reAlpha Tech (AIRE) - 2024 Q3 - Quarterly Report

PART I Item 1. Financial Statements Q1 2024 financials show decreased revenue, increased net loss, reduced assets and liabilities, reflecting a strategic shift to AI technology Unaudited Condensed Consolidated Balance Sheets Total assets decreased to $25.4 million by March 31, 2024, primarily from reduced cash, while liabilities and stockholders' equity also declined Condensed Consolidated Balance Sheet Summary (in USD) | Balance Sheet Item | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $5,739,903 | $7,400,294 | | Total Assets | $25,372,103 | $27,424,869 | | Total Current Liabilities | $1,082,363 | $1,469,084 | | Total Liabilities | $2,082,363 | $2,716,084 | | Total Stockholders' Equity | $23,289,740 | $24,708,785 | Unaudited Condensed Consolidated Statements of Operations Q1 2024 saw revenue drop to $20,426, operating expenses rise to $1.31 million, and net loss widen to $1.42 million or ($0.03) per share Statement of Operations Summary (in USD) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenues | $20,426 | $111,451 | | Gross Profit | $2,177 | $40,676 | | Total Operating Expenses | $1,309,675 | $834,568 | | Operating Loss | ($1,307,498) | ($793,892) | | Net Loss | ($1,419,045) | ($864,913) | | Net Loss Per Share (basic & diluted) | ($0.03) | ($0.02) | Unaudited Condensed Consolidated Statements of Stockholders' Equity (Deficit) Total stockholders' equity decreased to $23.29 million by March 31, 2024, primarily due to the $1.42 million net loss incurred during the quarter - The net loss of $1,418,980 was the primary driver for the decrease in stockholders' equity during the first quarter of 2024[14] Unaudited Condensed Consolidated Statements of Cash Flows Q1 2024 saw $1.53 million net cash used in operations, minimal investing outflow, and $71,286 from financing, resulting in a $1.62 million cash decrease Cash Flow Summary (in USD) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,527,238) | ($1,585,918) | | Net cash provided by (used in) investing activities | ($19,700) | ($138,973) | | Net cash provided by (used in) financing activities | ($71,286) | $282,577 | | Net decrease in cash | ($1,618,224) | ($1,442,314) | | Cash - End of Period | $4,838,146 | $1,547,468 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail a strategic shift to AI, confirm sufficient cash for going concern, outline two segments (rental paused), and discuss unlikely GEM Warrants exercise - The company has suspended its real estate acquisition operations due to macroeconomic challenges like higher interest rates and has shifted its focus to advancing and refining its AI technologies for commercial applications[19] - Despite ongoing operating losses, management believes the company has sufficient liquid capital ($4.8 million in cash as of March 31, 2024) to fund operations for the next 12 months, supporting its ability to continue as a going concern[51][52] - The company reports two segments: Rental business and Platform service business. The Rental business segment is expected to be paused until the first quarter of 2025 due to market conditions[67] - The company has 1,700,884 GEM Warrants outstanding with an exercise price of $371.90 per share, making their exercise unlikely given the current stock price[74][75] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the strategic pivot to AI, Q1 2024 revenue decline and wider net loss, and confirms sufficient liquidity for the next 12 months Business Overview The company halted real estate acquisitions due to macroeconomic conditions, now focusing on commercializing AI technologies, with the rental business segment paused - Due to escalating interest rates, inflation, and high property prices, the company has halted its real estate acquisition operations[84] - The current focus is on enhancing and refining AI technologies for commercial use to generate technology-derived revenue, including the recent launch of GENA, an AI-powered tool for creating property listing descriptions[84][97] - The company operates two reportable segments: platform services (offering AI-based products) and rental business (currently on hold)[86] Results of Operations Q1 2024 revenues fell to $20,426 due to property disposals, operating expenses increased, leading to a $1.42 million net loss, with varied segment performance Q1 2024 vs. Q1 2023 Financial Comparison (in USD) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenues | $20,426 | $111,451 | | Gross Profit | $2,177 | $40,676 | | Operating Loss | ($1,307,498) | ($793,892) | | Net Loss | ($1,419,045) | ($864,913) | - The decrease in revenues is mainly attributed to lower rental income from property disposals and reduced platform services revenue following the sale of myAlphie[111] - The increase in net loss is primarily due to higher wages, professional and legal fees, and amortization of a commitment fee related to an equity facility[120] Liquidity and Capital Resources As of March 31, 2024, the company held $4.8 million in cash, deemed sufficient for 12 months, supported by prior financing and an undrawn $100 million equity facility - The company held cash and cash equivalents of approximately $4.8 million as of March 31, 2024, and believes it has sufficient working capital for the next 12 months[136] - In November 2023, a best-efforts financing raised aggregate gross and net proceeds of $8.0 million and $7.6 million, respectively[137] - The company has access to a $100 million share purchase agreement with GEM but does not intend to draw down on it at this time[138] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is exempt from providing quantitative and qualitative market risk disclosures - The company is not required to provide quantitative and qualitative disclosures about market risk because it qualifies as a smaller reporting company[150] Item 4. Controls and Procedures As of March 31, 2024, disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective at the reasonable assurance level[152] - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, internal controls[153] PART II Item 1. Legal Proceedings This section reports no legal proceedings, though Note 10 details a malpractice lawsuit and a legal proceeding in India involving the CEO - The report states there are no legal proceedings to disclose under this item[157] Item 1A. Risk Factors No material changes to risk factors have occurred since the prior Transition Report on Form 10-KT - No material changes in risk factors from those disclosed in the prior Transition Report on Form 10-KT[158] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales or changes in use of proceeds occurred that were not previously reported in a Form 8-K - There are no transactions that have not been previously included in a Current Report on Form 8-K[159] Item 5. Other Information No directors or officers adopted, modified, or terminated Rule 10b-5 or non-Rule 10b-5 trading arrangements during Q1 2024 - No directors or officers adopted, modified, or terminated a Rule 10b-5 trading arrangement during the quarter[162] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including officer certifications and Inline XBRL documents