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reAlpha Tech (AIRE) - 2026 Q1 - Quarterly Report
reAlpha Tech reAlpha Tech (US:AIRE)2025-08-14 11:00

PART I - FINANCIAL INFORMATION This part contains the company's unaudited financial statements, management's discussion, market risk disclosures, and internal controls ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements and related notes for recent reporting periods Condensed Consolidated Balance Sheet The balance sheet shows a significant decrease in cash and a shift to a stockholders' deficit by June 30, 2025 | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :--------------------------------- | :------------------------ | :------------------ | | Assets | | | | Cash | $587,311 | $3,123,530 | | Total current assets | $5,061,607 | $4,043,098 | | Total assets | $15,517,538 | $11,994,458 | | Liabilities | | | | Total current liabilities | $9,488,487 | $4,145,437 | | Total liabilities | $16,618,018 | $10,426,986 | | Stockholders' (Deficit) Equity | | | | Total stockholders' (deficit) equity | $(1,100,480) | $1,567,472 | - The company's cash significantly decreased from $3.12 million at December 31, 2024, to $0.59 million at June 30, 2025. Total assets increased by approximately 29.38%, while total liabilities increased by approximately 59.39% over the same period. Stockholders' equity shifted from a positive balance of $1.57 million to a deficit of $(1.10) million910 Condensed Consolidated Statements of Operations and Comprehensive Loss The statements show significant revenue growth but also a widening net loss due to increased operating expenses | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | | :--------------------------------------- | :------------------------------- | :------------------------------- | :--------- | | Revenues | $1,252,381 | $62,353 | 1909.0% | | Cost of revenues | $630,916 | $18,250 | 3357.1% | | Gross Profit | $621,465 | $44,103 | 1309.1% | | Operating Expenses | $4,829,411 | $1,253,498 | 285.3% | | Operating Loss | $(4,207,946) | $(1,209,395) | 247.9% | | Net Loss | $(4,110,016) | $(1,478,312) | 178.0% | | Basic loss per share | $(0.08) | $(0.03) | 166.7% | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (%) | | :--------------------------------------- | :------------------------------- | :------------------------------- | :--------- | | Revenues | $2,178,016 | $82,779 | 2531.1% | | Cost of revenues | $1,037,884 | $36,499 | 2743.5% | | Gross Profit | $1,140,132 | $46,280 | 2362.8% | | Operating Expenses | $7,651,521 | $2,488,704 | 207.5% | | Operating Loss | $(6,511,389) | $(2,442,424) | 166.6% | | Net Loss | $(6,960,368) | $(2,897,357) | 140.2% | | Basic loss per share | $(0.14) | $(0.07) | 100.0% | - Revenues for the three months ended June 30, 2025, increased by 1,909% to $1.25 million, and for the six months ended June 30, 2025, increased by 2,531% to $2.18 million, primarily due to contributions from reAlpha Mortgage, GTG Financial, and AiChat12178182 - Net loss significantly widened for both the three-month period (178% increase to $(4.11) million) and the six-month period (140.2% increase to $(6.96) million), driven by substantial increases in operating expenses, particularly wages, marketing, and professional fees, following recent acquisitions13180184 Condensed Consolidated Statements of Stockholders' (Deficit) Equity Stockholders' equity transitioned to a deficit, while common stock shares outstanding increased due to various issuances | Metric | December 31, 2024 | March 31, 2025 | June 30, 2025 | | :--------------------------------------- | :------------------ | :----------------- | :----------------- | | Total Stockholders' (Deficit) Equity | $1,567,472 | $(965,220) | $(1,100,480) | | Common Stock Shares Outstanding | 45,864,503 | 46,230,934 | 52,364,654 | | Additional Paid-in Capital | $39,770,060 | $40,099,285 | $44,174,344 | | Accumulated Deficit | $(38,260,913) | $(41,110,855) | $(45,222,909) | - The company's total stockholders' equity transitioned from a positive balance of $1.57 million at December 31, 2024, to a deficit of $(1.10) million by June 30, 2025, primarily due to net losses and other comprehensive losses1718 - Common stock shares outstanding increased significantly from 45,864,503 to 52,364,654 during the six months ended June 30, 2025, driven by issuances for warrant exercises, acquisitions (GTG Financial), ATM programs, and employee compensation1718 Condensed Consolidated Statements of Cash Flows Cash flows show increased usage in operations, positive investing activities, and significant financing inflows | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(4,602,029) | $(2,550,879) | | Net cash provided by (used in) investing activities | $191,132 | $(79,423) | | Net cash provided by (used in) financing activities | $1,874,264 | $(143,885) | | Net decrease in cash | $(2,536,633) | $(2,774,187) | | Cash - End of Period | $587,311 | $3,682,327 | - Net cash used in operating activities increased to $(4.60) million for the six months ended June 30, 2025, from $(2.55) million in the prior year, primarily due to higher operating expenses from acquired businesses20206 - Net cash provided by financing activities significantly increased to $1.87 million, driven by proceeds from common stock issuance ($3.51 million) and debt issuance ($0.16 million), partially offset by debt payments ($1.55 million) and equity issuance costs20208 Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of the company's accounting policies, business changes, and financial commitments Note 1 - Organization and Description of Business The company transitioned to a technology-driven, AI-powered integrated services model, discontinuing its rental segment - reAlpha Tech Corp. has transitioned from an asset-heavy operational model focused on short-term rentals to a technology-driven, integrated services company, leveraging AI to enhance the homebuying experience2324 - The company discontinued its rental segment operations effective December 31, 2024, due to macroeconomic challenges like elevated interest rates and inflated property prices23 - Strategic acquisitions of Naamche, AiChat, reAlpha Mortgage, Hyperfast, and GTG Financial have strengthened AI capabilities and diversified revenue streams across real estate brokerage, mortgage brokering, and digital title/escrow services252627 Note 2 - Summary of Significant Accounting Policies This note details the company's accounting policies for accounts receivable, revenue recognition, and other financial aspects - The company applies the Current Expected Credit Losses (CECL) model to accounts receivable, incorporating historical loss experience, current economic conditions, and forward-looking adjustments3940 - A new CECL provision of $59 was recorded as of June 30, 2025, after collecting all previously outstanding receivables attributable to AiChat and releasing the prior reserve4142 - Revenue recognition varies by subsidiary: AiChat recognizes license fees over subscription duration and consulting services based on delivery; reAlpha Mortgage and GTG Financial recognize revenue at loan funding; Naamche recognizes revenue over time as tech-driven services are delivered44454647 Note 3 - Going Concern The company faces substantial doubt about its ability to continue as a going concern due to short-term obligations exceeding resources - The company's short-term obligations exceed available resources under current operational plans, raising substantial doubt about its ability to continue as a going concern for the next 12 months5354 - Management anticipates continuing operating losses due to growth initiatives and expects to raise capital through additional debt and/or equity financings54 - Recent capital raises in July 2025, including $7 million in gross proceeds, are expected to mitigate going concern conditions, with a majority allocated to repaying outstanding debt54 Note 4 - Business Combinations This note details the acquisition of GTG Financial, including stock issuance and measurement period adjustments - The acquisition of GTG Financial, Inc. was completed on February 20, 2025, involving the issuance of 700,055 shares of common stock valued at approximately $1.29 million57 - A measurement period adjustment of $835,866 related to the GTG Financial acquisition resulted in a corresponding reduction to goodwill, primarily due to finalizing the equity issuance valuation5766 Note 5 - Property and Equipment, Net Net property and equipment decreased significantly, primarily due to vehicle disposals, with reduced depreciation expense | Category | June 30, 2025 Net Book Value | December 31, 2024 Net Book Value | | :------------------------- | :----------------------------- | :------------------------------- | | Computer | $41,283 | $18,621 | | Furniture and fixtures | $10,045 | $28,641 | | Vehicles | $0 | $55,376 | | Total | $51,328 | $102,638 | - Total net property and equipment decreased by approximately 50% from $102,638 at December 31, 2024, to $51,328 at June 30, 2025, largely due to the disposal of vehicles5960 - Depreciation expense for the six months ended June 30, 2025, was $17,781, a significant decrease from $140,784 in the comparable period of 202461 Note 6 - Capitalized Software Development Costs, Work In Progress The company impaired capitalized software due to discontinued development, resulting in a zero net carrying value - During the six months ended June 30, 2025, the company impaired the carrying amount of capitalized software by $105,900 due to discontinued development and obsolescence6263 | Metric | June 30, 2025 Net Carrying Value | December 31, 2024 Net Carrying Value | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Capitalized software development costs, work in progress | $0 | $105,900 | Note 7 - Goodwill and Intangible Assets Goodwill increased due to the GTG Financial acquisition, with no impairment identified after an interim test | Metric | January 1, 2025 Balance | June 30, 2025 Balance | | :--------------------------------------- | :---------------------- | :-------------------- | | Goodwill (Technology Services) | $4,211,166 | $6,171,918 | | Goodwill acquired, GTG Financial | N/A | $2,799,523 | | Goodwill measurement period adjustment | N/A | $(838,771) | - Goodwill increased to $6.17 million as of June 30, 2025, from $4.21 million at January 1, 2025, primarily due to the GTG Financial acquisition, partially offset by measurement period adjustments66 | Intangible Asset | June 30, 2025 Net Carrying Value | | :------------------------- | :------------------------------- | | Developed technology | $1,495,557 | | Trademarks and trade names | $1,605,521 | | Customer relationships | $71,005 | | Total | $3,172,083 | - The company performed an interim goodwill impairment test as of June 30, 2025, and determined no impairment was present69 Note 8 - Notes Payable Total notes payable decreased due to repayments, with the secured promissory note fully repaid post-quarter end | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :-------------- | :---------------- | | Secured promissory note to Streeterville Capital, LLC | $5,455,000 | $5,455,000 | | Less: Repayment (cash and shares of common stock) | $(1,410,000) | — | | Less: Unamortized debt issuance costs and original issue discount | $(303,122) | $(545,624) | | Total notes payable | $3,741,878 | $4,909,376 | - Total notes payable decreased to $3.74 million as of June 30, 2025, from $4.91 million at December 31, 2024, primarily due to repayments of $1.41 million on the secured promissory note to Streeterville Capital, LLC7173 - Subsequent to June 30, 2025, the outstanding balance of approximately $4.47 million under the Note was fully repaid on July 23, 2025, using cash on hand and proceeds from recent equity offerings, including a 9% prepayment penalty74 Note 9 - Related Party Transactions The company has outstanding related party loans from its CEO, a board member, and an entity controlled by a board member's spouse - As of June 30, 2025, the company had outstanding related party loans totaling approximately $330,787 from AiChat's CEO, a board member, and Sea Easy Capital Ltd. (an entity controlled by a board member's spouse)76 | Related Party Loan | June 30, 2025 Outstanding Balance | | :--------------------------------------- | :-------------------------------- | | AiChat's CEO (Kester Poh) | ~$104,028 | | Board member (Balaji Swaminathan) | ~$49,113 | | Sea Easy Capital Ltd. (SEA) | ~$177,646 | | Total Short Term Loans - Related Parties | $258,239 | | Total Other Long Term Loans - Related Parties | $22,514 | Note 11 - Deferred Liabilities, Current Portion Deferred liabilities significantly increased due to deferred consideration from an acquisition and deferred revenue | Metric | December 31, 2024 | June 30, 2025 | | :--------------------------------------- | :------------------ | :---------------- | | Balance as on December 31, 2024 | $1,534,433 | N/A | | Deferred Revenue - AiChat | — | $37,036 | | Deferred Consideration – GTG Financial | — | $1,344,750 | | Balance as on June 30, 2025 | N/A | $2,916,219 | - Deferred liabilities increased significantly to $2.92 million as of June 30, 2025, from $1.53 million at December 31, 2024, primarily due to deferred consideration from the GTG Financial acquisition ($1.34 million) and deferred revenue from AiChat ($37,036)7980 Note 12 – Embedded Derivative Liability Embedded derivative liabilities were recorded for preferred stock and a media-for-equity transaction, measured at fair value - The company recorded embedded derivative liabilities of $4.75 million as of June 30, 2025, related to Series A Preferred Stock issued in the GTG Financial acquisition and the MMC media-for-equity transaction8184 - These liabilities represent the fair value of shortfall settlement features, measured using the Black-Scholes option pricing model, with a total increase in fair value of $215,204 recognized from the prior quarter818284 | Derivative Liability | June 30, 2025 Fair Value | | :--------------------------------------- | :----------------------- | | Embedded Derivative Liability – GTG acquisition | $253,134 | | Embedded Derivative Liability – MMC transaction | $4,492,500 | | Total | $4,745,634 | Note 13 - Preferred Stock Liability Preferred stock issued in acquisitions is classified as a liability due to redemption and shortfall settlement features - The company issued 264,063 shares of Series A Preferred Stock with a stated value of $20 per share in connection with the GTG Financial acquisition and the MMC transaction86 - These shares are classified as liabilities under U.S. GAAP due to redemption features and shortfall settlement provisions, with a total net value of $249,458 as of June 30, 20258788 | Preferred Stock Liability | June 30, 2025 Net Value | | :--------------------------------------- | :---------------------- | | Preferred stock liability – GTG Financial acquisition | $15,632 | | Preferred stock liability – MMC transaction | $184,277 | | Accrued interest on preferred stock | $49,549 | | Total | $249,458 | Note 14 - Other Long-Term Loans Other long-term loans decreased due to repayments on term loan facilities and the sale of a vehicle | Loan Type | June 30, 2025 Balance | December 31, 2024 Balance | | :------------------------- | :-------------------- | :---------------------- | | Term Loan Facility | $164,595 | $210,866 | | Vehicle Loan | $0 | $48,188 | | Less: Interest Reserve | $(11,670) | $(17,933) | | Total | $152,925 | $241,121 | - Other long-term loans decreased to $152,925 as of June 30, 2025, from $241,121 at December 31, 2024, primarily due to repayments on term loan facilities and the sale of a Naamche-owned vehicle8990 Note 15 - Stockholders' Equity (Deficit) This note details common and preferred stock outstanding, equity incentive plans, warrant transactions, and ATM programs - As of June 30, 2025, there were 52,364,654 shares of common stock and 264,043 shares of Series A Preferred Stock issued and outstanding91 - The 2022 Equity Incentive Plan has 2,891,118 shares available for issuance as of June 30, 2025, and 99,100 shares were issued to employees during the three months ended June 30, 202592 - The company granted 840,743 Restricted Stock Units (RSUs) during the six months ended June 30, 2025, with 790,743 remaining outstanding after forfeitures, subject to two-year time-based vesting9798 - A warrant inducement transaction on April 6, 2025, resulted in the exercise of 4,218,751 existing warrants for cash at a reduced price of $0.75 per share, generating approximately $3.1 million in gross proceeds, and the issuance of 8,437,502 new warrants101 - The company utilized At-The-Market (ATM) programs, issuing 160,879 shares for $231,235 gross proceeds under the AGP Sales Agreement (terminated March 29, 2025) and 317,702 shares for $107,094 net proceeds under the Wainwright ATM program109110 Note 16 - Commitments and Contingencies The company has deferred cash consideration obligations, contingent liabilities, and is involved in ongoing litigation - The company is obligated to pay deferred cash consideration of $1.34 million for the GTG Financial acquisition in three tranches, with the first payment not yet made as of June 30, 2025113 - Contingent consideration liabilities for Naamche, GTG Financial, and reAlpha Mortgage totaled $1.96 million as of June 30, 2025, with an $81,000 gain recognized from an increase in the fair value of reAlpha Mortgage's contingent consideration116118 - The company is involved in ongoing litigation with GEM Yield Bahamas Limited (GYBL) regarding the enforceability and exercise price adjustment of GEM Warrants, with an appeal pending and a separate lawsuit filed by GYBL119120121 Note 17 - Segment Reporting The company operates as one technology services segment, with performance assessed at a consolidated level by the CEO - The company's operations are organized into one operating and one reportable segment: technology services, which includes mortgage, real estate, and technology product lines123 - The Chief Executive Officer, as the Chief Operating Decision Maker (CODM), reviews financial information at a consolidated level and assesses performance based on net income (loss)123124 Note 18 - Discontinued Operations The company fully discontinued its rental business segment due to lack of future revenue potential and funding - The company fully discontinued its rental business segment operations (Rhove) during the year ended December 31, 2024, due to a lack of future revenue potential and funding127 | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :-------------- | :---------------- | | Rhove Related Assets - Current Assets | $53,476 | $56,931 | | Rhove Related Liabilities - Current Liabilities | $0 | $0 | | Discontinued Operating Loss (Six Months Ended June 30) | $0 (2025) | $(1,710) (2024) | Note 19 - Subsequent Events Post-quarter events include significant capital raises through ATM programs and equity offerings, and full debt repayment - Subsequent to June 30, 2025, the company issued 2,474,402 shares through its ATM program, generating net proceeds of approximately $837,664131 - On July 2, 2025, the company satisfied a $350,000 redemption payment to Streeterville by issuing 1,267,656 shares of common stock132 - A best-efforts public offering on July 18, 2025, raised gross proceeds of $2.0 million from the sale of 13,333,334 shares and accompanying warrants133 - A registered direct offering and concurrent private placement on July 22, 2025, raised gross proceeds of $5.0 million from the sale of 14,285,718 shares and unregistered warrants135 - On July 23, 2025, the company fully repaid its secured promissory note to Streeterville for approximately $4.47 million, including a 9% prepayment penalty, extinguishing all related obligations136 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS Management discusses the company's financial condition, operational results, strategic transition to an AI-powered platform, liquidity, and macroeconomic impacts Business Overview reAlpha Tech Corp. is developing an AI-powered homebuying platform, integrating realty, mortgage, and title services - reAlpha Tech Corp. is developing an AI-powered, end-to-end homebuying platform named 'reAlpha' to offer a more affordable and streamlined homeownership experience142 - The platform integrates AI-driven tools like 'Claire' (an AI agent) and a 'Loan Officer Assistant' to automate tasks, provide tailored property recommendations, and offer realty, mortgage brokering, and digital title/escrow services143150 - The company offers a commission refund model, allowing homebuyers to receive up to 75% of buy-side brokerage commissions when utilizing all three integrated services (realty, mortgage, title/escrow)145151 - The full reAlpha platform is currently available only in Florida, with mortgage brokering services in 30 U.S. states and title/escrow services in 3 U.S. states, with plans for nationwide expansion by the end of 2026145152153 Recent Developments Recent developments include Nasdaq compliance issues, ATM program sales, warrant inducement, and post-quarter capital raises - The company received notices from Nasdaq regarding non-compliance with the Minimum Bid Price Requirement ($1 per share) and the Minimum Market Value of Listed Securities Requirement ($35 million), with compliance periods until October 1, 2025, and December 29, 2025, respectively154155 - An At-The-Market (ATM) program with Wainwright allowed the sale of 2,792,104 shares for aggregate net proceeds of approximately $944,759 as of July 18, 2025157 - A warrant inducement transaction on April 6, 2025, generated approximately $2.9 million in net proceeds from the exercise of existing warrants at a reduced price, and issued new warrants158159160 - The company increased its ownership in AiChat to 100% on June 30, 2025, in exchange for $240,000 in common stock shares to be issued by December 1, 2025161 - Subsequent to the quarter, the company completed a public offering ($1.56 million net proceeds) and a registered direct offering with a concurrent private placement ($4.5 million net proceeds) in July 2025166169 - The secured promissory note to Streeterville Capital, LLC, with an initial principal of $5.46 million, was fully repaid on July 23, 2025, for approximately $4.47 million, including a 9% prepayment penalty170171 Impact of Macroeconomic Conditions, Cyclicality and Seasonality on our Business Macroeconomic conditions, including inflation and high mortgage rates, continue to constrain the cyclical real estate market - U.S. inflation remained above the Federal Reserve's 2% target (2.3%-2.7%) from April to June 2025, leading the Fed to maintain the target federal funds rate at 4.25%-4.50%172 - Elevated 30-year fixed mortgage rates (high-6% range, averaging 6.77% in June 2025) and limited housing inventory continue to constrain affordability and weigh on home purchase activity and mortgage origination volume173 - The residential real estate market is cyclical and seasonal, typically peaking in spring/summer and slowing in fall/winter, which can cause variability in operating results174 Critical Accounting Policies No material changes occurred in the company's critical accounting policies during the three months ended June 30, 2025 - There have been no material changes to the company's critical accounting policies or methods during the three months ended June 30, 2025177 Results of Operations This section analyzes the company's financial performance for the three and six months ended June 30, 2025 Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024 Revenue significantly increased, but operating expenses also surged, leading to a widened loss for the quarter | Metric | June 30, 2025 | June 30, 2024 | Change (%) | | :------------------------- | :-------------- | :-------------- | :--------- | | Revenue | $1,252,381 | $62,353 | 1909% | | Cost of revenue | $630,916 | $18,250 | 3357% | | Gross profit | $621,465 | $44,103 | 1309% | | Operating expense | $4,710,595 | $1,253,498 | 276% | | Operating loss | $(4,089,130) | $(1,209,395) | 238% | | Other expense | $20,886 | $268,046 | -92% | | Loss from continuing operations before tax | $(4,110,016) | $(1,477,441) | 178% | - Revenue increased by 1,909% to $1.25 million, driven by $1.01 million from mortgage brokerage transactions (reAlpha Mortgage and GTG Financial) and $158,660 from AiChat's AI conversational technology178 - Operating expenses surged by 276% to $4.71 million, primarily due to $1.54 million in salaries from newly acquired businesses, $1.48 million in marketing and advertising, and $440,101 in professional and legal fees related to capital raising activities180 Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024 Revenue saw substantial growth, but operating expenses also rose significantly, contributing to a larger net loss | Metric | June 30, 2025 | June 30, 2024 | Change (%) | | :------------------------- | :-------------- | :-------------- | :--------- | | Revenue | $2,178,016 | $82,779 | 2531% | | Cost of revenue | $1,037,884 | $36,499 | 2744% | | Gross profit | $1,140,132 | $46,280 | 2363% | | Operating expense | $7,651,521 | $2,488,704 | 207% | | Operating loss | $(6,511,389) | $(2,442,424) | 167% | | Other expense | $448,979 | $453,223 | -1% | | Loss from continuing operations before tax | $(6,960,368) | $(2,895,647) | 140% | - Revenue increased by 2,531% to $2.18 million, with $1.76 million from mortgage brokerage transactions and $268,212 from AiChat's AI technologies182 - Operating expenses rose by 207% to $7.65 million, driven by $2.60 million in salaries from acquisitions, $2.00 million in marketing, and $1.95 million in professional and legal services (including $440,101 for capital raising)184 Non-GAAP Financial Measures The company uses Adjusted EBITDA as a non-GAAP measure to evaluate operating performance, excluding certain non-cash items - The company uses Adjusted EBITDA as a non-GAAP financial measure to evaluate operating performance and facilitate comparisons, excluding interest expense, depreciation, amortization, changes in fair value, share-based compensation, and other non-cash/non-recurring items187189 | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net loss | $(4,110,016) | $(1,478,312) | $(6,960,368) | $(2,897,357) | | Adjusted EBITDA | $(3,474,092) | $(1,147,511) | $(5,286,098) | $(2,236,601) | Liquidity and Capital Resources The company faces liquidity challenges, relying on future equity or debt financing, despite recent capital raises - As of June 30, 2025, the company had approximately $0.58 million in cash and cash equivalents, down from $3.1 million at December 31, 2024193 - The company does not believe it has sufficient working capital to meet financial needs for the 12-month period following June 30, 2025, and expects to fund operations through additional equity or debt financing193 - Recent capital raises, including $985,448 from the ATM program, $3.1 million from warrant inducement, and $7.0 million gross from July 2025 equity offerings, are intended to increase liquidity196197 - Following the recent capital raises and full repayment of the Streeterville Note, the company estimates cash and cash equivalents will be sufficient to fund operating expenses and capital expenditure requirements until the end of October 2025198 Contractual Commitments and Obligations The company has deferred cash consideration obligations for an acquisition and recently repaid a secured promissory note - The secured promissory note to Streeterville Capital, LLC, with an initial principal of $5.46 million, was fully repaid on July 23, 2025, for approximately $4.47 million, including a 9% prepayment penalty, eliminating all future cash payment obligations under the note201202 - The company is obligated to pay $1.34 million in deferred cash consideration for the GTG Financial acquisition in three tranches, with no payments made to date, and the unpaid balance will accrue 4% interest annually after 180 days from the closing date203 - Failure to pay the GTG Financial cash portion in full by the 180th day could allow the seller to rescind the acquisition, potentially impacting the business203 Cash Flows Cash flows reflect increased operating cash usage, positive investing activities, and significant financing inflows | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(4,602,029) | $(2,550,879) | | Net cash provided by (used in) investing activities | $191,132 | $(79,423) | | Net cash provided by (used in) financing activities | $1,874,264 | $(143,885) | - Net cash used in operating activities increased to $(4.60) million due to higher operating expenses from acquired businesses, including salaries, marketing, and legal fees206 - Net cash provided by investing activities turned positive at $191,132, primarily due to the integration of GTG Financial, which added $349,529 in cash207 - Net cash provided by financing activities significantly increased to $1.87 million, driven by proceeds from ATM programs, warrant exercises, and debt issuance, partially offset by debt repayments and equity issuance costs208 Off-Balance Sheet Transactions The company does not have any off-balance sheet transactions to disclose - The company does not have any off-balance sheet transactions209 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, the company is exempt from providing market risk disclosures - The company is exempt from providing quantitative and qualitative disclosures about market risk as a smaller reporting company210 ITEM 4. CONTROLS AND PROCEDURES Management concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting Disclosure Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025212 Changes in Internal Control over Financial Reporting No material changes occurred in internal control over financial reporting during the quarter ended June 30, 2025 - There have been no material changes in internal control over financial reporting during the quarter ended June 30, 2025213 Limitations on Effectiveness of Controls and Procedures Control systems provide reasonable, not absolute, assurance and are subject to inherent limitations and potential circumvention - Management acknowledges that control systems provide only reasonable, not absolute, assurance and are subject to inherent limitations such as faulty judgments, simple errors, circumvention by individuals or collusion, and management override214 PART II - OTHER INFORMATION This part covers legal proceedings, risk factors, equity sales, and other required disclosures ITEM 1. LEGAL PROCEEDINGS This section details ongoing legal disputes with GEM Yield Bahamas Limited regarding GEM Warrants, including lawsuits and counterclaims - The company filed a lawsuit against GYBL on November 1, 2024, seeking rescission of GEM Warrants or a declaratory judgment on their exercise price adjustment, which was dismissed by the Court on March 14, 2025, and is currently under appeal216 - GYBL filed a separate lawsuit against the company, asserting breach of GEM Warrants and seeking monetary damages, specific performance, and legal costs, to which the company filed a motion to dismiss217 ITEM 1A. RISK FACTORS This section updates risk factors, including operating losses, going concern doubts, Nasdaq compliance, regulatory issues, and market dependency - The company has a history of operating losses, with a net loss of $4.11 million for the quarter ended June 30, 2025, and an accumulated deficit of $45.22 million, raising substantial doubt about its ability to achieve and sustain profitability219220221 - The company is at risk of delisting from Nasdaq due to non-compliance with the Minimum Bid Price Requirement ($1 per share) and the Minimum Market Value of Listed Securities Requirement ($35 million), with compliance deadlines in October and December 2025224225 - The company is permanently barred from raising capital in Massachusetts due to a Consent Order, which could limit its access to capital markets if enforceable232 - Financial results are highly dependent on macroeconomic conditions (e.g., interest rates, inflation) and the cyclical/seasonal nature of the U.S. residential real estate market, which can cause significant fluctuations in revenue234239 - Ongoing litigation with GYBL could result in a significant downward adjustment of GEM Warrants' exercise price, additional expenses, and diversion of management's time, materially affecting financial position and operations246247 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS No unregistered sales of equity securities or use of proceeds have occurred that were not previously reported - No unregistered sales of equity securities or use of proceeds have occurred that were not previously reported in a Form 8-K251 ITEM 3. DEFAULTS UPON SENIOR SECURITIES This item is not applicable to the company - This item is not applicable252 ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company - This item is not applicable253 ITEM 5. OTHER INFORMATION No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025254 ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including organizational documents, agreements, and certifications - The exhibits include various corporate documents such as the Second Amended and Restated Certificate of Incorporation, Bylaws, and Certificate of Designation of Series A Convertible Preferred Stock255 - Key agreements listed are the Secured Promissory Note, Form of Inducement Letter, and Exchange Agreement with Streeterville Capital, LLC255256 - Certifications from the Principal Executive Officer and Principal Financial Officer (Rule 13a-14(a)/15d-14(a) and Section 1350) are included, along with Inline XBRL documents256