UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
(Mark One)
For the fiscal year ended
or
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject
to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the issuer is a
shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐
No
The aggregate market value of the voting held
by non-affiliates of the registrant as of June 28, 2024, the last business day of the registrant’s most recently completed
second fiscal quarter, was $
As of May 12, 2025, the registrant had
DOCUMENTS INCORPORATED BY REFERENCE
None.
EXPLANATORY NOTE
This Form 10-K/A is being filed solely for the purpose of amending (i) “Item 8. Financial Statements and Supplementary Data” of Part II of our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the Securities and Exchange Commission (the “SEC”) on April 2, 2025 (the “Original Form 10-K”), to reflect related party transactions involving an invoice financing arrangement (the “Financing Arrangement”) with Sea Easy Capital Pte. Ltd., a Singapore-based entity, that were not expressly identified in the financial statements and related footnotes thereto included in the Original Form 10-K; and (ii) “Item 13. Certain Relationships and Related Party Transactions” of Part III of the Original 10-K to include the required information of the Financing Arrangement therein.
Specifically, this Form 10-K/A (i) corrects the amount reflected in the balance sheet line item “Short term loans – related parties – current portion” by increasing such amount by $146,900 to reflect the Financing Arrangement; (ii) corrects the amount reflected in the balance sheet line item “Short term loans – unrelated parties – current portion” by decreasing such amount by $146,900 to remove the Financing Arrangement from such line item; (iii) includes disclosure in “Note 10 – Related Party Transactions” to reflect the Financing Arrangement; and (iv) includes the required information of the Financing Arrangement in “Item 13. Certain Relationships and Related Party Transactions.” The effect of the changes described herein did not impact total assets, total liabilities, or total stockholders’ equity (deficit) in the consolidated balance sheet, nor did it impact the consolidated statements of operations and comprehensive (loss) income, consolidated statements of cash flows, or consolidated statements of stockholders’ equity (deficit) for the reported periods. Rather, the effect of the changes described herein only impacted the presentation of the Financing Arrangement from “Short term loans – unrelated parties – current portion” to “Short term loans – related parties – current portion” in the consolidated balance sheet.
In addition, pursuant to the rules of the SEC, “Item 15. Exhibits and Financial Statement Schedules” of Part III of the Original Form 10-K has been amended to contain currently dated certifications from our Principal Executive Officer and Principal Financial Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 and filed as Exhibits 31.1, 31.2 and 32.1 hereto, as well as an updated Consent of Independent Registered Public Accounting Firm filed as Exhibit 23.1.
Except for the foregoing information that was specifically amended under “Item 8. Financial Statements and Supplementary Data” and “Item 13. Certain Relationships and Related Party Transactions” as provided herein, this Form 10-K/A and the disclosures contained herein have not been updated to reflect events, results or developments that occurred after the date of the Original Form 10-K nor does it change any other disclosures contained in the Original Form 10-K. Accordingly, this Form 10-K/A should be read in conjunction with the Original Form 10-K and our filings made with the SEC subsequent to the filing of the Original Form 10-K.
Unless otherwise stated or the context otherwise requires, the terms “we,” “us,” “our” and the “Company” refer to reAlpha Tech Corp. and its subsidiaries, as applicable.
PART II
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required hereunder are included on the pages immediately following “Item 15. Exhibits and Financial Statement Schedules” appearing on page F-1.
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PART III
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Policy for Approval of Related Party Transactions
Our board of directors has adopted a related-person transaction policy that sets forth our procedures for the identification, review, consideration and approval or ratification for the review of any transaction, arrangement or relationship in which we are a participant, the amount involved exceeds $120,000 and one of our executive officers, directors, director nominees or each person whom we know to beneficially own more than 5% of our outstanding shares of common stock (a “5% stockholder”) (or their immediate family members), each of whom we refer to as a “related person,” has a direct or indirect material interest.
If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related-person transaction,” the related person must report the proposed related-person transaction to the Company’s general counsel. The policy calls for the proposed related-person transaction to be reviewed by and if deemed appropriate approved by, the audit committee of our board of directors after full disclosure of the related-person interest in the transaction. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the audit committee will review and, in its discretion, may ratify the related-person transaction. The policy also permits the chair of the audit committee to review, and if deemed appropriate approve, proposed related-person transactions that arise between audit committee meetings, subject to ratification by the audit committee at its next meeting. Any related-person transactions that are ongoing in nature will be reviewed annually.
A related-person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the audit committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the committee will review and consider:
| ● | the related person’s interest in the related-person transaction; |
| ● | the approximate dollar amount involved in the related-person transaction; |
| ● | the approximate dollar amount of the related person’s interest in the transaction without regard to the amount of any profit or loss; | |
| ● | whether the transaction was undertaken in the ordinary course of our business; |
| ● | whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party; | |
| ● | the purpose of, and the potential benefits to us of, the related-person transaction; and | |
| ● | any other information regarding the related-person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction. |
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The audit committee may approve or ratify the transaction only if the audit committee determines that, under all of the circumstances, the transaction is not inconsistent with our best interests. The audit committee may impose any conditions on the related-person transaction that it deems appropriate.
The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by the compensation committee of our board of directors in the manner specified in its charter.
Related Party Transactions
Except as disclosed herein, no director, executive officer, stockholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since January 1, 2022, in which the amount involved in the transaction exceeds the lesser of $120,000 or one percent (1%) of the average of our total assets at the year-end for the last two completed fiscal years.
myAlphie LLC
On December 31, 2022, the Company entered into that certain Membership Interest Purchase Agreement, dated as of December 31, 2022, which was amended pursuant to a First Side Letter Amendment on March 11, 2023 and subsequently a Second Side Letter Amendment, effective as of May 17, 2023 (as amended, the “myAlphie Agreement”), between us and Turnit Holdings, LLC, an Ohio limited liability company (the “Buyer”). The Buyer was an indirect subsidiary of Crawford Hoying, which is owned and partially controlled by Brent Crawford, former chairman of the Company’s board of directors and – at the time – more than 5% beneficial ownership of the Company’s common stock. The myAlphie Agreement provided for the Buyer’s acquisition of all the issued and outstanding membership interests of myAlphie, LLC, subsequent to its conversion from a Delaware corporation to a Delaware limited liability company.
Prior to the execution of the myAlphie Agreement and pursuant to our short-form merger in accordance with Section 253 of the DGCL, we held myAlphie LLC as a subsidiary, along with (a) all its technology and intellectual property, and (b) two on-demand promissory notes in the amounts of $975,000 and $4,875,000 payable to CH REAlpha Investments, LLC, and CH REAlpha Investments II, LLC, respectively (together, the “Promissory Notes”). CH REAlpha Investments, LLC, and CH REAlpha Investments II, LLC are also managed by Mr. Crawford. Upon closing of the myAlphie Agreement (a) the Company sold all of its interests in myAlphie LLC, and (b) the Buyer assumed the Company’s remaining liabilities and outstanding obligations under the Promissory Notes.
Sea Easy Capital Pte. Ltd. Loans
During the year ended December 31, 2024, AiChat Pte Ltd., a subsidiary of the Company since July 12, 2024 (“AiChat”), utilized its existing invoice financing arrangement with Sea Easy Capital Pte. Ltd., a Singapore-based entity (“SEA”), pursuant to which AiChat financed an aggregate of $320,510 (Singapore Dollar (“SGD”) 417,000) of its invoices (as defined below) through SEA’s online platform (the “SEA platform”). Mala Swaminathan (the wife of our director, Balaji Swaminathan) is the co-owner of SEA and she controls SEA by virtue of her ownership or control of a majority (51%) of the capital stock of SEA. Mr. Swaminathan also serves on the advisory board of SEA.
The SEA platform allows AiChat to act as an account receivable invoice seller, under which AiChat is able to upload account receivable invoices (each, an “invoice”) from time to time to the SEA platform for approval by SEA, with each such invoice denoting a dollar amount to be payable by AiChat in accordance with the SEA platform’s terms and conditions (the “terms and conditions”), subject to limits, if any, imposed by SEA on the aggregate value of invoices AiChat may upload and offer for sale. Upon approval, these invoices can be purchased at a discount to its face value based on the payable amounts thereunder (the “invoice purchase price”), by SEA or an authorized third-party (collectively, the “purchasers”) through the SEA platform in accordance with the terms and conditions. After such purchase, the purchaser becomes obligated to fund such invoice purchase price to AiChat directly in the form of a loan (each, a “loan”), minus any fees or interests payable thereunder, and all rights, title and interest in such invoice are assigned to such purchaser at the time of the purchase. Once an invoice is purchased, AiChat provides notice to the customer to which the invoice relates to with the payment instructions to direct such customer to send funds to a designated payment account in order to repay for the loans.
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These loans bear a fixed interest rate of 16.5% per annum, and are each payable to the purchaser 89 to 120 days after the date of the respective loan. Additionally, in accordance with the terms and conditions, to the extent AiChat defaults on these loans, or is deemed to have defaulted in accordance with the terms and conditions, then, on and at any time after the occurrence of such default, the purchaser is entitled request the immediate repurchase by AiChat of the applicable invoice and amounts thereunder, suspend SEA platform access, as well as declare that any fees and all other amounts accrued or outstanding under the loans be immediately due and payable and/or take any other actions, including legal action, to recover such amounts due and payable. If AiChat fails to repurchase the applicable invoice upon written demand by the relevant purchaser, then AiChat is liable to such purchaser for an amount equal to the outstanding amounts under the invoice, minus any paid amounts by AiChat, plus a default interest rate of 10% and liquidated damages. Further, if AiChat fails to pay any amounts outstanding under the loans when due, and such failure to pay continues beyond any grace period provided by SEA, then AiChat is required to pay a default interest rate on such outstanding amounts from the expiration of the grace period provided, if any, of 10%, or any other default interest rate determined by the purchaser, until the date of full payment. AiChat and the purchaser are each able to terminate any loan documents by giving written notice of at least 30 days to the other, provided that any and all outstanding amounts are fully paid prior to such termination. The terms and conditions further provide for representations and warranties for any user of the SEA platform, including limitation of liability for SEA and its affiliates, indemnification of such parties by the user of the SEA platform, confidentiality provisions and others.
During the year ended December 31, 2024, we repaid SEA an aggregate amount of $160,255 of the principal amount outstanding for the loans, and we accrued and paid $8,234 in interest payments to SEA in connection with these loans during such period. Further, in accordance with the terms and conditions, we paid $39,912 in fees to SEA for using the SEA platform. Since then, and as of April 2, 2025, SEA has loaned an additional $160,255 (SGD 208,500) to AiChat, and we have accrued interest in the amount of $6,138 in connection with the loans made during such period. As of April 2, 2025, we had an aggregate amount of $155,481 in principal outstanding for these loans and we have not defaulted on any of these loans as of such date.
Director Independence
Our common stock is listed on Nasdaq under the symbol “AIRE”. Subject to the controlled company exemption described above, the listing rules of Nasdaq generally require that a majority of the members of a listed company’s board of directors be independent. In addition, the listing rules generally require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and governance committees be independent subject to the controlled company exemptions described above, as applicable to the compensation and governance committees.
Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or be an affiliated person of the listed company or any of its subsidiaries.
Our board of directors undertook a review of its composition, the composition of its committees and the independence of our directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each non-employee director concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that none of our directors have relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the rules of Nasdaq and Rule 10A-3 and Rule 10C-1 under the Exchange Act. Only Monaz Karkaria and Giri Devanur are not independent under Nasdaq’s independence standards.
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PART IV
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
| (a) | (1) Consolidated Financial Statements |
The financial statements filed as part of this report are listed and indexed in the Index to Consolidated Financial Statements stating on page F-1 located in this Annual Report on Form 10-K/A.
| (a) | (2) Financial Statement Schedules |
Financial statement schedules are omitted because they are not required, not applicable or because the required information is shown in the consolidated financial statements or notes thereto.
| (a) | (3) Exhibits |
Required exhibits are incorporated by reference or are filed with this report.
| (b) | The exhibits set forth in the following index of exhibits are filed or incorporated by reference as a part of this Annual Report on Form 10-K/A: |
5
6
7
8
| 31.1* | Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2* | Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1*** | Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 97** | Clawback Policy (previously filed as Exhibit 97.1 of Form 10-KT filed with the SEC on March 12, 2024). | |
| 101.INS* | Inline XBRL Instance Document. | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104* | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101). |
| * | Filed herewith. |
| ** | Previously filed. |
| *** | Furnished herewith. |
| + | Indicates management contract or compensatory plan or arrangement. |
| # | Schedules, exhibits and similar attachments to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request. |
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REALPHA TECH CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Board of Directors
reAlpha Tech Corp. and Subsidiaries
Dublin, Ohio
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of reAlpha Tech Corp. and Subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for the year ended December 31, 2024, the eight-month period ended December 31, 2023 and the year ended April 30, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for the year ended December 31, 2024, the eight-month period ended December 31, 2023 and the year ended April 30, 2023, in conformity with accounting principles generally accepted in the United States of America.
Continuation as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in the notes to the consolidated financial statements, the Company has experienced recurring losses from operations and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in the notes. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Other Matter – Discontinued Operations
As described in Note 16 to the consolidated financial statements, during 2024 the Company suspended real estate acquisition operations of Roost Enterprises, Inc. (“Rhove”), and presented the related amounts as discontinued operations in the consolidated financial statements. Our opinion is not modified with respect to this matter.
/s/GBQ Partners LLC
We have served as the Company’s auditor since 2021
April 2, 2025, except for Note 10 and 11, as to which the date is May 13, 2025
F-2
reAlpha Tech Corp. and Subsidiaries
Consolidated Balance Sheet
December 31, 2024 and December 31, 2023
| December 31, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Receivable from related parties | ||||||||
| Prepaid expenses | ||||||||
| Current assets of discontinued operations | ||||||||
| Other current assets | ||||||||
| Total current assets | $ | $ | ||||||
| Property and Equipment, at cost | ||||||||
| Property and equipment, net | $ | $ | ||||||
| Other Assets | ||||||||
| Investments | ||||||||
| Other long term assets | ||||||||
| Intangible assets, net | ||||||||
| Long term assets of discontinued operations | ||||||||
| Goodwill | ||||||||
| Capitalized software development - work in progress | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Related party payables | ||||||||
| Short term loans - related parties -current portion | ||||||||
| Short term loans - unrelated parties -current portion | ||||||||
| Accrued expenses | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Deferred liabilities, current portion | ||||||||
| Total current liabilities | $ | $ | ||||||
| Long-Term Liabilities | ||||||||
| Deferred liabilities, net of current portion | ||||||||
| Mortgage and other long term loans - related parties - net of current portion | ||||||||
| Mortgage and other long term loans - unrelated parties - net of current portion | ||||||||
| Note payable, net of discount | ||||||||
| Other long term liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Preferred stock, $ | ||||||||
| Common stock ($ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders’ equity (deficit) of reAlpha Tech Corp. | ||||||||
| Non-controlling interests in consolidated entities | ||||||||
| Total stockholders’ equity (deficit) | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
F-3
reAlpha Tech Corp. and Subsidiaries
Consolidated Statements of Operations and Comprehensive (Loss) Income
For the Year Ended December 31, 2024 and Eight Months Ended December 31, 2023 and Year Ended April 30, 2023
| For the Year Ended | For the Eight Months Ended | For the Year Ended | ||||||||||
| December 31, 2024 | December 31, 2023 | April 30, 2023 | ||||||||||
| Revenues | $ | $ | $ | |||||||||
| Cost of revenues | ||||||||||||
| Gross Profit | ||||||||||||
| Operating Expenses | ||||||||||||
| Wages, benefits and payroll taxes | ||||||||||||
| Repairs & maintenance | ||||||||||||
| Utilities | ||||||||||||
| Travel | ||||||||||||
| Dues & subscriptions | ||||||||||||
| Marketing & advertising | ||||||||||||
| Professional & legal fees | ||||||||||||
| Depreciation & amortization | ||||||||||||
| Impairment of intangible assets | ||||||||||||
| Other operating expenses | ||||||||||||
| Total operating expenses | ||||||||||||
| Operating Loss | ( | ) | ( | ) | ( | ) | ||||||
| Other Income (Expense) | ||||||||||||
| Gain on sale of myAlphie | ||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ||||||
| Other expense, net | ( | ) | ( | ) | ( | ) | ||||||
| Total other (expense) income | ( | ) | ( | ) | ||||||||
| Net Loss from continuing operations before income taxes | ( | ) | ( | ) | ( | ) | ||||||
| Income tax benefit (expense) | ( | ) | ||||||||||
| Net Loss from continuing operations | ( | ) | ( | ) | ( | ) | ||||||
| Discontinued operations (Rhove) | ||||||||||||
| Loss from operations of discontinued Operations | ( | ) | ( | ) | ( | ) | ||||||
| Impairment of goodwill and intangible assets of discontinued operations | ( | ) | ||||||||||
| Loss on discontinued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Net Loss after income taxes | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Less: Net (Loss) Income Attributable to Non-Controlling Interests | ||||||||||||
| Net Loss Attributable to Controlling Interests | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Other comprehensive income | ||||||||||||
| Foreign currency translation adjustments | ||||||||||||
| Total other comprehensive gain | ||||||||||||
| Comprehensive Loss Attributable to Controlling Interests | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Basic and diluted loss per share | ||||||||||||
| Continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Discontinued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Net Loss per share — basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Weighted-average outstanding shares — basic | ||||||||||||
| Weighted-average outstanding shares — diluted | ||||||||||||
F-4
reAlpha Tech Corp. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
For the Year Ended December 31, 2024 and Eight Months Ended December 31, 2023 and Year Ended April 30, 2023
| Accumulated | ReAlpha Tech Corp. | |||||||||||||||||||||||||||||||
| Additional | Other | and | Non- | Total | ||||||||||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Comprehensive | Subsidiaries | Controlling | Stockholders’ | ||||||||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Equity | Interests | Equity | |||||||||||||||||||||||||
| Balance at April 30, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Shares issued through Reg A offering | ||||||||||||||||||||||||||||||||
| Reg A offering costs | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Distribution to syndicate members | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Shares issued for acquisition of Rhove | ||||||||||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||||||||||
| Shares issued in former parent | ||||||||||||||||||||||||||||||||
| RTC India - Non controlling interest | - | |||||||||||||||||||||||||||||||
| Cancellation of shares in the former parent | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Recapitalization of shares | ||||||||||||||||||||||||||||||||
| Downstream merger transaction | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance at April 30, 2023 | $ | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Shares issued through follow on listing | ||||||||||||||||||||||||||||||||
| Issuance of warrants | ||||||||||||||||||||||||||||||||
| Issuance of stock options for Rhove acquisition | - | |||||||||||||||||||||||||||||||
| Reg A offering costs | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Follow on listing offering costs | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| RTC India - Non controlling interest | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Other Comprehensive gain | - | |||||||||||||||||||||||||||||||
| Shares issue - BMN acquisition | ||||||||||||||||||||||||||||||||
| Shares issue - AiChat10X Pte | ||||||||||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||||||||||
| Shares issued to employees & directors | ||||||||||||||||||||||||||||||||
| Share issued to AiChat employees | ||||||||||||||||||||||||||||||||
| Hyperfast - Non Controlling Interests | - | |||||||||||||||||||||||||||||||
| RTC India - Non Controlling Interest | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||||||||||
F-5
reAlpha Tech Corp. and Subsidiaries
Consolidated Statements of Cash Flows
For the Year Ended December 31, 2024 and Eight Months Ended December 31, 2023 and Year Ended April 30, 2023
| For the Year Ended | For the Eight Months Ended | For the Year Ended | ||||||||||
| December 31, 2024 | December 31, 2023 | April 30, 2023 | ||||||||||
| Cash Flows from Operating Activities: | ||||||||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Stock based compensation - employees | ||||||||||||
| Stock based compensation - services | ||||||||||||
| Legal & professional expenses | ||||||||||||
| Amortization of loan discounts and origination fees | ||||||||||||
| Write-off of capitalized software costs | ||||||||||||
| Impairment of goodwill and intangible assets | ||||||||||||
| Commitment fee expenses | ||||||||||||
| Loss on sale of properties | ( | ) | ( | ) | ||||||||
| Gain on previously held equity | ( | ) | ||||||||||
| Gain on sale of myAlphie | ( | ) | ||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | ( | ) | ||||||||||
| Receivable from related parties | ( | ) | ( | ) | ||||||||
| Payable to related parties | ( | ) | ||||||||||
| Prepaid expenses | ( | ) | ||||||||||
| Other current assets | ( | ) | ( | ) | ( | ) | ||||||
| Accounts payable | ||||||||||||
| Accrued expenses | ( | ) | ||||||||||
| Deferred liabilities | ||||||||||||
| Total adjustments | ( | ) | ||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ( | ) | ||||||
| Cash Flows from Investing Activities: | ||||||||||||
| Proceeds from sale of properties | ||||||||||||
| Additions to property, plant & equipment | ( | ) | ( | ) | ||||||||
| Cash paid to acquire business | ( | ) | ( | ) | ( | ) | ||||||
| Cash paid for equity method investment | ( | ) | ||||||||||
| Cash used for additions to capitalized software development and intangibles | ( | ) | ( | ) | ( | ) | ||||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||||||
| Cash Flows from Financing Activities: | ||||||||||||
| Proceeds from issuance of debt | ||||||||||||
| Payments of debt | ( | ) | ( | ) | ||||||||
| Deferred financing costs | ( | ) | ||||||||||
| Proceeds from issuance of common stock | ||||||||||||
| Offering costs paid on issuance of common stock | ( | ) | ||||||||||
| Net cash provided by financing activities | ||||||||||||
| Net (decrease) increase in cash | ( | ) | ( | ) | ||||||||
| Cash - Beginning of Period | ||||||||||||
| Cash - End of Period | $ | $ | $ | |||||||||
| Supplemental disclosure of cash flow information | ||||||||||||
| Interest expense | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
F-6
reAlpha Tech Corp.
Notes to Consolidated Financial Statements
Note 1 - Organization and Description of Business
reAlpha Tech Corp. and Subsidiaries (“we,”
“us,” “our,” the “Company,” “reAlpha” or the “Registrant”) were initially
incorporated with the name reAlpha Asset Management, Inc. in the State of Delaware on
reAlpha has transitioned into a technology-driven, integrated services company, leveraging AI to enhance the homebuying experience and streamline real estate transactions. At the core of its strategy is the reAlpha platform, an AI-powered solution designed to simplify the home purchase process while generating revenue through mortgage brokerage and title and escrow services.
To strengthen its AI capabilities, reAlpha has acquired Naamche and AiChat (each as defined below), expanding its software development expertise and AI-driven engagement tools. Naamche enhances reAlpha platform functionality, while AiChat improves customer interaction of their clients through AI-powered automation.
reAlpha operates through its key subsidiaries, including reAlpha Realty, AiChat, Be My Neighbor, Hyperfast, each playing a role in its vertically integrated ecosystem. These subsidiaries enable reAlpha to provide real estate brokerage, and closing services, which enables us to capture value across multiple stages of the transaction process.
With its focus on AI technology and integrated real estate services, reAlpha is creating a scalable, end-to-end, tech-enabled model for customers to buy a home. Through strategic acquisitions and innovations in its platform, reAlpha is expanding its market presence and diversifying revenue streams across real estate, mortgage services, and AI-powered solutions.
The Company’s head office is located at 6515 Longshore Loop, Suite 100, Dublin, OH 43017.
Note 2 - Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Form 10-K”). These financial statements include all adjustments, which consist of normal recurring accruals, deemed necessary by management for a fair presentation of the Company’s financial position and results of operations for the reported period.
F-7
This note on significant accounting policies is provided to aid in the understanding of the Company’s financial statements. The policies adhere to U.S. GAAP and have been consistently applied in the preparation of both the annual and interim financial statements. The financial statements reflect the operations, assets, and liabilities of the Company as a whole.
The consolidated balance sheet as of December 31, 2024, has been derived from the Company’s audited consolidated financial statements for that date. It is essential that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s previous Transition Report on Form 10-KT for the eight-months ended December 31, 2023. The results of operations for the fiscal year are not necessarily indicative of the results to be expected for any future periods.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the financial statements not misleading have been included. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Concentration of Credit Risks
Financial instruments that potentially subject
the Company to a significant concentration of credit risk primarily consist of cash, cash equivalents, and accounts receivable. As of
December 31, 2024, the Company’s cash was held by financial institutions that management believes have acceptable credit. The Federal
Deposit Insurance Corporation insures balances up to $
In accordance with Accounting Standards Codification (“ASC”) 326, Investments - Financial Instruments—Credit Losses, (“ASC 326”) the Company applies the Current Expected Credit Losses (“CECL”) model to estimate expected credit losses over the lifetime of financial assets measured at amortized cost. The Company has determined that accounts receivable (“AR”) is the only financial asset subject to CECL assessment, as it does not have any loan receivables, held-to-maturity debt securities, or other financial instruments requiring CECL evaluation.
The Company’s CECL methodology incorporates historical loss experience, current economic conditions, and forward-looking adjustments to assess credit risk and expected loss reserves.
As of December 31, 2024, the Company has experienced
no historical credit losses on accounts receivable. A significant portion of the Company’s accounts receivable is attributable to
AiChat, its Singapore subsidiary, as its customers are large multinational corporations with strong financial stability and a consistent
payment history. However, given macroeconomic risks, including interest rate fluctuations and regulatory considerations, the Company has
applied a
F-8
The Company will continue to monitor macroeconomic conditions and reassess the adequacy of its CECL reserve on a quarterly basis. Future adjustments may be made as economic conditions evolve and additional credit risk factors are identified.
As of December 31, 2024, the Company’s assessment under ASC 326 confirms that its accounts receivable remains recoverable, with no material impairments beyond the CECL provision recorded.
| Accounts receivable | ||||
| Opening Balance, January 1, 2024 | $ | |||
| Current-period provision for expected credit losses(1) | ||||
| Release of allowance for expected credit losses | ||||
| Ending Balance, December 31, 2024 | $ | |||
| (1) |
Equity Method Investment
The Company accounts for investments in entities in which the Company has significant influence over the entity’s financial and operating policies, but does not control, using the equity method of accounting. The equity method investment is initially recorded at cost, and subsequently increased for capital contributions and allocations of net income, and decreased for capital distributions and allocations of net loss. Equity in net income (loss) from the equity method investment is allocated based on the Company’s economic interest. The equity method investment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If it is determined that a loss in value of the equity method investment is other than temporary, an impairment loss is measured based on the excess of the carrying amount of an investment over its estimated fair value.
We recorded the Xmore AI investment of $
Capitalized Software Development Costs
The Company adheres to ASC 350-40 for the capitalization of software development costs. Under these standards, costs incurred during the application development stage—including coding, testing, and the development of software functionalities—are eligible for capitalization if they relate to significant improvements that substantially enhance the software’s functionality or extend its service capacity. These costs include direct labor, third-party services, and other expenses directly attributable to the software’s development. Conversely, expenditures for minor enhancements and routine software maintenance are expensed as incurred, consistent with specific US GAAP requirements.
Amortization of capitalized software development costs begins when the software is ready for its intended use and placed in service. These costs are amortized over the software’s estimated useful life, which is assessed by considering factors such as the expected future benefits to the Company and the rate of technological change.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable assets acquired and liabilities assumed. Goodwill is tested for impairment at the reporting unit level at least annually, as of December 31, or more frequently when events occur and circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Accounting requirements provide that a reporting entity may perform an optional qualitative assessment on an annual basis to determine whether events occurred or circumstances changed that would more likely than not reduce the fair value of a reporting unit below its carrying amount. If an initial qualitative assessment identifies that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or the optional qualitative assessment is not performed, a quantitative analysis is performed. The quantitative goodwill impairment test is performed by calculating the fair value of the reporting unit and comparing it to the reporting unit’s carrying amount. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired. However, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill recorded on the reporting unit.
F-9
As of December 31, 2024, on our annual goodwill testing date, we conducted a quantitative impairment test for our reporting unit, Rhove. This evaluation was necessitated by operational challenges that led to prompting a re-evaluation of the fair value of the reporting units compared to their carrying amounts.
The results of this impairment test indicated that the fair value of Rhove was less than its carrying amount, necessitating an impairment charge. This impairment reflects adjustments to the carrying values on our consolidated balance sheet as of December 31, 2024, and has been recognized in our financial results for the fiscal year to accurately reflect the reduced value of the reporting unit. These financial statements include all necessary adjustments, consisting of the noted impairment loss, to present fairly the financial position and results of operations of the company.
Definite-lived Intangible Assets
ASC 350 on Intangibles – Goodwill and Other; Intangible assets are definite-lived intangible assets such as technology, customer contracts and trademarks resulted from business acquisitions. The valuation and classification of these intangible assets and determination of useful lives involves judgments and significant estimates. These Identifiable intangible assets resulting from the acquisitions of entities accounted for using the purchase method of accounting are amortized over their estimated useful lives in a manner that best reflects the economic benefits of the intangible asset using the straight-line method and estimated useful lives. We periodically review the estimated useful lives of our definite-lived intangible assets and identify events or changes in circumstances that may indicate revised estimated useful lives.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606 when control of services is transferred to the customer. On a standalone basis, reAlpha generates revenue by providing monthly support services to Turnit related to the myAlphie platform. Revenue is recognized over time as the services are performed and the customer benefits from them. reAlpha recognized rental revenue upon customer control of the asset and recorded deferred revenue for book sales until the delivery obligation was met, both in accordance with ASC 606.
AiChat, which provides an AI conversational platform, adheres to the revenue recognition standards outlined in ASC 606. The license fee for platform access and consulting services are recognized as distinct performance obligations, reflecting their ability to provide value independently within our customer contracts. For the “right to access” license fee, revenue is recognized over the duration of the subscription period, as control and benefits are provided continuously to the customer. Consulting services are recognized based on the nature of the engagement. Revenue for one-time services, such as project setups, is recognized at the point in time of delivery. For ongoing consulting services, revenue is recognized over time, reflecting the continuous benefit transferred to the customer throughout the service period. This approach ensures that revenue recognition accurately matches the ongoing provision of access and the timing of consulting services, as per the guidelines of ASC 606.
Be My Neighbor, a mortgage brokerage company, complies with ASC 606 by recognizing revenue at the point of loan closing. This moment marks the transfer of control of the loan to the borrower, capturing the completion of Be My Neighbor’s primary service—successfully securing a loan. All services, including loan origination, application processing, and credit assessment, contribute to this culminating event. Revenue is therefore recognized only when the loan closes, ensuring that the exact revenue amount is determinable based on the loan amount and agreed commission, accurately reflecting the completion of all related performance obligations.
F-10
Naamche, a company that provides services related to the development of technology, adheres to ASC 606 for revenue recognition, primarily from its service-based contracts. This approach involves detailed identification of contracts with customers, determination of distinct performance obligations within these contracts, and accurate allocation of transaction prices to these obligations. Revenue is recognized as Naamche satisfies each performance obligation, typically over time, reflecting the ongoing delivery and customer consumption of its tech-driven services.
Income Taxes
We account for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires recognition of deferred tax assets and liabilities for the expected tax consequences of our future financial and operating activities. Under ASC 740, we determine deferred tax assets and liabilities based on the temporary difference between the financial statement and tax bases of assets and liabilities using the tax rates in effect for the year in which we expect such differences to reverse. If we determine that it is more likely than not that we will not generate sufficient taxable income to realize the value of some or all of our deferred tax assets (net of our deferred tax liabilities), we establish a valuation allowance offsetting the amount we do not expect to realize. We perform this analysis each reporting period and reduce our measurement of deferred taxes if the likelihood we will realize them becomes uncertain.
The deferred tax assets that we record each period depend primarily on our ability to generate future taxable income in the United States. Each period, we evaluate the need for a valuation allowance against our deferred tax assets and, if necessary, adjust the valuation allowance so that net deferred tax assets are recorded only to the extent we conclude it is more likely than not that these deferred tax assets will be realized. If our outlook for future taxable income changes significantly, our assessment of the need for, and the amount of, a valuation allowance may also change.
We are also required to evaluate and quantify other sources of taxable income, such as the possible reversal of future deferred tax liabilities, should any arise, and the implementation of tax planning strategies. Evaluating and quantifying these amounts is difficult and involves significant judgment, based on all of the available evidence and assumptions about our future activities.
Fair Value of Financial Instruments
ASC 825, Disclosure about Fair Value of Financial Instruments, (“ASC 825”) requires certain disclosures regarding the fair value (“FV”) of financial instruments. The carrying amounts of accounts receivable, other current assets and prepaid expenses, accounts payable, other payables and accrued liabilities and due to Company affiliates approximate their FVs because of the short-term nature of the instruments. The management of the Company is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial statements.
Note 3 - Going Concern
We assess going concern uncertainty in our consolidated financial statements to determine if we have sufficient cash and cash equivalents on hand and working capital, including available loans or lines of credit, if any, to operate for a period of at least 12 months from the date our consolidated financial statements are issued. As part of this assessment, based on conditions that are known and reasonably knowable to us, we consider various scenarios, forecasts, projections, and estimates, and we make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and our ability to delay or curtail those expenditures or programs, if necessary, among other factors.
Management has reviewed our financial condition, focusing on liquidity sources and upcoming financial obligations. This assessment shows that our short-term obligations exceed the resources available under current operational plans that raise a substantial doubt about our ability to continue as a going concern for the next 12 months after the date that these consolidated financial statements are issued. Additionally, while recent acquisitions are expected to increase operational expenses, we anticipate that they will increase revenue streams, contributing positively to our financial outlook. We believe these acquisitions will enhance product offerings and market reach, which we anticipate will drive higher revenue in the coming months. However, the revenue from our recent acquisitions and from our technology platforms do not yet offset our current obligations and expenses. Management anticipates continuing operating losses for the next 12 months due to growth initiatives, management expects to continue raising capital through additional debt and/or equity financings to fund its operations. Management believes that these actions will effectively mitigate the conditions that raise substantial doubt about our ability to continue as a going concern and to ultimately achieve profitability. However, management cannot provide assurance that their plans to add revenue streams, raise revenue or raise additional capital will be successful, and whether we will ultimately achieve profitability, become cash flow positive, or raise additional debt and/or equity capital. If we are unable to raise our revenues sufficiently to cover our obligations and expenses or raise additional capital in the near future, management expects that we will need to curtail operations, seek additional capital on less favorable terms, and/or pursue other remedial measures.
As of December 31, 2024, the Company holds $
F-11
Note 4 - Income Taxes
The Company generated a worldwide pre-tax loss
of $
Pre-tax book income/(loss) has been recorded in the following jurisdictions:
| Tax Years Ended | ||||||||||||
| 12/31/24 | 12/31/23 | 4/30/23 | ||||||||||
| US | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Foreign | ( | ) | ||||||||||
| From continuing operations | ( | ) | ( | ) | ( | ) | ||||||
| From discontinued operations (US) | ( | ) | ( | ) | ( | ) | ||||||
| Total pre-tax income/(loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
The Company recorded federal and state income
tax expense for the period ended December 31, 2024 of ($
| Tax Years Ended | ||||||||||||
| 12/31/24 | 12/31/23 | 4/30/23 | ||||||||||
| Current: | ||||||||||||
| Federal | $ | ( | ) | $ | $ | |||||||
| State | ( | ) | ||||||||||
| Foreign | ||||||||||||
| ( | ) | |||||||||||
| Deferred: | ||||||||||||
| Federal | ||||||||||||
| State | ||||||||||||
| Foreign | ||||||||||||
| Income tax expense (benefit) for continuing operations | ( | ) | ||||||||||
| Income tax expense (benefit) for discontinued operations | ||||||||||||
| Total | $ | ( | ) | $ | $ | |||||||
The Company follows the Financial Accounting Standards
Board (“FASB”) ASC 740, for the computation and presentation of its tax provision.
| Tax Years Ended | ||||||||||||
| 12/31/24 | 12/31/23 | 4/30/23 | ||||||||||
| U.S. federal taxes at statutory rate | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| State tax | ( | ) | ||||||||||
| Foreign Taxes | ||||||||||||
| Regulation-A Costs | ||||||||||||
| Stock Registration Expenses | ||||||||||||
| Goodwill Impairment | ||||||||||||
| Non-Controlling Interest | ||||||||||||
| Other Permanent Differences | ||||||||||||
| Other | ( | ) | ||||||||||
| Change in valuation allowance | ( | ) | ||||||||||
| Total | $ | ( | ) | $ | $ | |||||||
F-12
Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes.
| Tax Years Ended | ||||||||||||
| 12/31/24 | 12/31/23 | 4/30/23 | ||||||||||
| Deferred tax assets: | ||||||||||||
| Net operating loss carryforwards | $ | $ | $ | |||||||||
| Charitable Contributions | ||||||||||||
| Section 174 Capitalization | ||||||||||||
| Property and equipment | ||||||||||||
| Gross deferred tax assets | ||||||||||||
| Valuation allowance | ( | ) | ( | ) | ( | ) | ||||||
| Net deferred tax assets | $ | $ | $ | |||||||||
| Deferred tax liabilities | ||||||||||||
| Property and equipment | ( | ) | ( | ) | ( | ) | ||||||
| Intangibles | ( | ) | ( | ) | ( | ) | ||||||
| Gross deferred tax liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Net deferred tax liabilities | ( | ) | ( | ) | ||||||||
| Net deferred taxes | $ | $ | $ | |||||||||
The Company accounts for income taxes under the
asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences
of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities
on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in
effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities
is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that
these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and
negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning
strategies, and results of recent operations. The valuation allowance changed by $
For the period ended December 31,
2024, we had a total carryover of Federal Net Operating Losses (“NOLs”) of $
The Internal Revenue Code of 1986, as amended,
imposes restrictions on the utilization of net operating losses and tax credits in the event of an “ownership change” of a
corporation. Accordingly, a company’s ability to use net operating losses and tax credits may be limited as prescribed under Internal
Revenue Code Section 382 and 383 (“IRC Section 382”). Events which may cause limitations in the amount of the net operating
losses or tax credits that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more
than
F-13
It is the Company’s policy to include penalties and interest expense in income tax expense. There was no interest expense or penalties related to unrecognized tax benefits recorded through December 31, 2024.
The Company’s major tax jurisdictions are the United States, India, Nepal and Singapore. All of the Company’s tax years will remain open for examination by the Federal and State tax authorities for three and four years, respectively, from the date of utilization of the net operating loss or research and development credit. The Company does not have any tax audits pending in the United States.
‘The Inflation Reduction Act of 2022 was
signed into law August 16, 2022, and includes significant legislation addressing taxes, inflation, climate change and renewable energy
incentives, and healthcare. Key tax provisions include a
Change to Internal Revenue Code Section 174 under
the 2017 Tax Cuts and Jobs Act went into effect during 2022. The revised code no longer permits a deduction for research and development
expenditures in the tax year that such costs incurred. Instead, such costs must be capitalized and amortized over
The Organization for Economic Co-operation and
Development (the “OECD”) has issued various proposals that would change long-standing global tax principles. These proposals
include a two-pillar approach to global taxation (BEPS 2.0/ Pillar Two), focusing on global profit allocation and a global minimum tax
rate. On December 12, 2022, the European Union member states agreed to implement the OECD’s global corporate minimum tax rate of
| 12/31/24 | 12/31/23 | |||||||
| A. Valuation Allowance Increase | $ | 2,428,348 | $ | |||||
| B. Federal NOL Carryforward | 22,085,100 | |||||||
| C. City of Dublin, OH NOL Carryforward | 14,232,690 | |||||||
| D. State of Ohio NOL Carryforward | 18,753,731 | |||||||
Note 5 - Business Combinations
Acquisition of Naamche Inc. and Naamche Inc. Pvt Ltd.
On
The purchase price consisted of (i) a $
F-14
The table below represents the final purchase price allocation to total assets acquired and liabilities assumed and the associated estimated useful lives as of the acquisition date.
| Initial Amounts Recognized as of the acquisition date | Measurement Period Adjustment | Final Purchase Price Allocation | ||||||||||
| Cash & Cash Equivalents | $ | $ | $ | |||||||||
| Accounts Receivable | ( | ) | ||||||||||
| Other Current Assets | ||||||||||||
| Net Property Plant & Equipment | ||||||||||||
| Goodwill(1) | ( | ) | ||||||||||
| Intangible assets | ||||||||||||
| Accounts Payable | ( | ) | ||||||||||
| Accrued Expenses | ( | ) | ( | ) | ||||||||
| Dividend Payable | ( | ) | ( | ) | ||||||||
| Long Term Loans | ( | ) | ( | ) | ||||||||
| Net assets acquired | $ | $ | ( | ) | $ | |||||||
| (1) |
The determination of the fair value for the acquired business employed the income approach, specifically the discounted cash flow (“DCF”) method. This method involves assessing the present value of anticipated future cash flows from the acquired business. These cash flows are discounted at the weighted average cost of capital (“WACC”), which represents the necessary return on the combined entity’s equity and debt. The WACC is weighted by the respective proportions of equity and debt in the overall capital structure.
For the fair valuation of trademarks and trade names, the relief from royalty method was applied. Customer and other relationships were valued through the multi-period excess earnings model (“MPEEM”), which calculates the present value of excess earnings attributed to these relationships over their estimated remaining useful life. Assembled workforce is not recognized separately from goodwill, as it lacks separability and contractual nature.
The final purchase price allocation includes $
The purchase price allocation to identifiable intangible assets acquired subject to amortization consists of the following:
| Estimated Useful Life (in years) | Gross Value | Accumulated Amortization | Net Book Value | |||||||||||||
| Definite Lived Intangible Assets: | ||||||||||||||||
| Trademarks and trade names | $ | $ | $ | |||||||||||||
| Customer and other relationships | ||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | |||||||||||||
F-15
We estimate amortization expense for the next five years and beyond will be as follows:
| Years Ending December 31: | Amount | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
Acquisition of AiChat Pte. Ltd.
On July 12, 2024, we entered into a Business Acquisition
and Financing Agreement (the “Business Acquisition Agreement”) with AiChat Pte. Ltd. (“AiChat”), AiChat10X Pte.
Ltd., and Kester Poh Kah Yong, pursuant to which we acquired
The total purchase price to acquire
The table below represents the final purchase price allocation to total assets acquired and liabilities assumed and the associated estimated useful lives as of the acquisition date.
| Final Purchase Price Allocation | ||||
| Cash & cash equivalents | $ | |||
| Accounts receivable | ||||
| Other current assets | ||||
| Net property plant & equipment | ||||
| Goodwill | ||||
| Intangible assets | ||||
| Accounts payable | ( | ) | ||
| Accrued expenses | ( | ) | ||
| Other current liabilities | ( | ) | ||
| Debt assumed | ( | ) | ||
| Net assets acquired | $ | |||
The determination of the fair value for the acquired business employed the income approach, specifically the DCF method. This method involves assessing the present value of anticipated future cash flows from the acquired business. These cash flows are discounted at the WACC, which represents the necessary return on the combined entity’s equity and debt. The WACC is weighted by the respective proportions of equity and debt in the overall capital structure.
For the fair valuation of developed technology, the relief from royalty method was applied. The estimation of the economic useful life of these assets took into account factors outlined in ASC 350. Trademarks and trade names fair value was determined using the relief from royalty method. Customer and other relationships were valued through MPEEM, which calculates the present value of excess earnings attributed to these relationships over their estimated remaining useful life. Assembled workforce is not recognized separately from goodwill, as it lacks separability and contractual nature.
F-16
The final purchase price allocation includes $
Additionally, as part of the acquisition of AiChat,
we committed to purchase
The purchase price allocation to identifiable intangible assets acquired subject to amortization consists of the following:
| Estimated Useful Life (in years) | Gross Value | Accumulated Amortization | Net Book Value | |||||||||||||
| Definite Lived Intangible Assets: | ||||||||||||||||
| Developed technology | $ | $ | $ | |||||||||||||
| Trademarks and trade names | ||||||||||||||||
| Customer and other relationships | ||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | |||||||||||||
We estimate amortization expense for the next five years and beyond will be as follows:
| Years Ending December 31: | Amount | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
Acquisition of Debt Does Deals, LLC (d/b/a Be My Neighbor)
On September 8, 2024, we entered into a Membership
Interest Purchase Agreement (the “MIPA”) with Debt Does Deals, LLC (d/b/a Be My Neighbor) (“Be My Neighbor” or
“BMN”), a Texas-based mortgage brokerage, and its sellers, Christopher Bradley Griffith and Isabel Williams (collectively,
the “Sellers”). In accordance with the MIPA, we acquired
The purchase price was $
F-17
The table below represents the final purchase price allocation to total assets acquired and liabilities assumed and the associated estimated useful lives as of the acquisition date.
| Initial Amounts Recognized as of the acquisition date | Measurement Period Adjustment | Final Purchase Price Allocation | ||||||||||
| Cash & cash equivalents | $ | $ | - | $ | ||||||||
| Accounts receivable | ||||||||||||
| Goodwill(1) | ||||||||||||
| Intangible assets | ||||||||||||
| Accounts payable | ( | ) | ( | ) | ||||||||
| Other current liabilities | ( | ) | ( | ) | ||||||||
| Net assets acquired | $ | $ | $ | |||||||||
| (1) |
The determination of the fair value for the acquired business employed the income approach, specifically the DCF method. This method involves assessing the present value of anticipated future cash flows from the acquired business. These cash flows are discounted at the WACC, which represents the necessary return on the combined entity’s equity and debt. The WACC is weighted by the respective proportions of equity and debt in the overall capital structure.
For the fair valuation of trademarks and trade names the relief from royalty method was applied. Assembled workforce is not recognized separately from goodwill, as it lacks separability and contractual nature.
The final purchase price allocation includes $
The purchase price allocation to identifiable intangible assets acquired subject to amortization consists of the following:
| Estimated Useful Life (in years) | Gross Value | Accumulated Amortization | Net Book Value | |||||||||||||
| Definite Lived Intangible Assets: | ||||||||||||||||
| Trademarks and trade names | $ | $ | $ | |||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | |||||||||||||
We estimate amortization expense for the next five years and beyond will be as follows:
| Years Ending December 31: | Amount | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
F-18
Acquisition of Hyperfast Title, LLC
On July 24, 2024, we acquired
Acquisition of USRealty, LLC
In November 2024, the Company entered into agreements related to the acquisition of USRealty Brokerage Solutions, LLC and an investment in Unreal Estate Inc.
As part of these agreements the Company agreed
to provide $
On March 19, 2025, the Company entered into a
Mutual Settlement and Release Agreement (the “Settlement Agreement”) with Unreal Estate Inc. (“Unreal Estate”),
resolving certain claims and disputes related to the previously disclosed Membership Interest Purchase Agreement, Letter Agreement, and
convertible promissory note (collectively, the “Agreements”). Pursuant to the Settlement Agreement, the Company agreed to
pay Unreal Estate a one-time cash amount of $
The $
Note 6 - Property and equipment, net
| 1. |
| a. |
| Accumulated | Net | |||||||||||
| Cost | Depreciation | Investment | ||||||||||
| Computer | $ | ( | ) | $ | ||||||||
| Furniture and fixtures | ( | ) | ||||||||||
| Vehicles | ( | ) | ||||||||||
| Total investment in property & equipment | $ | $ | ( | ) | $ | |||||||
F-19
| 2. | Investments in property and equipment consisted of the following as of December 31, 2023 |
| a. |
| Accumulated | Net | |||||||||||
| Cost | Depreciation | Investment | ||||||||||
| Computer | ( | ) | $ | |||||||||
| Furniture and fixtures | ( | ) | $ | |||||||||
| Total investment in property & equipment | $ | $ | ( | ) | $ | |||||||
| b. |
| Accumulated | Net | |||||||||||
| Cost | Depreciation | Investment | ||||||||||
| Land | $ | $ | $ | |||||||||
| Buildings and building improvements | ( | ) | $ | |||||||||
| Furniture and fixtures | ( | ) | $ | |||||||||
| Total investment in real estate | $ | $ | ( | ) | $ | |||||||
The Company recorded depreciation expenses of
$
Note 7 - Capitalized Software Development costs, work in progress
As of December 31, 2024, the Company continues to assess the carrying amount of capitalized software for impairment, considering expected future benefits and cash flows to determine recoverability.
| December 31, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||
| Gross carrying amount | Additions | Impaired(1) | Reclassified to Intangibles & Expenses (2) | Net carrying value | Gross carrying amount | Additions | Net carrying value | |||||||||||||||||||||||||
| Capitalized Software Development costs, work in progress | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||||||
| (1) |
| (2) |
F-20
Note 8 - Goodwill and Intangible Assets
Goodwill and intangible assets are primarily the result of business acquisitions. Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable assets acquired and liabilities assumed. Goodwill is tested for impairment at the reporting unit level at least annually, as of December 31, or more frequently when events occur and circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
During the measurement period, the Company recorded
an adjustment of $
Additionally, the Company assessed the Rhove acquisition for impairment and determined that an impairment charge was necessary. The impairment evaluation considered factors such as changes in expected future cash flows and market conditions affecting the acquired assets. The impairment expense has been recognized in the financial statements accordingly.
Changes in the carrying amount of goodwill were as follows:
| Technology Services | Rental Business | Total | ||||||||||
| Balance at January 1, 2024 | $ | $ | $ | |||||||||
| Goodwill acquired, net of purchase price adjustments (1) | ||||||||||||
| Goodwill impairment | ( | ) | ( | ) | ||||||||
| Goodwill measurement period adjustment | ||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | |||||||||
| (1) |
The components of intangible assets, all of which are finite-lived, are as follows:
| December 31, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||
| Gross carrying amount | Additions | Impaired | Accumulated amortization | Net carrying value | Gross carrying amount | Accumulated amortization | Net carrying value | |||||||||||||||||||||||||
| Definite-life Intangibles: | ||||||||||||||||||||||||||||||||
| Developed technology | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Trademarks and trade names | ||||||||||||||||||||||||||||||||
| Customer relationships | ( | ) | ||||||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Following this reclassification, during the fourth
quarter of 2024, the Company capitalized an additional
F-21
The Company recorded amortization expenses of
$
The following table outlines the estimated future amortization expense related to intangible assets held as of December 31, 2024:
| Years Ending December 31: | Amount | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
Note 9 - Notes Payable
On August 14, 2024, we entered into a note purchase
agreement with Streeterville Capital, LLC (“Lender”) pursuant to which we issued and sold a secured promissory note in the
original principal amount of $
The Company had the following outstanding notes payable as of December 31, 2024 and December 31, 2023:
a. Summary of Notes payable:
| December 31, 2024 | December 31, 2023 | |||||||
| Secured promissory note to Streeterville Capital, LLC, $ | $ | $ | ||||||
| Less: Unamortized debt issuance costs & Original issue discount | ( | ) | ||||||
| Total Notes payable | $ | $ | ||||||
As of December 31, 2024, accrued interest was
$
Note 10 - Related Party Transactions
Loans from Related Parties
Related party transactions involve loans provided to AiChat, our subsidiary, by Kester Poh, a director of AiChat, and Balaji Swaminathan, a member of our board of directors. All transactions were conducted on terms consistent with those offered to unrelated third parties.
During the year ended December 31, 2024, AiChat entered
into various financing arrangements with Sea Easy Capital Ltd. (“SEA”). SEA is a Singapore-based entity that the spouse of
Balaji Swaminathan, a member of our board of directors, controls by virtue of her ownership or control of a majority (
F-22
As of December 31, 2024, the balance due to Kester
Poh under the loans was $
Similarly, as of December 31, 2024, the balance
due to Mr. Swaminathan under the loans is $
a.
| Average Interest Rate as of December 31, 2024 | December 31, 2024 | December 31, 2023 | ||||||||||
| Term Loan Facilities | % | $ | $ | |||||||||
| Less: Interest Reserve | ( | ) | $ | |||||||||
| Total Debt | $ | $ | ||||||||||
b.
| Maturity Year | Average Interest Rate as of December 31, 2024 | December 31, 2024 | December 31, 2023 | |||||||||||||
| Term Loan Facilities | % | |||||||||||||||
| Less: Interest Reserve | ( | ) | ||||||||||||||
| $ | $ | |||||||||||||||
Note 11 - Short Term Loans to Unrelated Parties
Short-Term Loans consisted of the following as of December 31, 2024, and December 31, 2023:
a. Summary of Short-Term Loans to Unrelated Parties
| Average Interest Rate as of December 31, 2024 | December 31, 2024 | December 31, 2023 | ||||||||||
| Term Loan Facilities | % | $ | $ | |||||||||
| D&O Insurance | ||||||||||||
| Other Loans | ||||||||||||
| Less: Interest Reserve | ( | ) | ||||||||||
| Total Debt | $ | $ | ||||||||||
F-23
Note 12 - Deferred Liabilities, Current Portion
The Company had the following deferred liabilities as of December 31, 2024 and December 31, 2023:
| Gross carrying amount | Consideration Paid | Net carrying value | ||||||||||
| Balance as on December 31, 2023 | $ | $ | $ | |||||||||
| Deferred Consideration – AiChat | ||||||||||||
| Deferred Revenue - AiChat | ||||||||||||
| Deferred Liability - Commitment fee | ||||||||||||
| Deferred Consideration - Xmore AI | ||||||||||||
| Balance as on December 31, 2024 | $ | $ | $ | |||||||||
Note 13 - Mortgage and Other Long-Term Loans
Mortgage and Other Long-Term Loans consisted of the following as of December 31, 2024, and December 31, 2023:
a. Summary of Mortgage and Other Long-Term Loans to Unrelated Parties
| Maturity Year | Average Interest Rate as of December 31, 2024 | December 31, 2024 | December 31, 2023 | |||||||||||||
| Mortgage Loan | % | $ | $ | |||||||||||||
| Term Loan Facilities | % | |||||||||||||||
| Vehicle Loan | % | |||||||||||||||
| Less: Interest Reserve | ( | ) | ||||||||||||||
| $ | $ | |||||||||||||||
Note 14 - Stockholders’ Equity (Deficit)
The total number of shares of capital stock that
the Company has the authority to issue is up to
Stock Based Compensation
We issued an aggregate of
Equity Incentive Plan
We maintain the 2022 Plan, under which we may
grant awards to our employees, officers and directors and certain other service providers. The compensation committee of our board of
directors administers the 2022 Plan. The 2022 Plan permits grants of awards to eligible employees, consultants and other service providers.
The aggregate number of shares of common stock that may be issued under the 2022 Plan may not exceed
The 2022 Plan permits the discretionary award of incentive stock options (“ISOs”), non-statutory stock options (“NQSOs”), stock awards (which may have varying vesting schedules and be subject to lock-up periods at the board of directors’ discretion) and other equity awards to selected participants. Unless sooner terminated, no ISO may be granted under the 2022 Plan on or after the 10th anniversary of the Effective Date (as defined in the 2022 Plan).
F-24
The compensation committee has the sole discretion in setting the vesting period and, if applicable, exercise schedule of an award, determining that an award may not vest for a specified period after it is granted and accelerating the vesting period of an award. The plan administrator determines the exercise or purchase price of each award, to the extent applicable. The 2022 Plan does not allow for the assignment, transfer or exercise of awards other than by will or the laws of descent and distribution.
Unless otherwise provided by the participant’s Option Award Agreement or Stock Award Agreement (as both terms are defined in the 2022 Plan) issued pursuant to the 2022 Plan, upon the participant’s termination for any reason, including but not limited to death, Disability (as defined in the 2022 Plan), voluntary termination nor involuntary termination with or without Cause (as defined in the 2022 Plan), all unvested equity awards in the form of options or shares shall be forfeited. Vested options, unless otherwise provided, will remain exercisable for three (3) months following termination of the participant if such termination is for any reason other than death, Disability or termination for Cause. In case the participant’s separation from service is due to death or Disability, then the vested options will be exercisable for a period of twelve (12) months thereafter. In case the participant’s termination is for Cause, the participant will immediately forfeit any and all options issued to such participant under the 2022 Plan.
The 2022 Plan also provides the Company with a right of repurchase all or portion of the shares awarded to the participant under the 2022 Plan, which may be exercised in case a participant separates from service for any reason, at a price equal to the fair market value, as determined by the board of directors. In the event of a Change in Control (as defined in the 2022 Plan), the board of directors will have the sole discretion to address the treatment of a participant’s unvested awards in connection with such Change in Control in the participant’s award agreement.
The board of directors may modify, amend or terminate the plan at any time, provided that no such modification, amendment or termination of the 2022 Plan materially affects the rights of a participant under a previously granted award without that participant’s consent. Further, the board of directors cannot, without the approval of the Company’s stockholders, amend this plan: (i) increase the number of common stock with respect to the ISOs that may be granted under the 2022 Plan; (ii) make any changes in the class of employees eligible to receive the ISOs under the plan; (iii) without stockholder approval if required by applicable law.
Warrants
We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of the warrant’s issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.
F-25
The Warrants issued in connection with the follow-on offering and in connection with the GEM Agreement meet the criteria for equity classification under ASC 480 and ASC 815, therefore, the warrants are classified as equity.
On October 23, 2023, we issued GEM Yield Bahamas
Limited (“GYBL”) warrants to purchase up to
On November 24, 2023, we conducted a follow-on
offering by issuing
On January 31, 2025, the Company entered into
Amendment No. 1 to At the Market Sales Agreement, which amended the At the Market Sales Agreement, dated December 19, 2024, by and between
the Company and A.G.P. (the “Original Agreement” and, as amended by the Amendment, the “Sales Agreement”) to reduce
the floor price from $
Subsequently, on February 27, 2025, in connection
with Amendment No. 2 to the At-the-Market Sales Agreement, the floor price used for warrant adjustment purposes was further reduced from
$
We believe the likelihood that any Warrant holders
will exercise their warrants, and the amount of cash proceeds we may receive, depends on the trading price of our common stock. As of
the date of this filing, the exercise price of the GEM Warrants remains $
Our analysis is based on the trading price of
our common stock as of March 28, 2024, which was $
F-26
Rights
On March 24, 2023, in connection with the acquisition
of Rhove, we allocated rights to each seller and participating investors a right to purchase
For details on the factors used in the calculation of the fair value of the Follow-On Warrants and Rights, refer to the audited consolidated financial statements included in the Form 10-KT. As the warrants issued in connection with the follow-on offering and GEM Agreement are classified as equity instruments, they are not subject to fair value remeasurement at the end of each reporting period.
Warrants and Rights activity as of December 31, 2024 were as follows:
| Issue date | Period ended | Contractual life (years) | Warrants/Options Outstanding | Weighted Average Exercise Price | Average Remaining Contractual Life (Years) | ||||||||||||||||
| Rhove (rollover options) Issued on March 24, 2023 | |||||||||||||||||||||
| GEM Warrants Issued on October 23, 2023 | |||||||||||||||||||||
| Follow-on Warrants Issued on November 21, 2023(1) | |||||||||||||||||||||
| Warrants outstanding on December 31, 2024 | |||||||||||||||||||||
| (1) |
Shelf Registration Statement on Form S-3
The Company filed a Form S-3 (File No. 333-283284) shelf registration statement with the SEC on November 15, 2024, that was declared effective on November 26, 2024 (the “Form S-3”). The Form S-3 allows us to offer common stock, preferred stock, warrants, subscription rights and units from time to time, as market conditions permit to fund, to the extent required beyond the 12 months from the date hereof, the ongoing operations of the Company. Until the growth of revenue increases to a level that covers operating expenses, the Company intends to continue to fund operations in this manner, although, the volatility in the capital markets and potential upcoming recession may negatively affect our ability to do so.
As of December 31, 2024,
the Company has an At-the-Market (“ATM”) program with A.G.P./Alliance Global Partners (“A.G.P.”), as sales agent,
pursuant to an ATM Sales Agreement, dated December 19, 2024 (the “Sales Agreement”), under which it may sell shares of common
stock with an aggregate offering price of up to $
As of December 31, 2024,
the Company is subject to the SEC’s “baby shelf rules,” which prohibits companies with a public float of less than $
F-27
Note 15 - Commitments and Contingencies
Pursuant to the terms of that certain Share Purchase Agreement between the Company and GEM Global Yield LLC SCS (“GEM Yield”) and GEM Yield Bahamas Limited (“GYBL,” and collectively, “GEM”), dated December 1, 2022 (the “GEM Agreement”), we are required to indemnify GEM for any losses it incurs as a result of a breach by us or of our representations and warranties and covenants under the GEM Agreement or for any misstatement or omission of a material fact in a registration statement registering those shares pursuant to the GEM Agreement. Also, GEM is entitled to be reimbursed for legal or other costs or expenses reasonably incurred in investigating, preparing, or defending against any such loss. To date, we have not raised any capital pursuant to the GEM Agreement and we may not raise any capital pursuant to the GEM Agreement prior to its expiration. Restrictions pursuant to terms of our future financings may also affect our ability to raise capital pursuant to the GEM Agreement.
The Company maintains indemnification agreements with our directors and officers that may require the Company to indemnify these individuals against liabilities that arise by reason of their status or service as directors or officers, except as prohibited by law.
Contingent Consideration and Compensation
Acquisition Agreement – Naamche
The Company’s agreement with Naamche includes deferred payment provisions representing potential milestone payments for Naamche’s former owners. The provisions are made up of two general types of arrangements, contingent compensation and contingent consideration. The contingent compensation arrangement is contingent on the former owner’s future employment with the Company and the related amounts are recognized over the required employment period. The contingent consideration is not contingent on employment and was recorded as purchase consideration in other long-term liabilities on the consolidated balance sheets at the time of the initial acquisition based on the fair value of the estimated liability. The amounts are paid over a three-year period, contingent on the achievement of certain revenue milestones.
Acquisition Agreement – Debt Does Deals, LLC (dba “Be My Neighbor”)
The Company’s agreement with Be My Neighbor includes deferred payment provisions representing potential milestone payments for its former owners. The provisions are made up of contingent consideration. The contingent consideration is not contingent on employment and was recorded as purchase consideration in other long-term liabilities on the consolidated balance sheets at the time of the initial acquisition based on the fair value of the estimated liability. The amounts are paid over a three-year period, contingent on the achievement of certain revenue and EBITDA milestones.
The Company primarily determines the contingent consideration liability based on the forecasted probability of achieving the respective milestones. The contingent consideration liability is measured at fair value each reporting period and changes in estimates of fair value are recognized in earnings.
As of December 31, 2024, the Company’s contingent consideration liabilities related to acquisitions are categorized as Level 3 within the fair value hierarchy. Contingent consideration was valued at December 31, 2024 using unobservable inputs, primarily internal revenue forecasts. Contingent consideration was valued at the time of acquisitions and have included using the Monte Carlo simulation model. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management with the assistance of a third-party valuation specialist.
F-28
As of December 31, 2024, the Company’s contingent consideration liabilities, non-current balances were as follows:
| As of December 31, 2024 | ||||||||||||||||||||
| Contingent consideration at Purchase Date | Consideration Paid | Changes in Fair Value | Fair Value | Contingent Consideration | ||||||||||||||||
| Level 3: | ||||||||||||||||||||
| Contingent consideration, non-current - Naamche | $ | $ | $ | $ | $ | |||||||||||||||
| Contingent consideration, non-current - BMN | ||||||||||||||||||||
| Total contingent consideration | $ | $ | $ | $ | $ | |||||||||||||||
Legal Matters
India Proceeding Involving Giri Devanur
In 2006, Mr. Devanur became the CEO of an India-based company named Gandhi City Research Park, Private Limited (“Gandhi City Research Park”). Gandhi City Research Park was liquidated as a result of the Lehman Brothers collapse in 2009. In 2010, an investor in Gandhi City Research Park filed a fraud complaint with the Cubbon Park Police Station in Bengaluru, India, against, among others, Mr. Devanur. In 2014, the Cubbon Park Police dismissed all claims. Subsequently, in 2015 the investor appealed the Cubbon Park Police’s decision before the Lower Court. In November 2018, the Lower Court issued a criminal summons against, among others, Mr. Devanur. Mr. Devanur petitioned the High Court to quash the summons. By order dated March 27, 2023, the High Court granted Mr. Devanur’s petition and ordered the Lower Court to reconsider the investor’s appeal. On August 3, 2023, the Lower Court decided to uphold the Cubbon Park Police’s decision and close the criminal case against Mr. Devanur. On December 4, 2023, Mr. Devanur received a petition to challenge the Lower Court’s order to uphold the Cubbon Park Police’s decision and close Mr. Devanur’s criminal case. Mr. Devanur is vigorously contesting this petition.
Malpractice Lawsuit
On July 13, 2023, the Company filed a complaint
in Franklin County, Ohio, against Buchanan, Ingersoll & Rooney, PC (“Buchanan”), Rajiv Khanna (“Khanna”) and
Brian S. North (“North,” together with Buchanan and Khanna, the “Buchanan Legal Counsel”). The complaint alleges
that the Buchanan Legal Counsel failed to provide proper and timely legal advice during the Company’s Tier 2 Regulation A offering,
resulting in late Blue Sky notice filings with all required states prior to the Company offering and selling securities in those states.
As a result, the Company was subject to a number of inquiries, investigations, and subpoenas by the various states, incurring significant
legal fees and fines, lost opportunity due to pausing its Regulation A campaign, in addition to the loss of a $
GEM Yield Bahamas Limited Litigation
On November 1, 2024, we filed a lawsuit against GYBL in the United States District Court for the Southern District of New York (the “Court”) in which we have asserted two causes of action: (i) rescission of the GEM Warrants issued pursuant to the GEM Agreement, pursuant to Section 29(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) due to GYBL’s underlying violation of Section 15(a) of the Exchange Act for effecting the GEM Warrants as an unregistered dealer, and (ii) in the alternative, a declaratory judgment that the exercise price adjustment calculation of the GEM Warrants is governed by the terms provided in the GEM Warrants, rather than the terms of the GEM Agreement.
On March 14, 2025, the Court granted GYBL’s motion to dismiss our complaint relating to the lawsuit against GYBL. We are currently evaluating the Court’s decision and all legal rights available to us, including, but not limited to, appealing the Court’s decision to the United States Court of Appeals for the Second Circuit. There is no assurance that any such appeal would be successful.
F-29
Note 16 - Discontinued Operations
During the year ended December 31, 2024, the Company made a strategic decision to fully discontinue its Rhove operations, a component that previously operated under the rental business segment. This decision was based on the lack of future revenue potential and the absence of funding to further develop the platform.
As a result, the Rhove operations have been classified as a discontinued operation in accordance with ASC 205-20.
The following table rolls forward Rhove assets and liabilities from their carrying values prior to classification as discontinued operations to their values after such classification, and presents the impact of reclassifications, impairments, and write-offs:
| Rhove Related Assets | Carrying Value Prior To Abandonment | Asset and Liability Transfers Retained by reAlpha | Asset Impairments and Liability Write-Offs | Carrying Value as of 12/31/2024 | ||||||||||||
| Cash | $ | $ | ( | ) | $ | $ | ||||||||||
| Other Current Assets(1) | ( | ) | ( | ) | ||||||||||||
| Intangibles, net | ( | ) | ||||||||||||||
| Goodwill | ( | ) | ||||||||||||||
| Total assets - Rhove | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
| Accounts Payable and Other Accrued Liabilities | $ | $ | $ | ( | ) | $ | ||||||||||
| Other Current Liabilities | ( | ) | ||||||||||||||
| Total Liabilities - Rhove | $ | $ | $ | ( | ) | $ | ||||||||||
| Net Assets and Liabilities - Rhove | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
| (1) |
The following table provides detail of the discontinued operations as of December 31, 2024 and 2023:
| Rhove Related Assets | December 31, 2024 (transferred to reAlpha) | December 31, 2023 | ||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Other current Assets | ||||||||
| $ | $ | |||||||
| Long term Assets | ||||||||
| Intangibles, net | ||||||||
| Goodwill | ||||||||
| $ | $ | |||||||
| Current Liabilities | ||||||||
| Accounts payable and other accrued liabilities | ||||||||
| Other current liabilities | ||||||||
| Total liabilities - Rhove | $ | $ | ||||||
F-30
The following table represents the statement of operations for discontinued operations as of each reporting period:
| For the Year Ended | For the Eight Months Ended | For the Year Ended | ||||||||||
| December 31, 2024 | December 31, 2023 | April 30, 2023 | ||||||||||
| Revenues | $ | $ | $ | |||||||||
| Cost of revenues | ||||||||||||
| Gross profit | ||||||||||||
| Discontinued operating expenses | ||||||||||||
| Depreciation & amortization | ||||||||||||
| Professional & legal fees | ||||||||||||
| Other operating expense (income) | ( | ) | ||||||||||
| Total operating expenses | ||||||||||||
| Discontinued Operating Loss | ( | ) | ( | ) | ( | ) | ||||||
| Discontinued other expense (income) | ||||||||||||
| Impairment of intangible assets | ||||||||||||
| Goodwill impairment | ||||||||||||
| Other expense (income) | ( | ) | ||||||||||
| Total other (expense) income | ( | ) | ||||||||||
| Net loss from discontinued operations before income taxes | ( | ) | ( | ) | ( | ) | ||||||
Note 17 - Segment Reporting
In November 2023, FASB issued Accounting Standards Update (“ASU”) 2023-07 (“ASU 2023-07”). ASU 2023-07 requires expanded disclosures about reportable segments including additional information on segment expenses, expanded interim period disclosures, and an explanation of how the chief operating decision maker utilizes segment information in evaluating segment performance. We are currently assessing the impact that the adoption of ASU 2023-07 will have on the disclosures in our consolidated financial statements.
Existing guidance, which is based on a management
approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide
disclosures about products and services, in which the entity holds material assets and reports revenue. We have
Note 18 - Subsequent Events
Exchange Agreement with Streeterville Capital, LLC
On March 20, 2025, the Company entered into an
Exchange Agreement with Streeterville Capital, LLC (the “Note Holder”), pursuant to which the Company issued
F-31
GEM Yield Bahamas Limited Litigation
On March 19, 2025, GYBL filed a complaint against the Company in the United States District Court for the Southern District of New York. The complaint relates to the GEM Warrants and asserts claims for breach of contract and declaratory relief regarding the validity and enforceability of the GEM Warrant. GYBL seeks unspecified monetary damages, specific performance of the GEM Warrant, and reimbursement of attorneys’ fees and costs. The Company believes the claims are without merit and intends to vigorously defend against the action. As of the date of this filing, the outcome of this matter is uncertain, and no loss contingency has been recorded in the financial statements.
Series A Preferred Stock Designation
On February 20, 2025, the Company filed a Certificate
of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock with the Delaware Secretary of State, establishing
the terms of its Series A Convertible Preferred Stock (the “Series A Preferred Stock”), designating
Acquisition of GTG Financial, Inc.
On February 20, 2025, the Company completed the
acquisition of GTG Financial, Inc. (“GTG”), a California-based mortgage brokerage, acquired
Additionally, the GTG Purchase
Agreement provides that, to the extent that, upon an Automatic Conversion (as defined in the Certificate of Designation), the aggregate
value for the shares issuable upon conversion of the Series A Preferred Stock (the "Conversion Shares”) on the Automatic Conversion
Date (as defined in the Certificate of Designation) is less than $
Further, to the extent that
the Company does not pay the Cash Portion in full by the date that is 180 days of the closing date, then, beginning on the 181st day following
the closing date, the outstanding amount of the Cash Portion will bear interest at a rate per annum equal to
Amendments to the At the Market (ATM) Sales Agreement
On January 31, 2025, the Company entered into
Amendment No. 1 to its Sales Agreement with A.G.P., which amended the original Sales Agreement. Amendment No. 1 reduced the floor price
for sales under the Sales Agreement from $
F-32
Subsequent to the year ended December 31, 2024,
the Company issued an aggregate of
On March 24, 2025, the Company provided notice to A.G.P. of its election to terminate the Sales Agreement, which termination was effective on March 29, 2025 in accordance with the terms of the Sales Agreement.
Warrant Adjustment on Follow On Offering
On November 24, 2023, the Company issued the Follow-On
Warrants (as defined above) to purchase up to
Subsequently, on February 27, 2025, in connection
with the Company entering into Amendment No. 2 to the Sales Agreement, the exercise price for the Follow-On Warrants was further adjusted
from $
Advertising Agreement and Investment Agreement with Mercurius Media Capital LP
On March 7, 2025 (the “Closing Date”),
the Company simultaneously entered into an Advertising Agreement and an Investment Agreement (collectively, the “Transaction Documents”)
with Mercurius Media Capital LP (“MMC”). In accordance with the Transaction Documents, the Company agreed to issue and sell
to MMC
Additionally, the Investment Agreement further
provides that, to the extent that the aggregate value of the Conversion Shares issued upon the Automatic Conversion is less than the Consideration,
as determined based on the closing price of our common stock, as reported on the Nasdaq Stock Market on the applicable Automatic Conversion
Date, then the Company shall pay for such difference in cash or in shares of common stock, at the Company’s sole discretion, no
later than 30 calendar days after the Automatic Conversion Date, on the terms and subject to the conditions set forth in the Investment
Agreement. The Investment Agreement further provides that at any time during the 2-month period beginning on the Closing Date, MMC will
have the right, but not the obligation, to reinvest up to an additional $
Issuance of Restricted Stock Units Under the 2022 Equity Incentive Plan
On February 4, 2025, the compensation committee
of the board of directors approved the issuance of
F-33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| REALPHA TECH CORP. | ||
| Date: May 13, 2025 | By: | /s/ Giri Devanur |
| Giri Devanur Chief Executive Officer and Chairman | ||
| Date: May 13, 2025 | By: | /s/ Piyush Phadke |
| Piyush Phadke Chief Financial Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Date: May 13, 2025 | /s/ Giri Devanur |
|
Giri Devanur Chief Executive Officer and Chairman (Principal Executive Officer) | |
| Date: May 13, 2025 | /s/ Piyush Phadke |
| Piyush Phadke | |
|
Chief Financial Officer (Principal Financial and Accounting Officer) | |
| Date: May 13, 2025 | * |
| Dimitrios Angelis, Director | |
| Date: May 13, 2025 | * |
| Brian Cole, Director | |
| Date: May 13, 2025 | * |
| Monaz Karkaria, Director | |
| Date: May 13, 2025 | * |
| Balaji Swaminathan, Director | |
| Date: May 13, 2025 | * /s/ Piyush Phadke |
| Piyush Phadke, Attorney-in-Fact |
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