdictions outside the U.S. in which we do business; and
consumer fraud statutes that are broadly written.
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.
Adverse U.S. and global market, economic and political conditions, including the ongoing conflict between Ukraine and Russia, recent conflicts in the Middle East and other events or circumstances beyond our control could have a material adverse effect on us.
Another economic or financial crisis or rapid decline of the consumer economy, significant concerns over energy costs, geopolitical issues, including the ongoing armed conflicts between Ukraine and Russia, United States and Iran, as well as in Israel and the Gaza Strip, the availability and cost of credit, the U.S. mortgage market, or a declining real estate market in the U.S. can contribute to increased volatility, diminished expectations for the economy and the markets, and high levels of structural unemployment by historical standards.
Market, political and economic challenges, including dislocations and volatility in the credit markets, general global economic uncertainty, uncertainty or volatility from matters such as the implementation of the governing agenda of President Donald J. Trump, and changes in governmental policy on a variety of matters such as trade, tariffs and manufacturing policies may adversely affect the economy and financial markets, our financial condition, results of operations, cash flows and our ability to pay distributions on, and the per share trading price of, our Common Stock.
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.
We are subject to risks of operating in foreign countries.
In 2025, we commenced an expansion of our business in Europe, starting with engaging an area developer and establishing a subsidiary in Spain. Our international operations are subject to risks that are different from those of our U.S. operations that could result in lossesagainst which we are not insured and therefore negatively affect our profitability. Those international risks include:
fluctuations in foreign currency exchange rates and foreign exchange restrictions;
exposure to local economic conditions and local laws and regulations, including those relating to the agents of our franchisees;
foreign economic and credit markets;
potential adverse changes in the political stability of foreign countries or in their diplomatic relations with the U.S.;
restrictions on the withdrawal of foreign investment and earnings;
government policies against businesses owned by foreigners;
investment restrictions or requirements;
diminished ability to legally enforce our contractual rights in foreign countries;
difficulties in registering, protecting or preserving trade names and trademarks in foreign countries;
potential governmental and industry corruption;
restrictions on the ability to obtain or retain licenses required for operation; and
changes in foreign tax laws.
We depend substantially on our Founder, Joseph La Rosa, and our Chief Operating Officer, Deana 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, Interim Chief Financial Officer and President, Joseph La Rosa, our Chief Operating Officer, Deana La Rosa, our senior management and other key employees. The loss of the services of Mr. La Rosa, Mrs. La Rosa and other senior management would have a significant detrimental effect on the Company as its brand is tied to their 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 June 3, 2026, Mr. La Rosa beneficially owned approximately 0.19% of our outstanding Common Stock and all 1,800 shares of our Series X Preferred Stock that provides for 10,000 votes per share when voting with the Common Stock, representing 91.81% of the total voting power of our capital stock. Thus, Mr. La Rosa, our President, Chief Executive Officer, and Interim Chief Financial Officer, and majority stockholder, controls 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 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.
Mr. Joseph La Rosa has 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 controls 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 Chief Executive Officer, Director and Interim Chief Financial 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 controls, as of June 3, 2026, 91.81% 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 “LR” logo that we own, as having significant value and as being important factors in the marketing of our brand. 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 have 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 the conduct of individuals or entities outside of our control, including our agents, third-party service or product providers, antitrustclaims, general fraudclaims, employment law claims, including claimschallenging the classification of our agents as independent contractors and compliance with wage and hour regulations, and claimsallegingviolations 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 againstclaims 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 omissionsclaims 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.
Adverse outcomes in litigation and regulatory actions against the NAR, other real estate brokerage companies and agents in our industry could adversely impact our financial results.
Adverse outcomes in legal and regulatory actions against the NAR, other companies, brokers, and agents in the residential and commercial real estate industry may adversely impact our financial condition and our real estate brokers and agents when those matters relate to business practices shared by the Company, our real estate brokers and agents, or our industry at large. Such matters may include, without limitation, antitrust and anticompetition, RESPA, Telephone Consumer Protection Act of 1991 and state consumer protection law, and worker classification claims. Additionally, if plaintiffs or regulatory bodies are successful in such actions, this may increase the likelihood that similar claims are made against the Company and/or our real estate brokers and agents which claims could result in significant liability and be adverse to our financial results if we or our brokers and agents are unable to distinguish or defend our business practices.
As an example, in the matter of Burnett v. National Association of Realtors (U.S. District Court for the Western District of Missouri), a federal jury found the NAR and certain other remaining brokerage defendants liable for $1.8 billion in damages on claims that these companies conspired to artificially inflate brokerage commissions, which is in violation of federal antitrust law (the “Burnett Ruling”). The verdict was appealed on October 31, 2023. Additionally, certain other brokerage defendants settled with the plaintiffs, including both monetary and non-monetary settlement terms. That same day, the NAR, EXP World Holdings, Inc., Compass, Inc., Redfin Corporation, Weichert Realtors, United Real Estate, Howard Hann Real Estate Services, Douglas Elliman, Inc., The Keyes Company, Illustrated Properties, LLC, Baird & Warner, Inc., Real Estate One, Inc., and others were named as defendants in Gibson v. National Association of Realtors (U.S. District Court for the Western District of Missouri), alleging a similar fact pattern and antitrustviolations. On or about March 15, 2024, NAR agreed to settle the Burnett Ruling, along with a sister litigation, by agreeing to pay $418 million over approximately four years, and changing certain of its rules surrounding agent commissions. On November 26, 2024, the NAR Settlement was granted over objections, The final approval order is currently being appealed. If the NAR Settlement is sustained on appeal, it is expected to resolveclaimsagainst the NAR and certain companies related to this matter.
On March 22, 2024, real estate brokerage company Compass Inc. (“Compass”) announced that it will pay $57.5 million as part of a proposed settlement to resolve lawsuits over real estate commissions and agreed to change its business practices to ensure clients can more easily understand how brokers and agents are compensated for their services. Compass’s motion for final approval of the settlement agreement was granted on October 31, 2024 and the settlement agreement is now effective. The final approval ruling was appealed by certain class members that objected to the settlement and is now pending before the United States Circuit Court of Appeals for the Eighth Circuit. In the same litigation, the court granted final approval of multiple additional settlements, including (i) an $8.62 million settlement on June 25, 2025 involving The Keyes Company Illustrated Properties, LLC, Baird & Warner, Inc. Real Estate One, Inc. and other defendants, and (ii) a $42 million settlement on February 5, 2026 involving William Raveis Real Estate Inc., Hanna Holdings Inc., Windermere Real Estate Services Company Inc., Exit Realty Corp. International, Exit Realty Corp. USA, and William L. Lyon & Associates Inc.
While the Company was not named as a defendant in any of these actions, it is possible that it could be a litigant at some point in the future. These settlements can result in changes in the way real estate brokers are compensated for their services. Most notably, home sellers will no longer be required to pay buyer agent commissions which will result in lower buyer agent compensation. We cannot predict the full breadth of the outcome of these lawsuits but believe that they will result in a significant adverse effect on our financial condition and results of operations for the foreseeable future.
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 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 attempt to, or acquire other complementary businesses, we will face certain risks inherent with such activities.
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 Cryptocurrencies and Digital Assets
The continuing development and acceptance of digital assets and distributed ledger technology are subject to a variety of risks.
Cryptocurrencies, such as stablecoins, and the other types of digital assets in which we began investing and trading in 2026 involve a new and rapidly evolving industry of which blockchain technology is a prominent, but not unique, part. The growth of the digital asset industry in general, and distributed ledger technology that supports digital assets, is subject to a high degree of uncertainty. The factors affecting the further development of the digital asset industry, as well as distributed ledger technology, include:
continued worldwide growth in the adoption and use of digital assets;
the limited operating histories of many cryptocurrency networks, which have not been validated in production and are still in the process of developing and making significant decisions that will affect the design, supply, issuance, functionality, and governance of their respective digital assets and underlying blockchain networks;
government and quasi-government regulation of digital assets and their use, or restrictions on or regulation of access to and operation of applicable distributed ledger technology or systems that facilitate their issuance and secondary trading;
the taxation, and tax-related reporting, of transactions involving digital assets by the United States and other jurisdictions;
the maintenance and development of the open-source software protocols of certain blockchain networks used to support digital assets;
quantum computing, which poses a critical technical challenge to the viability of current digital asset standards underpinning blockchain technology and digital assets, as sufficiently powerful quantum computers could potentially break widely used encryption algorithms;
other advancements in technology, including computing power, that may adversely affect the respective cryptocurrency networks, render existing distributed ledger technology obsolete, inefficient, or fail to remediate or introduce new bugs and security risks;
the use of the networks supporting digital assets for developing smart contracts and distributed applications;
development of new technologies for mining and staking and the rewards and transaction fees for miners or validators on digital asset networks;
changes in consumer demographics and public tastes and preferences;
the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies; and
general economic conditions and the regulatory environment relating to digital assets.
Many digital asset networks, including Bitcoin and Ethereum, operate on open-source protocols maintained by groups of core developers. The open-source structure of these network protocols means that certain core developers and other contributors may not be compensated, either directly or indirectly, for their contributions in maintaining and developing the network protocol. A failure to properly monitor and upgrade network protocol could damage digital asset networks. As these network protocols are not sold and their use does not generate revenues for development teams, core developers may not be directly compensated for maintaining and updating the network protocols. Consequently, developers may lack a financial incentive to maintain or develop the network, and the core developers may lack the resources to adequately address emerging issues with the networks. There can be no guarantee that developer support will continue or be sufficient in the future. To the extent that material issues arise with certain digital asset network protocols and the core developers and open-source contributors are unable or unwilling to address the issues adequately or in a timely manner, such digital asset networks, and any corresponding digital assets held may be adversely affected.
Digital assets represent a new and rapidly evolving industry, and the market price of our Common Stock may in the future be impacted by the acceptance of stablecoins and other digital assets.
Digital assets built on blockchain technology were only introduced in 2008 and remain in the early stages of development. The Bitcoin network was first launched in 2009 and bitcoins were the first cryptographic digital assets created to gain global adoption and critical mass. Cryptographic and algorithmic protocols governing the issuance of digital assets represent a new and rapidly evolving industry that is subject to a variety of factors that are difficult to evaluate. If we continue investing significant funds in stablecoins and other digital assets, our results of operations and the market price of our Common Stock may be closely correlated with the acceptance and perception of such digital assets. As a result, the realization of one or more of the following risks could materially adversely affect the market price of our Common Stock:
Bitcoins have only recently become selectively accepted as a means of payment by some retail and commercial outlets, and use of bitcoins by consumers to pay such retail and commercial outlets remains limited. Banks and other established financial institutions may refuse to process funds for bitcoin transactions; process wire transfers to or from digital asset trading platforms, bitcoin-related companies or service providers; or maintain accounts for persons or entities transacting in bitcoin. As a result, the prices of bitcoins are largely determined by speculators and miners, thus contributing to price volatility that makes retailers less likely to accept it as a form of payment in the future.
Banks may choose to not provide banking services, or may choose to cut off banking services, to businesses that provide digital asset-related services or that accept digital assets as payment, which could dampen liquidity in the market and damage the public perception of digital assets generally or any one digital asset in particular, such as bitcoin, and their or its utility as a payment system, which could decrease the price of digital assets generally or individually.
Some digital asset networks and digital asset trading platforms or businesses that facilitate transactions in digital assets (including bitcoin) may be at an increased risk of having banking services cut off if they introduce or use certain privacy-preserving features. This is due to concerns that such features could interfere with anti-money laundering duties and economic sanctions checks.
Users, developers and miners may otherwise switch to or adopt certain digital assets at the expense of their engagement with other digital asset networks, which may negatively impact those networks.
Digital assets are a new asset class and represent a technological innovation and they are subject to a high degree of uncertainty. The adoption of digital assets will require growth in usage and in the blockchain technology generally for various applications. Adoption of digital assets will also require greater regulatory clarity. A lack of expansion in use of digital assets and blockchain technologies would adversely affect our financial performance. In addition, there is no assurance that digital assets generally will maintain their value over the long term. The value of digital assets is subject to risks related to our use. If growth in the use of digital assets generally occurs in the near or medium term, there is no assurance that such use will continue to grow over the long term. A contraction in use of digital assets may result in increased volatility or a reduction in digital asset prices, which would materially and adversely affect our investment and trading strategies, the value of our assets and the value of any investment in us.
Due to a lack of familiarity and some negative publicity associated with digital asset trading platforms, existing and potential customers, counterparties and regulators may lose confidence in digital asset trading platforms.
Since the inception of the cryptoeconomy, numerous digital asset trading platforms have been sued, investigated, or shut down due to fraud, manipulative practices, business failure, and security breaches. In many of these instances, customers of these platforms were not compensated or made whole for their losses. Larger platforms are more appealing targets for hackers and malware, and may also be more likely to be targets of regulatory enforcement actions. For example, in 2022 and 2023, each of Celsius Networks, Voyager Digital, Three Arrows Capital, FTX and Genesis declared bankruptcy. In particular, in November 2022, FTX-which was at the time one of the world’s largest and most popular digital asset trading platforms-became insolvent, and it was revealed that the platform had been misusing customer assets. These events resulted in a loss of confidence in the broader cryptoeconomy, adverse reputational impact to digital asset platforms, increased negative publicity surrounding crypto more broadly, heightened scrutiny by regulators and lawmakers and a call for increased regulation of digital assets and digital asset platforms.
In addition, there have been reports that a significant amount of trading volume on digital asset trading platforms is fabricated and false in nature. Such reports may indicate that the market for digital asset trading platform activities is significantly smaller than otherwise understood.
Negative perception, a lack of stability and standardized regulation in the cryptoeconomy, and the closure or temporary shutdown of digital asset trading platforms due to fraud, business failure, hackers or malware, or government mandated regulation, and associated lossessuffered by customers may reduce confidence in the cryptoeconomy and result in greatervolatility of the prices of assets, including significant depreciation in value. If we continue investing significant funds into digital assets, any of these events could have an adverse impact on our financial condition and our business.
The foreign and U.S. tax treatment of transactions in digital assets is unclear.
Due to the new and evolving nature of digital assets and the absence of comprehensive guidance with respect to digital assets, many significant aspects of the foreign and U.S. federal income tax treatment of digital assets are uncertain. Our operations and dealings in or in connection with digital assets, as well as transactions in digital assets generally, could be subject to adverse tax consequences in the United States, including as a result of development of the legal regimes surrounding digital assets, and our operating results, as well as the price of digital assets, could be adversely affected thereby.
Many significant aspects of the U.S. federal income tax treatment of digital assets (including with respect to the amount, timing and character of income recognition) are uncertain. In 2014, the IRS released Notice 2014-21, discussing certain aspects of “virtual currency” for U.S. federal income tax purposes and, in particular, stating that such virtual currency (i) is “property,” (ii) is not “currency” for purposes of the rules relating to foreign currency gain or loss, and (iii) may be held as a capital asset. From time to time, the IRS has released other notices and rulings relating to the tax treatment of virtual currency or digital assets reflecting the IRS’s position on certain issues. The IRS has not addressed many other significant aspects of the U.S. federal income tax treatment of digital assets and related transactions.
There continues to be uncertainty with respect to the timing, character and amount of income inclusions for various digital asset transactions including, but not limited to, lending and borrowing digital assets, staking, and other digital asset products that we offer. Although we believe our treatment of digital asset transactions for federal income tax purposes is consistent with current public positions of the IRS and/or existing U.S. federal income tax principles, because of the rapidly evolving nature of digital asset innovations and the increasing variety and complexity of digital asset transactions and products, it is possible the IRS and various U.S. states may disagree with our treatment of certain digital asset offerings for U.S. tax purposes, which could adversely affect the vitality of our business. We do not intend to request a ruling from the IRS on these issues, and we will take positions on these and other U.S. federal income tax issues relating to digital assets that we believe to be reasonable.
There can be no assurance that the IRS, U.S. state revenue agencies, or other foreign tax authorities will not alter their respective positions with respect to digital assets in the future or that a court would uphold the treatment set forth in existing positions. It also is unclear what additional tax authority positions, regulations, or legislation may be issued in the future on the treatment of existing digital asset transactions and future digital asset innovations under U.S. federal, U.S. state, or foreign tax law. Any such developments could result in adverse tax consequences for holders of digital assets and could have an adverse effect on the value of digital assets and the broader digital assets markets. Future technological and operational developments that may arise with respect to digital assets may increase the uncertainty with respect to the treatment of digital assets for U.S. and foreign tax purposes. The uncertainty regarding tax treatment of digital asset transactions could impact our business, both domestically and abroad.
Blockchain networks, digital assets and the digital asset trading platforms on which these assets are traded are dependent on internet and other blockchain infrastructure, which are susceptible to system failures, security risks and rapid technological change.
The success of cryptocurrency-based blockchain and other digital asset platforms will depend on the continued development of a stable public infrastructure, with the necessary speed, data capacity and security, and the timely development of complementary products such as high-speed modems for providing reliable internet access and services. Digital assets have experienced, and are expected to continue to experience, significant growth in the number of users and amount of content. Blockchains will continue to be increasingly interconnected with other blockchains and real-world applications. As services and applications continue to be built on top of blockchains, they will place increased reliance on third-party infrastructure providers, including in connection with cross-chain bridges and messaging, liquidity providers, wallets, data feeds and oracles. Reliance on any of these third-parties introduces additional risks and points of failure. There is no assurance that the relevant digital asset infrastructure will continue to be able to support the demands placed on it by this continued growth or that the performance or reliability of the technology will not be adversely affected by this continued growth. There is also no assurance that the infrastructure or complementary products or services necessary to make digital assets a viable product for their intended use will be developed in a timely manner, or that such development will not result in the requirement of incurring substantial costs to adapt to changing technologies. The failure of these technologies or platforms or their development could materially and adversely affect our investment and trading strategies, the value of our assets and the value of any investment in us. Any number of anticipated or unforeseen technical changes, software upgrades, soft or hard forks, cybersecurity incidents or other changes to the underlying blockchain network may occur from time to time, causing incompatibility, technical issues, disruptions or security weaknesses to our systems. If our third-party providers are unable to identify, troubleshoot and resolve any such issues successfully, they may no longer be able to support certain cryptocurrencies or blockchain networks, our assets may be frozen or lost, the security of our hot or cold wallets may be compromised and their systems and technical infrastructure may be affected, all of which could adversely impact the success of our business, financial condition and results of operations. Cryptocurrencies are created, issued, transmitted, and stored according to protocols run by computers in the cryptocurrency network. It is possible these protocols have undiscovered flaws or could be subject to network scale attacks which could result in losses to us.
If we hold digital assets through custodial arrangements or otherwise rely on private keys in the future, the loss, theft, destruction, or compromise of such private keys could result in the loss of digital assets and other adverse consequences.
Access to and transfer of digital assets generally requires the use of private cryptographic keys associated with a digital asset wallet. If we hold digital assets directly or through one or more custodians in the future, the security and availability of those private keys would be critical to our ability to access, transfer, and safeguard our digital assets. If private keys are lost, destroyed, stolen, compromised, or otherwise become inaccessible, and any backup or recovery mechanisms are unavailable or ineffective, the associated digital assets may become permanently inaccessible or may be misappropriated by unauthorized parties.
In connection with any future digital asset activities, we may rely on third-party custodians, wallet providers, or other service providers to store, safeguard, or administer digital assets. Such service providers may experience cybersecurity incidents, hacking events, insider misconduct, operational failures, technological malfunctions, data loss, or other disruptions that could impair their ability to safeguard or provide access to digital assets. In addition, digital asset wallets, blockchain networks, smart contracts, and related technologies may be vulnerable to security breaches, software defects, coding errors, phishing attacks, private key compromises, or other malicious activities.
If any private keys associated with digital assets owned by us or held on our behalf are compromised, or if any custodian or service provider is unable to access or recover such private keys, we could lose access to some or all of our digital assets. Any such event could result in financial losses, litigation, regulatory investigations or enforcement actions, reputational harm, increased compliance costs, operational disruptions, and other adverse effects on our business, financial condition, and results of operations.
Furthermore, to the extent we expand our digital asset activities in the future to include customer-facing products or services, any loss of or inability to access digital assets could adversely affect our customers, expose us to contractual or legal liabilities, and damage our reputation and relationships with customers, counterparties, and regulators.
Risks Associated with Our Capital Stock
We are currently listed on The Nasdaq Capital Market. Our failure to maintain our compliance with Nasdaq’s continued listing standards or other requirements could result in our Common Stock being delisted from Nasdaq, which could adversely affect our liquidity and the trading volume and market price of our Common Stock and decrease or eliminate your investment.
Our Common Stock is currently listed on the Nasdaq Capital Market on Nasdaq under the symbol “LRHC.” Nasdaq requires listed issuers to comply with certain standards in order to remain listed on its exchange. If, for any reason, Nasdaq should delist our securities from trading on its exchange and we are unable to obtain listing on another reputable national securities exchange, a reduction in some or all of the following may occur, each of which could materially adversely affect our stockholders.
If we violate Nasdaq’s listing requirements, or if we fail to meet any of Nasdaq’s listing standards, our Common Stock may be delisted. 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. The delisting of our Common Stock could significantly impair our ability to raise capital and the value of your shares.
On June 3, 2026, the closing price of our Common Stock was $1.21. Pursuant to Nasdaq Rule 5810(c)(3)(A)(iii), if the closing price of our Common Stock is $0.10 or less for 10 consecutive trading days, we will be issued a Staff Delisting Determination by Nasdaq. If we receive a Staff Delisting Determination Letter resulting from our Common Stock trading at or below $0.10 for 10 consecutive trading days, we will have 7 calendar days to request a hearing before a Nasdaq hearings panel to review the Staff Delisting Determination, which will determine the delisting of our Common Stock by Nasdaq. A hearing would then take place within 45 days of the hearing request to determine whether or not our Common Stock would be delisted. If, in the future, we receive a Staff Delisting Determination there can be no assurance that we would be successful in preventing a determination by the Nasdaq hearing panel that our stock will be delisted.
Any delisting determination by Nasdaq could seriously decrease or eliminate the value of an investment in our Common Stock and other securities linked to our Common Stock. While a listing on an over-the-counter exchange could maintain some degree of a market in our Common Stock, we could face substantial material adverse consequences, including, but not limited to, the following: limited availability for market quotations for our Common Stock; reduced liquidity with respect to and decreased trading prices of our Common Stock; a determination that shares of our Common Stock are “penny stock” under the Securities and Exchange Commission rules, subjecting brokers trading our Common Stock to more stringent rules on disclosure and the class of investors to which the broker may sell the Common Stock; limited news and analyst coverage for our Company, in part due to the “penny stock” rules; decreased ability to issue additional securities or obtain additional financing in the future; and potential breaches under or terminations of our agreements with current or prospective large stockholders, strategic investors and banks. The perception among investors that we are at heightened risk of delisting could also negatively affect the market price of our securities and trading volume of our Common Stock.
Additionally, in January 2026, Nasdaq proposed a rule change that would require companies listed on the Nasdaq Global and Capital Markets to maintain a minimum market value of listed securities (“MVLS”) of at least $5 million. If adopted, this requirement would represent an additional continued listing standard applicable to our Common Stock. Under the proposed rule, if a company’s MVLS falls below $5 million for 30 consecutive business days, Nasdaq would immediately suspend trading and delist the company’s securities, with no compliance or cure period. Unlike some other Nasdaq listing deficiencies, the proposed rule would not provide an opportunity to regain compliance prior to suspension, and a hearing request would not stay the suspension of trading. As of the date of this report, the Company’s MVLS is below $5 million. In addition, the market value of our Common Stock may fluctuate significantly due to a number of factors, many of which are outside of our control, including market conditions, investor sentiment toward small-cap companies, our operating performance, and general economic conditions. As a result, we may be unable to maintain the required MVLS threshold at all times. If this proposed rule is approved and adopted, any sustained decline in our MVLS below $5 million could result in the immediate suspension and delisting of our Common Stock from Nasdaq.
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 market for our Common Stock is 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, declineprecipitously 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:
variations in our revenues and operating expenses;
actual or anticipated changes in the estimates of our operating results or changes in stock market analyst recommendations regarding our Common Stock, other comparable companies or our industry generally;
market conditions in our industry and the economy as a whole;
actual or expected changes in our growth rates or our competitors’ growth rates;
developments in the financial markets and worldwide or regional economies;
announcements of innovations or new products or services by us or our competitors;
announcements by the government relating to regulations that govern our industry;
sales of our Common Stock or other securities by us, or in the open market;
changes in the market valuations of other comparable companies; and
other events or factors, many of which are beyond our control, including those resulting from such events, or the prospect of such events, including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, such as the COVID-19 pandemic, and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our suppliers or result in political or economic instability.
There have recently been 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.
Certain shares previously issued and sold under our Third Amended and Restated La Rosa Holdings Corp. 2022 Agent Incentive Plan may have been sold in violation of federal and state securities laws and may be subject to rescission rights and other penalties, requiring us to repurchase shares sold thereunder.
During the period from December 31, 2024 to September 30, 2025, the Company mistakenly issued an aggregate 31 shares (as adjusted for the reverse stock split effected on July 7, 2025, January 26, 2026 and April 20, 2026) of restricted common stock to its contractors pursuant to Third Amended and Restated La Rosa Holdings Corp. 2022 Agent Incentive Plan (a part of the La Rosa Holdings Corp. 2022 Equity Incentive Plan, as amended), as free trading shares (the “Sales”). At the time of issuance of such securities, the Company mistakenly relied on the Registration Statement on Form S-8 (File No. 333-275118) filed by the Company with the SEC and declared effective upon such filing on October 20, 2023, while the shares issued in such Sales were not registered pursuant to such registration statement.
Because the registration statement did not cover the Sales, the Sales could be determined to be unregistered sales of securities and, in accordance with Section 5 of the Securities Act, direct purchasers in the Sales may have rescission rights pursuant to which they may be entitled to recover the amount paid for such shares, plus statutory interest, upon returning the shares to us within one year from the transaction date. In addition, we could be subject to enforcement actions or penalties and fines by federal and/or state regulatory authorities. We cannot predict the likelihood of any claims or actions being brought against us or the amount of any penalties or fines in connection with the Sales.
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.
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 may have violated Section 13(k) of the Exchange Act (implementing Section 402 of the Sarbanes-Oxley Act of 2002) and may be subject to sanctions as a result.
Section 13(k) of the Exchange Act provides that it is unlawful for a company that has a class of securities registered under Section 12 of the Exchange Act to, directly or indirectly, including through any subsidiary, extend or maintain credit in the form of a personal loan to or for any of its directors or executive officers. From February 2017 to July 2023, La Rosa Realty, LLC, a subsidiary of the Company, provided interest free, due on demand advances to La Rosa Insurance LLC, a company owned by our Chief Executive Officer, which may be deemed to be personal loans made by us to Mr. La Rosa that are not permissible under Section 13(k) of the Exchange Act. Issuers that are found to have violated Section 13(k) of the Exchange Act may be subject to civil sanctions, including injunctive remedies and monetary penalties, as well as criminal sanctions. During the fourth quarter of 2023, upon us completing our IPO, the Compensation Committee reviewed the advance and determined that the existing related party receivable would be charged as part of the Company’s chief executive officer’s annual bonus as specified in his employment agreement. No outstanding balance existed as of December 31, 2023. Notwithstanding, the imposition of any sanctions on us could have a material adverse effect on our business, financial position, results of operations or cash flows.
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 of 2002 (“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 accounting 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.
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 depends in part on the research and reports that securities or industry analysts publish about us or our business. As of the date of this annual report, 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.
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.
Risks Relating to the Restatement of the Prior Financial Statements
We have concluded that certain of our previously issued financial statements should not be relied upon and have restated them, which was time-consuming, expensive and could expose us to additional risks that could have a negative effect on us.
As discussed in the Explanatory Note of this Comprehensive Form 10-K and in Note 2, “Restatement of Previously Issued Consolidated Financial Statements” under Item 8 of this Comprehensive Form 10-K, we have concluded that the Prior Financial Statements should not be relied upon. We have restated our previously issued (i) audited consolidated financial statements as of and for the fiscal year ended December 31, 2024, included in the 2024 10-K, and (ii) unaudited condensed consolidated financial statements for the quarterly periods ended March 31, 2024, through September 30, 2025, included in the Form 10-Qs. The restatement process was time-consuming and expensive and could expose us to additional risks that could have a negative effect on us. In particular, we incurred substantial unanticipated expenses and costs, including audit, legal and other professional fees, in connection with the restatement of the Prior Financial Statements and the ongoing remediation of material weaknesses in our internal control over financial reporting related to the restatement (see Part II, Item 9A, Controls and Procedures of this Comprehensive Form 10-K for a description of these remediation measures). To the extent our remediation actions are not successful, we could be required to incur additional time and expense. Our management’s attention was also diverted from some aspects of the operation of our business in connection with the restatement of the Prior Financial Statements and these ongoing remediation efforts. In addition, the restatement and related matters could impair our reputation and could cause our counterparties to lose confidence in us. Each of these occurrences could have an adverse effect on our business, results of operations, financial condition and stock price.
The restatement of the Prior Financial Statements may lead to future stockholder litigation.
Lawsuits may be commenced against the Company and its officers and directors based in part or whole on allegations related to the restatement of the Prior Financial Statements. As with any substantial litigation, the Company expects to devote significant time, attention and resources to the defense of the litigation, which may have a material adverse effect on the Company even if the litigation is resolved in a manner favorable to the Company, and cannot predict when or how the litigation will be resolved or estimate what the potential loss or range of loss would be, if any.
If we continue to fail to maintain an effective system of disclosure controls and fail to maintain an effective system of internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the applicable listing standards of Nasdaq. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly and place significant strain on our personnel, systems and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Based upon evaluation of our Chief Executive Officer and Interim Chief Financial Officer as of December 31, 2025, our disclosure controls and procedures are ineffective, as we are a smaller reporting company with limited resources in our finance department, and we are in the process of establishing our procedures around our disclosure controls. We are continuing to develop our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the applicable time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.
In order to improve and maintain the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. In addition, changes in accounting principles or interpretations could also challenge our internal controls and require that we establish new business processes, systems and controls to accommodate such changes. We have limited experience with implementing the systems and controls necessary to operate as a public company, as well as adopting changes in accounting principles or interpretations mandated by the relevant regulatory bodies. Additionally, if these new systems, controls or standards and the associated process changes do not give rise to the benefits that we expect or do not operate as intended, it could adversely affect our financial reporting systems and processes, our ability to produce timely and accurate financial reports, or the effectiveness of internal control over financial reporting. Moreover, our business may be harmed if we experience problems with any new systems and controls that result in delays in their implementation or increased costs to correct any post-implementation issues that may arise.
Further, additional weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our business or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our Common Stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq.
Section 404 of the Sarbanes-Oxley Act requires that we include a report from management on the effectiveness of our internal control over financial reporting in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. Based on evaluation of our Chief Executive Officer and Interim Chief Financial Officer as of December 31, 2025, our management has identified material weaknesses primarily related to deficiencies in our overall control environment including limited accounting resources, inadequate segregation of duties, and the absence of formalized policies and procedures. In addition, the Company did not maintain effective controls over (i) significant accounting estimates and judgments, including the goodwill impairment assessment and the income tax provision prepared by external consultants, (ii) revenue recognition, including the determination of gross versus net presentation under ASC 606, which resulted in errors in previously issued financial statements and the restatement of the Prior Financial Statements, (iii) the preparation, review, and approval of its periodic SEC filings to ensure the completeness, accuracy, and consistency of financial disclosures, and (iv) controls and processes related to cybersecurity risk management. Management has therefore concluded that our internal controls over financial reporting are not effective at the reasonable assurance level.
Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until our first annual report filed with the SEC where we are an accelerated filer or a large accelerated filer. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could harm our business, financial condition, and results of operations and could cause a decline in the trading price of our Common Stock.
General Risks
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 present 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 gainunauthorized 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, multi-factor authentication, 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.
Claims for indemnification by our directors and officers may reduce our available funds to satisfysuccessful stockholder claimsagainst 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 severelyharm 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:
providing for a single class of directors where each member of the Board shall serve for a one-year term and may be elected to successive terms;
authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our Common Stock;
limiting the liability of, and providing indemnification to, our directors, including provisions that require the Company to advance payment for defending pending or threatenedclaims;
limiting the ability of our stockholders to call and bring business before special meetings of stockholders;
requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our Board;
controlling the procedures for the conduct and scheduling of the Board and stockholder meetings; and,
limiting the determination of the number of directors on our Board and the filling of vacancies or newly created seats on the Board to our Board then in office.
These provisions, alone or together, could delayhostile 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.
enables
best
A significant driver of our past growth, and we believe, our future growth is our ability to create revenue by requiring our agents and our franchisees’ agents to use business services that we provide. For example, all agents new to our Company are required to have a “coach” and to attend multi-day training sessions to learn the Company’s philosophy, technology, and business practices. Concurrently, the agent works with his or her coach in obtaining listings, working with consumers, and closing transactions. All these activities are run through our La Rosa Coaching, LLC, our subsidiary which teaches advanced techniques for team building, personal growth, and business development, which we believe will enhance our revenue at a nominal increase in cost to us. In addition, unlike other residential real estate brokerages, we encourage our sales agents to pursue commercial real estate transactions and require them to utilize the services of our commercial real estate company, La Rosa CRE, LLC.
Our agent centric methodology, our advanced technology, and ancillary services, such as property management, will enable us to organically grow our agent base with virtually no incremental cost. In environments with increasing mortgage rates and declining sales transactions, we believe our model is more attractive to real estate agents, who retain more of their commission proceeds compared to traditional brokerage models. In fact, we have organically increased our agent count by just over 31 percent from December 31, 2022 to December 31, 2025.
In order to continue to provide cutting edge technology and provide best-in-class coaching and education, we periodically review our pricing structure, including increasing our agent annual fees and monthly fees, the fixed transaction fee, technology and accounting fees, and property management fees. We maintain a competitive pricing structure within the industry while simultaneously providing the necessary tools, education and perpetual innovation.
To maximize the utility of our technological infrastructure, we anticipate acquiring additional brokerage firms that will increase our agent count. We also expect to acquire other complementary businesses, such as title and insurance agencies and a mortgage brokerage. We continue to evaluate opportunities to drive our near-term and long-term growth.
On October 12, 2023, we consummated our initial public offering (the “IPO”). Since then, we acquired majority ownership of the following franchisees of the Company: Nona Legacy Powered By La Rosa Realty, Inc. (formerly, La Rosa Realty Lake Nona Inc.), Horeb Kissimmee Realty, LLC, La Rosa Realty Georgia LLC, La Rosa Realty California, and La Rosa Realty Success LLC and 100% ownership of the following franchisees of the Company: La Rosa Realty Orlando, LLC, La Rosa Realty Premier, LLC, La Rosa CW Properties, LLC, La Rosa Realty North Florida LLC, La Rosa Realty Winter Garden LLC, BF Prime LLC, FPG Title Group, LLC (formerly, Nona Title Agency LLC), La Rosa Realty Lakeland LLC (DBA La Rosa Realty Prestige), La Rosa Realty Beaches LLC, and Baxpi Holdings LLC. In December 2023, we also formed our majority owned subsidiary La Rosa Realty Texas LLC. In December 2024, we opened our first office and wholly owned subsidiary in North Carolina, La Rosa Realty NC LLC. In January 2025, we formed LR Luxury, LLC, engaged mostly in the residential real estate brokerage business. In April 2025, we formed LR Agent Advance, LLC, offering a commission advancement program exclusively for La Rosa agents. In 2025, we also formed LR Realty Spain, S.L., our wholly owned subsidiary in Spain.
During the fiscal year ended December 31, 2025, in an effort to simplify our corporate structure, we dissolved Baxpi Holdings LLC, which was non-operational, La Rosa Realty NC LLC, which was not profitable, and La Rosa Realty Success LLC, agents of which were moved to La Rosa CW Properties LLC. In February 2026, we also sold our majority interests in Horeb Kissimmee Realty, LLC to the minority member of that entity.
Description of Our Revenues
Our financial results are primarily driven by the total number of sales agents in our Company, the number of sales agents closing residential real estate transactions, the number of sales agents utilizing our coaching services, the number of agents who work with our franchisees, and the number of properties under management. We grew our agent count by 18 percent from 2,581 as of December 31, 2024 to 3,050 as of December 31, 2025.
The majority of our revenue is derived from a stable set of fees paid by our brokers, franchisees, and consumers. We have multiple revenue streams, with the majority of our revenue derived from commissions paid by consumers who transact business with our franchisees’ agents, royalties paid by our franchisees, dues and technology fees paid by our sales agents, our franchisees, and our franchisees’ agents. Our major revenue streams come from such sources as: (i) residential real estate brokerage revenue, (ii) revenue from our property management services, (iii) franchise royalty fees, (iv) fees from the sale or renewal of franchises and other franchise revenue, (v) coaching, training and assistance fees, (vi) brokerage revenue generated transactionally on commercial real estate, (vii) fees generated from title services revenue and insurance and (viii) fees from our events and forums.
The majority of our revenue is derived from fees and dues based on the number of agents working under the La Rosa Realty brand. Due to the low fixed cost structure of both our Company and franchise models, the addition of new sales agents generally requires little incremental investment in capital or infrastructure. Accordingly, the number of commission producing sales agents in our Company and our franchisees is the most important factor affecting our results of operations and the addition of new agents can favorably impact our revenue and our earnings before interest, taxes, depreciation and amortization (“EBITDA”). Historically, the number of agents in the residential real estate industry has been highly correlated with overall home sale transaction activity. We believe that the number of agents and those that produce commissions in our network is the primary statistic that drives our revenue. Another major factor is the cyclicality of the real estate industry that has peaks and valleys depending on macroeconomic conditions that we cannot control. And finally, our revenues fluctuate based on the changes in the aggregate fee revenue per sales agent as a significant portion of our revenue is tied to various fees that are ultimately tied to the number of agents, including annual dues, continuing franchise fees, and certain transaction or service-based fees. Our revenue per agent also increases in other ways including when transaction sides and transaction sizes increase since a portion of our revenue comes from fees tied to the number and size of real estate transactions closed by our agents.
While the Company was not named as a defendant in any of the recent class action lawsuits allegingantitrustviolations, it is possible that it could be a litigant at some point in the future. Several of these lawsuits have been settled (see “Risk Factors - Adverse outcomes in litigation and regulatory actions against the NAR, other real estate brokerage companies and agents in our industry could adversely impact our financial results). These settlements can result in changes in the way real estate brokers are compensated for their services. Most notably, home sellers will no longer be required to pay buyer agent commissions which will result in lower buyer agent compensation. We cannot predict the full breadth of the outcome of these lawsuits but believe that they will result in a significant adverse effect on our financial condition and results of operations for the foreseeable future.
Key Factors Affecting our Performance
As a result of a number of factors, our historical results of operations may not be comparable to our results of operations in future periods, and our results of operations may not be directly comparable from period to period. Set forth below is a brief discussion of the key factors impacting our results of operations.
Seasonality
Our business is affected by the seasons and weather. The spring and summer seasons, when school is out, have typically resulted in higher sales volumes compared to fall and winter seasons. With the slowdown in the later months, we have experienced slower listing activity, fewer transaction closings and lower revenues and have seen more agent turnover as well. Bad weather or natural disasters also negatively impact listings and sales which reduces our operating income, net income, operating margins and cash flow. While this pattern is fairly predictable, there can be no assurance that it will continue. Moreover, with the impact of climate change, we expect more business disruptions in the coming years, many of which could be unpredictable and extreme.
Our revenues and operating margins will fluctuate in successive quarters due to a wide variety of factors, including seasonality, weather, health exigencies, holidays, national or international emergencies, the school year calendar’s impact on timing of family relocations, and changes in mortgage interest rates. This fluctuation may make it difficult to compare or analyze our financial performance effectively across successive quarters.
Inflation and Market Interest Rates
The benchmark 30-year fixed conforming mortgage rate rose to a peak of about 8% during the second half of 2023, according to Freddie Mac data. That interest rate then retreated to between 6.08% and 7.22% during 2024 and between 6.15% to 7.04% during 2025. Consequently, housing demand remained soft, prices are rising, consumer sentiment has weakened, and home sales are declining. The U.S. Federal Reserve continues to take action intended to address inflation. The Federal Reserve Board maintained the federal funds rate at 533 basis points from August of 2023 through mid-September 2024, when it was reduced to 483 basis points. In February 2026, the federal funds rate was 364 basis points. The fluctuations impact interest rates, which significantly contribute to mortgage rate adjustments. In February 2026, the existing home sales market decreased 1.2% compared to February 2025 according to the NAR. This decline had an adverse impact on consumer demand for our services, as consumers weighed the financial implications of selling or purchasing a home. Continuing poor housing market conditions would adversely affect our operating performance and results of operations.
Recent Legal Challenges to Sales Agents’ Commission Structure
Recent developments in the real estate industry have seen increased scrutiny and legal challenges related to the structure of real estate agent commissions. Legal actions and regulatory inquiries have been initiated to examine the fairness, transparency, and potential anticompetitive practices associated with the traditional commission model. Courts and regulatory bodies may be increasingly focused on ensuring transparency in commission structures, potentially leading to reforms that impact the earnings and business models of real estate professionals. Changes in legislation or legal precedents could impact the standard practices of commission-sharing between listing agents and buyer’s agents and may adversely affect our business model and revenues.
On October 31, 2023, in the matter of Burnett v. National Association of Realtors (U.S. District Court for the Western District of Missouri), a federal jury found the NAR and certain other remaining brokerage defendants liable for $1.8 billion in damages on claims that these companies conspired to artificially inflate brokerage commissions, which is in violation of federal antitrust law (the “Burnett Ruling”). The verdict was appealed on October 31, 2023. Additionally, certain other brokerage defendants settled with the plaintiffs, including both monetary and non-monetary settlement terms. That same day, the NAR, EXP World Holdings, Inc., Compass, Inc., Redfin Corporation, Weichert Realtors, United Real Estate, Howard Hann Real Estate Services, Douglas Elliman, Inc., The Keyes Company, Illustrated Properties, LLC, Baird & Warner, Inc., Real Estate One, Inc., and others were named as defendants in Gibson v. National Association of Realtors (U.S. District Court for the Western District of Missouri), alleging a similar fact pattern and antitrustviolations. On or about March 15, 2024, NAR agreed to settle the Burnett Ruling, along with a sister litigation, by agreeing to pay $418 million over approximately four years, and changing certain of its rules surrounding agent commissions. On November 26, 2024, the NAR Settlement was granted over objections, The final approval order is currently being appealed. If the NAR Settlement is sustained on appeal, it is expected to resolveclaimsagainst the NAR and certain companies related to this matter. The terms of the NAR Settlement provide that NAR has agreed to put in place a new rule prohibiting offers of compensation on the MLS, as well as adopt new rules requiring written agreements between buyers and buyers’ agents.
On March 22, 2024, real estate brokerage company Compass Inc. (“Compass”) announced that it will pay $57.5 million as part of a proposed settlement to resolve lawsuits over real estate commissions and agreed to change its business practices to ensure clients can more easily understand how brokers and agents are compensated for their services. Compass’s motion for final approval of the settlement agreement was granted on October 31, 2024 and the settlement agreement is now effective. The final approval ruling was appealed by certain class members that objected to the settlement and is now pending before the United States Circuit Court of Appeals for the Eighth Circuit. In the same litigation, the court granted final approval of multiple additional settlements, including (i) an $8.62 million settlement on June 25, 2025 involving The Keyes Company, Illustrated Properties, LLC, Baird & Warner, Inc., Real Estate One, Inc., and other defendants, and (ii) a $42 million settlement on February 5, 2026 involving William Raveis Real Estate Inc., Hanna Holdings Inc., Windermere Real Estate Services Company Inc., Exit Realty Corp. International, Exit Realty Corp. USA, and William L. Lyon & Associates Inc.
These settlements may result in changes in the way real estate brokers are compensated for their services. Most notably, home sellers may no longer be required to pay buyer agent commissions which would result in lower buyer agent compensation. We cannot predict the full breadth of the outcome of these lawsuits but believe that they may result in a significant adverse effect on our financial condition and results of operations for the foreseeable future.
The Company will continue to monitor ongoing and similar antitrustlitigationagainst our competitors. However, the litigation and its ramifications could cause unforeseenturmoil in our industry, the impacts of which could have a negative effect on us as an industry participant.
Recent Accounting Pronouncements
See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” of the Notes to the consolidated financial statements in Part II, Item 8 of this Comprehensive Form 10-K.
Results of Operations
Revenue
Year Ended December 31,
Change
(restated)
Real Estate Brokerage Services (Residential)
Franchising Services
Coaching Services
Property Management (1)
Real Estate Brokerage Services (Commercial)
Title Settlement and Insurance
Total Revenue
Management identified that certain property management fee revenue for the year ended December 31, 2024 had been incorrectly recorded on a gross basis. Revenue should have been presented on a net basis reflecting only the fee retained by LRPM. See Note 2 Restatement of Previously Issued Consolidated Financial Statements.
Real Estate Brokerage Services (Residential)
Residential real estate services revenue increased $9.5 million, or 17%, in the year ended December 31, 2025 against the comparable prior year period. The increase was primarily related to $9.8 million of revenue due to a full year of income from the seven acquisitions completed in fiscal year 2024.
Franchising Services
Franchising services revenue decreased $199 thousand, or 61%, in the year ended December 31, 2025 against the comparable prior year period. The decrease is primarily attributable to the six franchise acquisitions during fiscal year 2024, which no longer contribute to franchising royalty fees. Our remaining franchisees saw a slight increase in revenue due to market conditions in our residential services stabilizing in 2024, which partially offset the decline in franchising royalty fee revenue. Franchising royalties would be expected to decline as the acquisition of additional franchises continues.
Coaching Services
Coaching services revenue declined by $125 thousand, or 22%, in the year ended December 31, 2025 against the comparable prior year period. This is attributable to a shift in focus by management in the agent plans to focus on agent count growth that does not require coaching. This was done in anticipation of boosting transaction volume.
Property Management
Property management revenue increased $47 thousand, or 13%, in the year ended December 31, 2025 against the comparable prior year period primarily due to increases in application fees despite a reduction in total properties managed.
Real Estate Brokerage Services (Commercial)
Residential real estate services revenue increased $366 thousand, or 112%, in the year ended December 31, 2025 against the comparable prior year period. The increase was driven mostly organically due to a change in the segments management.
Title Settlement and Insurance
Revenues increased $215 thousand, or 259%, in the year ended December 31, 2025 against the comparable prior year period. The increase is due to reporting full year of revenue for the first time since this segment was acquired in August of 2024.
Gross Proft and Gross Margin
Year Ended December 31,
Change
Real Estate Brokerage Services (Residential)
Gross Margin
Franchising Services
Gross Margin
Coaching Services
Gross Margin
Property Management
Gross Margin
Real Estate Brokerage Services (Commercial)
Gross Margin
Title Settlement and Insurance
Gross Margin
Total Gross Profit
Total Gross Margin
Real Estate Brokerage Services (Residential)
The percentage of gross margin remained the same year over year. Gross margin related to residential real estate brokerage services increased $924 thousand, or 17%, in the year ended December 31, 2025 against the comparable prior year period. The increase was driven in part by an increase in revenue of $9.5 million and a related cost of revenue increase of $8.6 million primarily from the seven acquisitions completed during fiscal year 2024. Therefore, gross margin remained relatively constant year-over-year.
Franchising Services
The percentage of gross margin declined by 114.1%. Gross margin related to franchising services declined by $52 thousand. The decline is attributable to the acquisitions of the seven acquisitions in 2024 related to franchises. As a result, this decreased the franchising revenues and costs though not necessarily proportionally due to changes in aspects of cost of sales.
Coaching Services
The percentage of gross margin declined by 5.8%. Gross margin related to coaching services declined by $82 thousand, primarily due to a change in operations which do not require the coaching services for certain plans, to expediate onboarding, therefore this resulted in the overall reduction of coaching revenues and cost of sales throughout 2025 as compared to 2024.
Property Management
The percentage of gross margin declined by 77.5%. Gross margin related to property management services declined by $23 thousand the year ended December 31, 2025 against the comparable prior year period. The increase in property management costs is related to fixed costs of sales that did not change while the number of properties under management declined.
Real Estate Brokerage Services (Commercial)
The percentage of gross margin declined year over year. Gross margin related to commercial real estate brokerage services increased $33 thousand, or 37%, in the year ended December 31, 2025, against the comparable prior year period. The change was driven in part by an increase in revenue of $366 thousand and a related cost of revenue increase of $333 thousand primarily from organic growth.
Title Settlement and Insurance
The percentage of gross margin increased by 259%. Gross margin related to title settlement and insurance increased by $215 thousand for the year ended December 31, 2025 against the comparable prior year period due to a full year of activity as this segment was acquired in August of 2024.
Selling, General and Administrative Expense
Year Ended December 31,
Change
Sales and Marketing
Payroll and benefits
Rent and other
Professional fees
Office
Technology
Insurance, training and other
Public company costs
Amortization and depreciation
Total SG&A Expenses
Selling, general and administrative costs increased $3.8 million, or 32%, in the year ended December 31, 2025 against the comparable prior year period. Sales and marketing costs increased as the Company worked to expand and grow the business.
Payroll and benefits increased $1.7 million or 40%, in the year ended December 31, 2025 against the comparable prior year period primarily due to benefits offered and headcount increases and certain one-time bonuses paid to our executives.
Rent and occupancy increased $472 thousand or 44% in the year ended December 31, 2025 against the comparable prior year period due to the seven acquisitions in 2024.
Professional fees increased $1.6 million, or 103%, in the year ended December 31, 2025 against the comparable prior year period. This increase was primarily due to professional and legal fees incurred related to financing transactions entered into in 2025.
Office and technology costs increased by $242 thousand, or 66%, in the year ended December 31, 2025 against the comparable prior year period. This is primarily due to one-time costs related to upgrading our accounting and internally developed customer resource applications.
Insurance, training and other costs decreased $54 thousand, or 9%, in the year ended December 31, 2025 against the comparable prior year period. This is due to new favorable contracts and using alternative less costly providers for trainings.
Public company costs decreased $470 thousand in the year ended December 31, 2025 against the comparable prior year period. This is due to a reduction in cost related to investor relations and cost related to acquisition activity.
Additionally, as part of total operating cost the Company recognized in December 31, 2025 and 2024, there were impairments of intangible and goodwill for $6,911,134 and $787,438, respectively, due to triggering conditions.
Stock-based compensation
We incurred stock-based compensation of $5.0 million in 2025 based mostly upon restricted stock units granted to consultants ($1.8), agents and employees ($0.5 million) and option grants and restricted Common Stock awards to our CEO pursuant to the terms of his employment agreement and 2022 Plan ($2.7 million).
We incurred stock-based compensation of $4.7 million in 2024 based upon restricted stock units granted to agents and employees ($0.8 million), consultants who provided various services to the company ($1.4 million), an option grant to our CEO pursuant to the terms of his employment agreement ($2.1 million) and an option grant to our COO pursuant to her employment agreement ($400,000).
Other Income (Expense), Net
Other expense, net for the year ended December 31, 2025 was $10.1 million compared to other expense, net of $3.2 million for the comparable prior year. The 2025 expense was mostly due to $15.4 million in expenses related to our convertible debt and associated warrants, partially off-set by a $4.0 million gain on the extinguishment of debt and a $0.9 million change in the fair value of derivative liabilities.
Liquidity and Capital Resources
On December 31, 2025 and 2024 we had cash of $3.1 million and $1.4 million, respectively, on hand.
On February 4, 2025, the Company and an institutional investor entered into the securities purchase agreement, pursuant to which the Company issued to the 2025 Investor: (i) the Initial Note in the original principal amount of $5,500,000 maturing on February 4, 2027; and (ii) sixteen (16) Incremental Warrants, each to purchase additional Notes in an original principal amount up to $2,500,000 at an exercise price of $2,256,250, in substantially the same form as the Initial Note. The purchase price paid by the 2025 Investor under the agreement for the Initial Note and Incremental Warrants was $4,963,750, of which $910,250, $496,191 and $148,724 were used to assume or extinguish other debt for net proceeds of $3,408,585. Remaining funds from the offering were used by the Company to pay-off certain indebtedness of the Company, pay certain outstanding fees and expenses (including expenses of the offering, and fees payable to the placement agent and advisors), acquisitions and general corporate purposes. Of the proceeds from the offering, $354,450 was paid to satisfy, in full, the remaining balance of the standard merchant cash advance agreements with Cedar Advance, LLC, $340,421 was paid to satisfy, in full, the remaining balance of the standard merchant cash advance agreement with Arin Funding, LLC and $910,250 was paid to satisfy, in full, the remaining balance of the senior secured promissory notes with an accredited investor. On June 18, 2025, the Company and 2025 Investor entered into the Exchange Agreement, pursuant to which (among other things) the 2025 Investor surrendered and exchanged all of its Incremental Warrants in exchange for 6,000 shares of the Series B Preferred Stock. The 2025 Investor fully converted the Initial Note, and the Company issued the 2025 Investor 8,215 in 2025 and 750 shares in the first quarter of 2026 for an aggregate of 8,965 shares of Common Stock upon such conversion. See Note 8 – Borrowings to the accompanying consolidated financial statements for further disclosure.
In addition to the debt pay downs during the year ended December 31, 2025, the Company eliminated all warrants tied to the investor senior secured promissory notes outstanding as of December 31,2024. Two of the three warrants were exercised on a cashless basis, with the third warrant being bought back by the Company in the amount of $379,083, fully eliminating these unfavorable ratchet warrants.
During the year ended December 31, 2025, the Company received proceeds from the sale of 3,871 shares of Common Stock pursuant to its sales agreement with AGP (“ATM Agreement”) of $7,496,361. The Company paid the sales agent compensation with respect to sale of such shares in the amount of $105,885.
During the year ended December 31, 2025, the Company sold 500 shares of Common Stock pursuant to the Facility for aggregate proceeds of $111,902.
The Company is subject to the risks and challenges associated with companies at a similar stage of development. These include dependence on key individuals, successful development and marketing of its offerings, and competition with larger companies with greater financial, technical, and marketing resources. Furthermore, during the period required to achieve substantially higher revenue in order to become profitable, the Company will require additional funds that might not be readily available or might not be on terms that are acceptable to the Company. Until such time that the Company fully implements its growth strategy, it expects to continue to generate operating losses in the foreseeable future, mostly due to corporate overhead and costs of being a public company. As such, the Company anticipates that its existing working capital, including cash on hand, and cash generated from operations will not be sufficient to meet projected operating expenses for the foreseeable future through at least twelve months from the issuance of the consolidated financial statements. The Company will be required to raise additional capital to service its promissory notes, to repay the principal balance of each of the notes, and to fund ongoing operations.
We have incurred recurring net losses, and our operations have not provided net positive cash flows. In view of these matters, there is substantial doubt about our ability to continue as a going concern. We plan on continuing to expand via acquisition, which will help achieve future profitability, and we have plans to raise capital from outside investors, as we have done in the past, to fund operating losses and to provide capital for further business acquisitions. We cannot provide any assurance that we can successfully raise the capital needed on favorable terms, if at all.
Summary of Cash Flows
For the year ended
December 31,
Net Cash Used in Operating Activities
Net Cash Used by Investing Activities
Net Cash Provided by Financing Activities
Cash Flows Used in Operating Activities
For the year ended December 31, 2025, net cash used in operating activities was $7.5 million, which was primarily attributable to the net loss of $26.5 million, excluding stock-based compensation and changes in operating assets and liabilities. Non-cash provided primarily included: Loss on issuance of senior secured convertible note and warrants, change on fair value of convertible note and warrants, gain on settlement of incremental warrants, amortization and depreciation and debt discount, change in fair value of derivatives, impairment of goodwill and non-cash lease and other expenses totaling $19.0 million.
For the year ended December 31, 2024, net cash used in operating activities was $3.0 million, which was primarily attributable to the net loss of $8.2 million, excluding stock-based compensation and changes in operating assets and liabilities. Non-cash provided primarily included: amortization and depreciation and debt discount, change in fair value of derivatives, impairment of goodwill, loss on extinguishment of debt and non-cash lease and other expenses totaling $3.6 million.
Cash Flows Used in Investing Activities
For the year ended December 31, 2025, there was no cash impact from investing activities.
For the year ended December 31, 2024, net cash used in investing activities was $69 thousand. This was the result of the purchase of property and equipment and cash acquired through acquisitions.
Cash Flows Provided by Financing Activities
For the year ended December 31, 2025, net cash provided by financing activities was $8.9 million. This was driven by cash flows from debt and equity financing that provided $11.0 million in proceeds. These proceeds were offset by $2.2 million of payments and advances on debt and other financing instruments,
For the year ended December 31, 2024, net cash provided by financing activities was $4.2 million. This was driven by cash flows from debt and equity financing that provided $6.6 million in proceeds. These proceeds were offset by $2.4 of payments and advances on debt and other financing instruments,
Off-Balance Sheet Arrangements
On December 31, 2025, we did not have any 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, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities. 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 that is material to stockholders.
Critical Accounting Estimates
A critical accounting estimate is one that is both important to the portrayal of a company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Use of Estimates. The preparation of financial statements in accordance with generally accepted accounting principles in the U.S. requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The financial statements in this report include estimates based on currently available information and our judgment as to the outcome of future conditions and circumstances. Changes in the status of certain facts or circumstances could result in material changes to the estimates used in the preparation of the financial statements and actual results could differ from the estimates and assumptions. The Company’s significant estimates in these financial statements are listed below:
Revenue Recognition
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.
Goodwill and Intangible Assets
Goodwill is tested for impairment at least annually in the fourth quarter of our fiscal year. We first perform a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount, and, if so, we then quantitatively compare the fair value of our reporting units to their carrying amount. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not impaired. If the carrying amount of a reporting unit exceeds its fair value, we then record an impairmentloss equal to the difference, up to the carrying value of goodwill. The carrying values of identifiable intangible assets are reviewed for recoverability on a quarterly basis. The facts and circumstances considered include the recoverability of the cost of other intangible assets from future undiscounted cash flows to be derived from the use of the asset or asset group. It is not possible for us to predict the likelihood of any possible future impairments or, if such an impairment were to occur, the magnitude of any impairment. Intangible assets are subject to amortization over the expected period of economic benefit to us. We evaluate whether events or circumstances have occurred that warrant a revision to the remaining useful lives of intangible assets. In cases where a revision is deemed appropriate, the remaining carrying amounts of the intangible assets are amortized over the revised remaining useful life.
Business Combinations
The allocation of the purchase price for acquisitions requires use of accounting estimates and judgments to allocate the purchase price to the identifiable tangible and intangible assets acquired, including franchise agreements, agent relationships, existing real estate listings, and non-compete agreements and liabilities assumed based on their respective fair values. The estimates we make include expected cash flows, expected cost savings, and the appropriate weighted average cost of capital. We complete these assessments as soon as practical after the acquisition closing dates. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.
Stock-Based Compensation
We use the fair value method of accounting for our stock options and restricted stock units (“RSUs”) granted to employees, contractors and consultants to measure the cost of services received in exchange for the stock-based awards. The fair value of stock option awards with only service conditions is estimated on the grant date using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires inputs such as the risk-free interest rate, expected term and expected volatility. These inputs are subjective and generally require significant judgment. The fair value of RSUs is measured on the grant date based on the prior day closing fair market value of our Common Stock. The resulting cost is recognized over the period during which an employee is required to provide service in exchange for the awards, usually the vesting period. Stock-based compensation expense is recognized on a straight-line basis, net of actual forfeitures in the period.
As we accumulate additional employee stock-based awards data over time and as we incorporate market data related to our Common Stock, we may calculate significantly different volatilities and expected lives, which could materially impact the valuation of our stock-based awards and the stock-based compensation expense that we will recognize in future periods.
Income Taxes
We are subject to taxes in the United States. Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We make these estimates and judgments about our future taxable income that are based on assumptions that are consistent with our future plans. Tax laws, regulations and administrative practices may be subject to change due to economic or political conditions including fundamental changes to the tax laws. As of December 31, 2025, we had recorded a full valuation allowance on our net U.S. deferred tax assets because we expect that it is more likely than not that our U.S. deferred tax assets will not be realized. Should the actual amounts differ from our estimates, the amount of our valuation allowance could be materially impacted.
