reAlpha Tech Corp. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes as disclosed in our Prospectus (as defined below). The following discussion contains forward looking statements that are based on current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward looking statements as a result of various factors, including, but not limited to, those identified below and those discussed in the section titled “Risk Factors” and other sections, including the “Special Note Regarding Forward-Looking Statements and Other Information Contained in this Report,” of this Quarterly Report on Form 10-Q and the section titled “Risk Factors” in our Prospectus. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Business Overview Our business model is built with technologies for analyzing and acquiring short-term rental properties that meet our investment criteria, which evaluates acquisition investments using our proprietary algorithm (the “Investment Criteria”) for syndication purposes, and which we call “Target Properties.” Once the Target Properties are acquired, they are prepared for rent and listed on short-term rental sites. Our technologies help us not only identify viable short-term rental properties, but also optimize their performance by generating listing descriptions using the surrounding attractions of the location, analyzing guest reviews in the area, and suggesting improvements. Once our technologies are fully developed and ready to be commercialized, we intend to make some of these technologies available for commercial use by other customers on a licensing fee basis, pay-per-use basis or other fee arrangements. The Company plans to make Target Properties available to investors via the Company’s subsidiary, Roost Enterprises, Inc. (“Rhove”). Rhove, along with Rhove Real Estate 1, LLC, reAlpha Acquisitions Churchill, LLC and future Syndication LLCs (the “Rhove SBU”), will create and manage limited liability companies (each, a “Syndication LLC”) to syndicate one or more of the Target Properties through exempt offerings. Once the Syndication LLCs are in place, Rhove will launch exempted offerings to sell membership interests in such properties to investors, through the purchase of membership interests in the Syndication LLCs, pursuant to Regulation A or Regulation D, each as promulgated under the Securities Act of 1933, as amended (the “Securities Act”) (each, a “Syndication”). To further facilitate the investment process in the Syndication LLCs, the Company is currently working on the reAlpha App (hereafter referred to as the “reAlpha App,” “App” or “app”). The membership interests will provide an ownership stake in the Syndication LLC and in turn in the Target Properties. We refer to such investors as “Syndicate Members,” who differ significantly to the holders of our common stock. To date, we have not yet developed a secondary trading market for equity interests in our Syndication LLCs. While the potential establishment of such a market is under consideration, no final decision has been made to implement a secondary trading market at this time. Rights among Syndicate Members may vary among each other depending on the specific terms and conditions agreed to in the offering documents pursuant to which the holder becomes a Syndicate Member. By becoming a Syndicate Member, the holder will not acquire any rights to the Company’s common stock and, therefore, will not be entitled to vote, receive a dividend or exercise any other rights of a stockholder of the Company. Likewise, acquiring shares of common stock of the Company will not provide the stockholders the status of Syndicate Member. Both Syndicate Members and our stockholders will receive the same quarterly financial metric information of our listed properties through the reAlpha App and the reAlpha website, which will also be available to the general public without a login, concurrently with our consolidated quarterly results (as more fully described under the “Segments - Platform Services” section below). Syndicate members that have access to the reAlpha App will only receive personalized financial information respective to their individual holdings in each of our Syndications. 18 To implement our business model, we plan to acquire the Target Properties through the Rhove SBU that satisfy our Investment Criteria. Then, if needed, we renovate the Target Properties, prepare them for rent, list them on short-term rental sites and arrange for the Target Properties to be managed, internally or through third-parties. We expect that in the future these investors will become Syndicate Members through the purchasing of membership interests in our Syndication LLCs. In addition to managing the property operations, whether internally or through third-parties, we will also manage the financial performance of the asset, such as evaluating if the after-repair value or appreciated value of the property is higher than the purchase price, or whether the property is ready to generate the expected profitability. Once our business model is fully implemented, we expect that Syndicate Members will hold up to 100% ownership of the Syndication LLC, and we would generate revenue through fees from the reAlpha App. Further, the Company expects that its other technologies, including the reAlphaBRAIN, reAlphaHUMINT, GENA, and future technologies, will generate revenue through licensing fees, usage fees and other fee arrangement methods that the Company will employ to capitalize on its developing technologies and platform. Segments We operate in two reportable segments consisting of (i) platform services and (ii) rental business. Our platform services segment offers and develops AI-based products and services to customers in the real-estate industry, while our rental business focuses on purchasing properties for syndication, which process is powered by our platform services technologies. See “Our Business and Properties” and “Note 14 – Segment Reporting” for additional information about our business segments. (i) Platform Services We develop our platform services segment technologies to advance our goal to empower retail investor participation in short-term rental properties. We seek to differentiate ourselves from competitors primarily through the integration of AI into our technologies for the real estate industry. We expect that our platform services segment will benefit from the current exponential growth of the AI industry, and we believe that we are well-positioned to take advantage of these current trends due to our early adoption of AI for the development of our technologies. Our platform services segment technologies include reAlpha BRAIN TM , reAlpha App, reAlpha HUMINT and GENA. As of October 31, 2023, we have gen erated revenue from technical support we are providing to Turnit in connection with myAlphie’s sale. Once our technologies are fully developed and ready to be commercialized, we intend to make some of these technologies available for commercial use by other customers on a licensing fee basis, pay-per-use basis or other fee arrangements. 19 (ii) Rental Business To advance our goal to empower retail investor participation in short-term rental properties, we intend to purchase properties identified by our technologies, and syndicate such properties through exempt offerings for investors to purchase membership interests of the Syndicated property through our Syndication LLCs. We believe that our competition in acquiring properties for investment purposes are individual investors, small private investment partnerships looking for one-off acquisitions of investment properties that can either be leased or restored and sold, and larger investors, including private equity funds and real estate investments trusts (“REITs”), that are seeking to capitalize on the same market opportunity that we have identified. The growth in the Sunbelt States, which includes Florida and Texas, gave us the opportunity to focus on those markets for short-term rentals. As such, since inception, we purchased properties in those states exclusively for Syndication purposes. Our rental segment revenue was lower during the year ended April 30, 2023 and quarter ended October 31, 2023, due to the disposition of most of our properties in our targeted geographical markets. The recent disposal of properties is occurring as part of a temporary adjustment, as we are currently in the process of re-evaluating our operations in Texas and Florida. As a result, we have sold four properties in such states, and have listed the fifth property for sale as well, during the three months ended October 31, 2023. As we continue to evaluate our rental business operations and strategy, we expect to not purchase properties until the second quarter of 2024 or later. Recent Developments Nasdaq Direct Listing On October 23, 2023, we completed our direct listing on The Nasdaq Stock Market LLC (“Nasdaq”), pursuant to which we registered for resale up to 4,151,519 shares of our common stock held by certain selling stockholders of the Company. Certificate of Incorporation and Bylaws Amendment In connection with the Direct Listing, on April 14, 2023, the board of directors of the Company (the “board of directors”) approved the Second Amended Certificate of Incorporation (the “Certificate of Incorporation”) and Second Amended and Restated Bylaws (the “Bylaws”), which became effective on October 20, 2023. The Certificate of Incorporation was amended and restated in their entirety to, among other things: (i) increase the number of authorized shares of common stock from 50,000,000 to 200,000,000 shares; (ii) authorize 5,000,000 shares of preferred stock, value $0.001 per share, which may be issued from time to time in one or more series as determined by the board of directors; and (iii) heighten the standards of voting for certain provisions regarding indemnification and application of Section 203 of the DGCL. The Bylaws were amended and restated in its entirety to include certain additional provisions, including indemnification provisions, and to reflect changes in the DGCL and market practices for similarly-situated public companies. Follow-On Offering On November 21, 2023, we entered into a placement agency agreement with Maxim Group LLC (“Maxim”), pursuant to which we agreed to sell 1,600,000 units on a best-efforts basis at a price of $5.00 per unit for aggregate gross and net proceeds of $8.0 million and $7.16 million, respectively. Each unit was comprised of one share and one and a half warrant to purchase one and a half share of common stock, with each warrant being exercisable for a five-year period to purchase an additional share at a price of $5.00, subject to adjustments specified therein (the “Common Warrants”). The securities were issued on November 24, 2023, and were registered pursuant to a Form S-11 registration statement (File No. 333-275604). Maxim was paid 7% of the gross proceeds from this offering and was also reimbursed $107,500 for its expenses. 20 Execution of Purchase Agreements to Acquire Naamche, Inc. and Naamche, Inc. Pvt. Ltd. On December 3, 2023, we entered into a Stock Purchase Agreement, dated as of December 3, 2023 (the “First Purchase Agreement”), by and among us, Naamche, Inc., a Delaware corporation and artificial intelligence (“AI”) studio (“U.S. Naamche”), the selling shareholders of U.S. Naamche identified therein (each a “Seller,” and, collectively, the “Sellers”), and Ramesh Pathak as the representative of the Sellers (the “Sellers’ Representative”), pursuant to which we agreed to acquire all of the issued and outstanding shares of capital stock of U.S. Naamche not already owned by us (the “First Acquisition”), in exchange for: (i) 225,000 shares (the “Shares”) of the our restricted common stock to be issued to the Sellers within 9 months from the closing date of the Acquisitions (as defined below) (the “Closing Date”), with each Seller receiving a number of Shares based on such Seller’s Relative Share (as defined in the First Purchase Agreement); and (ii) $450,000 in cash, payable to the Sellers in the 3 year period following the Closing Date based on the achievement of specified revenue-based targets (the “Contingent Payments,” and together with the Shares, the “U.S. Naamche Purchase Price”). The Shares will be subject to vesting over a 3 year period commencing from the date of issuance (the “Vesting Period”), provided that the Sellers remain actively involved in the management and operations of Naamche (as defined below) during the Vesting Period. As of the date of execution of the First Purchase Agreement, we owned 25% of the issued and outstanding capital stock of U.S. Naamche. Concurrently with the execution of the First Purchase Agreement, we also entered into a Stock Purchase Agreement, dated as of December 3, 2023 (the “Second Purchase Agreement,” and together with the First Purchase Agreement, the “Purchase Agreements”), by and among us, Naamche, Inc. Pvt. Ltd., a corporation formed in the country of Nepal (“Nepal Naamche,” and together with U.S. Naamche, “Naamche”), the Sellers and the Sellers’ Representative, pursuant to which we agreed to acquire all of the issued and outstanding shares of capital stock of Nepal Naamche (the “Second Acquisition,” and together with the First Acquisition, the “Acquisitions”), in exchange for $50,000 in cash payable to each Seller based on such Seller’s Relative Share (as defined in the Second Purchase Agreement) (the “Nepal Naamche Purchase Price,” and together with the U.S. Naamche Purchase Price, the “Purchase Price”). The closing of the Acquisitions is subject to the satisfaction or waiver of certain closing conditions set out in the Purchase Agreements, which with respect to the Second Purchase Agreement, includes the receipt of regulatory approval from the Department of Industries of Nepal for the transactions contemplated by the Second Purchase Purchase Agreement. Furthermore, the closing of the First Acquisition is contingent upon the satisfaction or waiver of all of the closing conditions set out in the Second Purchase Agreement. As a result of the Acquisitions, we will own 100% of the issued and outstanding shares of capital stock of Naamche, and both entities will be our wholly-owned subsidiaries. In accordance with the Purchase Agreements, we also have the right to set-off any amount owed by the Sellers in connection with the Purchase Agreements, including any Losses (as defined in the Purchase Agreements) for which we are entitled to indemnification, against any amount owed by us to any Seller under the Purchase Agreement (including, but not limited to, any portion of the Purchase Price). Letter of Intent On December 13, 2023, we entered into a non-binding letter of intent (the “LOI”) to acquire United Software Group, and certain subsidiaries and affiliates (collectively, “USG”) an Ohio-based privately-held, multi-industry information technology consulting company (the “Acquisition”). Each party is expected to be responsible for its own expenses related to the negotiation and preparation of the definitive agreements and any ancillary documents, together with the completion and closure of the Acquisition. Closing of the Acquisition will be subject to customary closing conditions and potential stockholder approval to the extent required by the Nasdaq Listing Rules. There can be no assurance we will enter into a definitive agreement or closing conditions will be satisfied. Therefore, there can be no assurance the Acquisition will be completed (see “Item 5 – Disclosure Pursuant to Item 8.01 of Current Report on Form 8-K – Other Events – Letter of Intent” for more information about the LOI). Results of Operations Pursuant to the merger (the “Downstream Merger”) between reAlpha Tech Corp. (the “Former Parent”) and reAlpha Asset Management, Inc. (the “Former Subsidiary”), our Former Parent merged with and into the Former Subsidiary, with the Company surviving the Downstream Merger. Because the Company acquired the Former Parent’s assets and liabilities upon consummation of the merger, the Former Parent’s financials became a part of the consolidated financial statements of the Company. As a result, the financial statements included in this report and discussed herein reflect the operating results of both our Former Parent and the Company prior to March 21, 2023, which was the date on which the Downstream Merger closed, and our combined results, including those of the Former Parent, following the Downstream Merger closing date. 21 Three months ended October 31, 2023, compared to three months ended October 31, 2022 For the Three Months Ended October 31, 2023 October 31, 2022 (unaudited) (unaudited) Revenues $ 33,459 $ 110,624 Cost of revenues 30,360 83,771 Gross Profit 3,099 26,853 Operating Expenses Wages, benefits and payroll taxes 265,099 298,326 Repairs and maintenance 24,663 4,776 Utilities 4,551 8,244 Travel 15,208 23,919 Dues and subscriptions 8,100 25,894 Marketing and advertising 43,213 402,359 Professional and legal fees 3,680,488 485,307 Depreciation and amortization 7,863 36,736 Other operating expenses 144,222 229,140 Total operating expenses 4,193,407 1,514,701 Operating Loss (4,190,308 ) (1,487,848 ) Other Income (Expense) Interest income 277 93 Other income - 2,660 Interest expense (22,075 ) (40,701 ) Other expense (40,760 ) (32,045 ) Total other income (expense) (62,558 ) (69,993 ) Net (Loss) Income (4,252,866 ) (1,557,841 ) Less: Net Income (Loss) Attributable to Non-Controlling Interests 13 46 Net (Loss) Income Attributable to Controlling Interests $ (4,252,879 ) $ (1,557,887 ) Revenues . Revenue was $33,459 for the three months ended October 31, 2023 compared to $110,624 for the three months ended October 31, 2022. Our revenues consist of both the short-term rental revenue that we receive from our listed properties, and platform services income that we receive from our technologies. This decrease in revenues is mainly attributed to lower rental income segment due to the disposal of four properties during the three months ended October 31, 2023, and lower platform services segment revenue compared to the three months ended October 31, 2022 as a result of the sale of myAlphie. Cost of Revenues . The cost of revenues was $30,360 for the three months ended October 31, 2023, compared to $83,771 for the three months ended October 31, 2022. Cost of revenue consists of payments for property management fees of listed properties and associated payment processing fees to Stripe, which is a payment platform. Previously, cost of revenues also included payments to vendors for work completed through myAlphie. The decrease in cost of revenues is mainly attributed to no longer incurring costs to these vendors after the sale of myAlphie. 22 Repairs and Maintenance . Repairs and maintenance were $24,663 for the three months ended October 31, 2023, compared to $4,776 for the three months ended October 31, 2022. This increase in repair and maintenance expenses for the three months ended October 31, 2023, is attributable to major repair work undertaken in some of the properties to prepare them for sale. Marketing and Advertising . Marketing and advertising expenses were $43,213 for the three months ended October 31, 2023, compared to $402,359 for the three months ended October 31, 2022. The significant decrease in expenses is mainly attributed to the closure of the Regulation A campaign on January 19, 2023. Professional and Legal Fees . Professional and legal fees were $3,680,488 for the three months ended October 31, 2023, compared to $485,307 for the three months ended October 31, 2022. This increase is mainly attributed to general legal advisory and professional services incurred in connection with our direct listing on Nasdaq, which primarily consists of 304,529 shares of our common stock issued for services rendered in connection with our direct listing on Nasdaq at an aggregate fair market value of approximately $3.05 million. Depreciation and Amortization . Depreciation and amortization were $7,863 for the three months ended October 31, 2023, compared to $36,736 for the three months ended October 31, 2022. The lower depreciation and amortization costs are attributable to the recent property sales during the three months ended October 31, 2023. Other Operating Expenses . Other expenses were $144,222 for the three months ended October 31, 2023, compared to $229,140 for the three months ended October 31, 2022. Other operating expenses mainly consist of property and employee insurance, homeowners’ association expenses, expenses related to sale of properties, such as commissions, title charges, employee recruitment expenses, employee training and skill development, and other associated costs. The overall decrease is mainly attributed to lower expenses related to properties after the recent sale of properties. Interest Expense . Interest expense was $22,075 for the three months ended October 31, 2023, compared to $40,701 for the three months ended October 31, 2022. This decrease in interest expense is attributable to repayments of mortgage loans after the sale of certain properties. Net Loss . Net loss was $4,252,879 for the three months ended October 31, 2023, compared to a net loss of $1,557,887 for the three months ended October 31, 2022. The net loss increase is mainly attributable to the increase in general legal advisory and professional services incurred in connection with our direct listing on Nasdaq, which primarily consists of 304,529 shares of our common stock issued for services rendered in connection with our direct listing on Nasdaq at an aggregate fair market value of approximately $3.05 million, which we believe is a non-recurring expense. 23 Analysis of Segment Results: The following is an analysis of our results by reportable segment for the quarter ended October 31, 2023 compared to the quarter ended October 31, 2022. For further information regarding our reportable business segments, please refer to our consolidated financial statements and related notes included elsewhere in this report. Platform Services 2023 2022 Change in $ Change in % Total revenue $ 30,360 $ 77,302 $ (46,942 ) (61 )% Cost of revenues (30,360 ) (76,773 ) 46,413 (60 )% Operating expenses - - - - Segment earnings (loss) $ - $ 529 $ ( 529 ) (100 )% Revenues. Revenues for the platform services segment were $30,360 for the three months ended October 31, 2023, compared to $77,302 for the three months ended October 31, 2022. This difference is attributable to the fact that the myAlphie platform was sold and we have not generated other platform services revenue, except for providing support to Turnit during the transition period after the sale of myAlphie. Cost of revenues. Cost of revenues for the platform services segment was $30,360 for the three months ended October 31, 2023, compared to $76,773 for the three months ended October 31, 2022. As a result of the sale of myAlphie, the cost of revenues in the platform services segment now consists only of costs incurred in connection with the technical support services provided to Turnit. The decrease in the cost of revenues is mainly attributable to The Company no longer incurring any payments to vendors previously associated with myAlphie’s platform. Segment earnings . Platform service segment earnings was $0 for the three months ended October 31, 2023, compared to segment earnings of $529 for the three months ended October 31, 2022. This decrease was mainly attributed to the sale of the myAlphie platform. Rental Business 2023 2022 Change in $ Change in % Total revenue $ 3,099 $ 33,322 $ (30,223 ) (91 )% Cost of revenues - (6,998 ) 6,998 (100 )% Operating expenses (1,148,117 ) (1,514,701 ) 366,584 (24 )% Segment earnings (loss) $ (1,145,018 ) $ (1,488,377 ) $ 343,359 (23 )% Revenues . Revenues for the rental business segment were $3,099 for the three months ended October 31, 2023, compared to $33,322 for the quarter ended October 31, 2022. This decline can be attributed to a reduction in the number of listed properties compared to the quarter ended October 31, 2022. The recent disposal of properties is occurring as part of a temporary adjustment, as we are currently in the process of re-evaluating our operations in Texas and Florida. As a result, we sold four of the five properties we previously held in those markets, and have listed the fifth property located in Texas for sale as well. Cost of revenues . Cost of revenues for the rental business segment was $0 for the three months ended October 31, 2023, compared to $6,998 for the three months ended October 31, 2022. This difference is attributed to the decrease in the number of properties listed, which decreased the associated costs of maintaining those properties. Operating expenses. Operating expenses of the rental business segment was $1,148,117 for the three months ended October 31, 2023, compared to $1,514,701 for the three months ended October 31, 2022. This decrease is mainly attributed to a reduction in expenses for marketing and advertising, general legal advisory, and professional services. 24 Segment loss . Segment loss was $1,145,018 for the three months ended October 31, 2023, compared to $1,488,377 for the three months ended October 31, 2022. This decrease is mainly attributable to a reduction in expenses for marketing and advertising, general legal advisory, and professional services. Six months ended October 31, 2023, compared to six months ended October 31, 2022 For the Six Months Ended October 31, 2023 October 31, 2022 (unaudited) (unaudited) Revenues $ 101,180 $ 199,497 Cost of revenues 74,554 151,413 Gross Profit 26,626 48,084 Operating Expenses Wages, benefits and payroll taxes 517,145 566,503 Repairs and maintenance 48,893 11,357 Utilities 11,453 21,285 Travel 25,229 38,078 Dues and subscriptions 17,827 46,750 Marketing and advertising 95,842 582,427 Professional and legal fees 3,876,300 936,825 Depreciation and amortization 29,176 73,738 Other operating expenses 192,569 150,937 Total operating expenses 4,814,434 2,427,900 Operating Loss (4,787,808 ) (2,379,816 ) Other Income (Expense) Interest income 321 157 Other income 525 2,660 Gain on sale of myAlphie 5,502,774 - Interest expense (67,588 ) (84,468 ) Other expense (57,946 ) (64,716 ) Total other income (expense) 5,378,086 (146,367 ) Net (Loss) Income 590,278 (2,526,183 ) Less: Net Income (Loss) Attributable to Non-Controlling Interests 150 500 Net (Loss) Income Attributable to Controlling Interests $ 590,128 $ (2,526,683 ) Revenues . Revenue was $101,180 for the six months ended October 31, 2023 compared to $199,497 for the six months ended October 31, 2022. Our revenues consist of short-term rental revenue that we receive from our listed properties, and platform services income that we receive from our technologies. This decrease in revenues is mainly attributed to lower platform services segment income due to the sale of myAlphie, and lower short-term rental revenues as a result of the disposal of properties located in Texas and Florida. Cost of Revenues . The cost of revenues was $74,554 for the six months ended October 31, 2023, compared to $151,413 for the six months ended October 31, 2022. This consists of payments for property management fees of listed properties as well as payments to vendors for work completed through myAlphie and associated payment processing fees to Stripe. Previously, cost of revenues also included payments to vendors for work completed through myAlphie. The decrease in cost of revenues is mainly attributed to incurring lower costs to these vendors after the sale of myAlphie. 25 Repairs and Maintenance . Repairs and maintenance were $48,893 for the six months ended October 31, 2023, compared to $11,357 for the six months ended October 31, 2022. This increase in repair and maintenance expenses for the six months ended October 31, 2023, is attributable to major repair work undertaken in some of the properties to prepare them for sale. Dues and Subscriptions . Dues and subscriptions were $17,827 for the six months ended October 31, 2023, compared to $46,750 for the six months ended October 31, 2022. This decrease is mainly attributable to the cancellation of software being used in connection with the Regulation A campaign that we no longer needed after the close of the campaign as of January 19, 2023. Marketing and Advertising . Marketing and advertising expenses were $95,842 for the six months ended October 31, 2023, compared to $582,427 for the six months ended October 31, 2022. The significant decrease in expenses is mainly attributable to the closure of the Regulation A campaign on January 19, 2023. Professional and Legal Fees . Professional and legal fees were $3,876,300 for the six months ended October 31, 2023, compared to $936,825 for the six months ended October 31, 2022. This increase is mainly due to general legal advisory and professional services incurred in connection with our direct listing on Nasdaq, which primarily consists of 304,529 shares of our common stock issued for services rendered in connection with our direct listing on Nasdaq at an aggregate fair market value of approximately $3.05 million. Depreciation and Amortization . Depreciation and amortization were $29,176 for the six months ended October 31, 2023, compared to $73,738 for the six months ended October 31, 2022. This decrease in depreciation and amortization costs is attributable to recent property sales during the six months ended October 31, 2023. Other Operating Expenses . Other expenses were $192,569 for the six months ended October 31, 2023, compared to $150,937 for the six months ended October 31, 2022. Operating expenses mainly consists of property and employee insurance, homeowners’ association expenses, expenses related to sale of properties, such as commissions, title charges, employee recruitment expenses, employee training and skill development, and other associated costs. This increase during the six months ended October 31, 2023 is mainly attributable to an increase in expenses related to sale of properties. Gain on Sale of myAlphie . Gain on sale of myAlphie was $5,502,774 for the six months ended October 31, 2023, compared to $0 for the six months ended October 31, 2022. This increase is attributable to the sale of the myAlphie platform. This increase may not reflect our current business and may be abnormally high for this period. Interest Expense . Interest expense was $67,588 for the six months ended October 31, 2023, compared to $84,468 for the six months ended October 31, 2022. This decrease in interest expense is attributable to repayments of mortgage loans upon the sale of certain properties. Net Income (Loss). Net income was $590,128 for the six months ended October 31, 2023, compared to a net loss of $2,526,683 for the six months ended October 31, 2022. The reason for this significant increase in our net income is mainly attributable to the gain on sale of myAlphie, as described above. This increase in net income may not reflect our current business and may be abnormally high for this period. 26 Analysis of Segment Results: The following is an analysis of our results by reportable segment for the six months ended October 31, 2023 compared to the six months ended October 31, 2022. For further information regarding our reportable business segments, please refer to our consolidated financial statements and related notes included elsewhere in this report. Platform Services 2023 2022 Change in $ Change in % Total revenue $ 78,518 $ 139,708 $ (61,190 ) (44 )% Cost of revenues (73,269 ) (138,862 ) 65,593 (47 )% Operating expenses - - - - Segment earnings (loss) $ 5,249 $ 846 $ 4,403 520 % Revenues. Revenues for the platform services segment was $78,518 for the six months ended October 31, 2023, compared to $139,708 for the six months ended October 31, 2022. This difference is attributable to the sale of myAlphie. We have not generated other platform services revenue, except for providing technical support to Turnit during the transition period after the sale of myAlphie. Cost of revenues. Cost of revenues for the platform services segment was $73,269 for the six months ended October 31, 2023, compared to $138,862 for the six months ended October 31, 2022. As a result of the sale of myAlphie, cost of revenues in the platform services segment now consists only of costs incurred in connection with the technical support services provided to Turnit. The decrease in the cost of revenues is mainly attributable to a reduction of payments to vendors previously associated with myAlphie’s platform before the sale. Segment earnings . Segment earnings were $5,249 for the six months ended October 31, 2023, compared to $846 for the six months ended October 31, 2022. This increase is mainly attributed to the growth in the platform services revenue before the sale of myAlphie. Rental Business 2023 2022 Change in $ Change in % Total revenue $ 22,662 $ 59,789 $ (37,127 ) (62 )% Cost of revenues (1,285 ) (12,551 ) 11,266 (90 )% Operating expenses (1,769,144 ) (2,427,900 ) 658,756 (27 )% Segment earnings (loss) $ (1,747,767 ) $ (2,380,662 ) $ 632,895 (27 )% Revenues . Revenues for the rental business segment were $22,662 for the six months ended October 31, 2023, compared to $59,789 for the six months ended October 31, 2022. This decrease is attributable to a decrease in the number of properties listed compared to the six months ended October 31 , 2022. The recent disposal of properties is occurring as part of a temporary adjustment, as we are currently in the process of re-evaluating our operations in Texas and Florida and are selling a significant portion of the properties we previously held in those markets and have listed the fifth property located in Texas for sale as well. Cost of revenues . Cost of revenues for the rental business segment was $1,285 for the six months ended October 31, 2023, compared to $12,551 for the six months ended October 31, 2022. This difference is attributed to the decrease in the number of properties listed, which decreased the associated costs of maintaining those properties. 27 Operating expenses . Operating expenses for the rental business segment was $1,769,144 for the six months ended October 31, 2023 compared to $2,427,900 for the six months ended October 31, 2022. This decrease is mainly attributable to expenses for marketing and advertising, general legal advisory and professional services. Segment loss . Segment loss was $1,747,767 for the six months ended October 31, 2023, compared to $2,380,662 for the six months ended October 31, 2022. This decrease is mainly attributable to reduction in expenses for marketing and advertising, general legal advisory, and professional services. The following table provides a concise overview of properties that have been sold. This includes the reasons they are no longer listed, the dates of their acquisition, and the dates when they ceased contributing to revenues and/or expenses: Property Date of Acquisition Date of Disposition Reason for Unlisting Date On Which Property No Longer Contributed to Revenue and Expenses 2540 Hamlet Lane 4/15/2022 8/15/2023 Sale of Property 7/31/23 790 Pebble Beach Drive 2/11/2022 9/7/2023 Sale of Property 8/31/23 612 Jasmine Lane 2/11/2022 10/16/2023 Sale of Property 10/01/23 7676 Amazonas Street 2/11/2022 10/11/2023 Sale of Property 10/11/23 Non-GAAP Financial Measures To supplement our financial information presented in accordance with U.S. GAAP (“GAAP”), we believe “Adjusted EBITDA,” a “non-GAAP financial measure”, as such term is defined under the rules of the SEC, is useful in evaluating our operating performance. We use Adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that Adjusted EBITDA may be helpful to investors because it provides consistency and comparability with past financial performance. However, Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business. We reconcile our non-GAAP financial measure of Adjusted EBITDA to our net income, adjusted to exclude interest expense, provision for (benefit from) income taxes, depreciation and amortization, non-recurring acquisition-related compensation expenses, non-recurring direct listing expenses, unrealized gain or loss on foreign exchange, non-recurring legal reserves and related costs and non-recurring gains. For the three months ended October 31, 2023 and October 31, 2022, we did not have any restructuring expenses and non-recurring acquisition-related compensation expenses. 28 The following table provides a reconciliation of net income to Adjusted EBITDA: For the Three Months Ended October 31, For the Six Months Ended October 31, 2023 2022 2023 2022 Net (Loss) Income $ (4,252,879 ) $ (1,557,887 ) $ 590,128 $ (2,526,683 ) Adjusted to exclude the following - - - - Depreciation & amortization 7,863 36,736 29,176 73,738 Interest Expense 22,075 40,701 67,588 84,468 Gain on Sale of myAlphie - - (5,502,774 ) - Non-recurring direct listing expenses (1) 3,596,056 - - - Adjusted EBITDA $ (626,885 ) $ (1,480,450 ) $ (4,815,882 ) $ (2,368,477 ) (1) Consists of (ii) 304,529 shares of our common stock issued for services rendered in connection with our direct listing on Nasdaq at an aggregate fair market value of approximately $3.05 million, and (ii) cash payments of approximately $550,000. Liquidity and Capital Resources Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt services, acquisitions, contractual obligations, and other commitments. As of the date of this report, we have yet to generate meaningful revenue from our business operations and have funded acquisitions, capital expenditure, and working capital requirements through equity and debt financing. We had cash of $605,337 as of October 31, 2023 and $1,256,868 as of April 30, 2023. On November 21, 2023, we entered into a placement agency agreement with Maxim Group LLC (“Maxim”) and a securities purchase agreement for the purposes of completing a best-efforts financing with Maxim resulting in the issuance of 1,600,000 shares of common stock and warrants to purchase common stock at an exercise price of $5.00 per share, subject to adjustments. As a result of this offering, we raised aggregate gross and net proceeds of $8.0 million and $7.6 million, respectively. We anticipate that, following this most recent public offering, we may require additional working capital in the next 12 months to finance our growth through potential acquisitions and to fund our operations. As of October 31, 2023, pursuant to the GEM Agreement (as defined below), we can issue and sell to GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, “GEM”) up to an aggregate value of $100 million in shares of our common stock pursuant to draw down notices in accordance with the GEM Agreement. At this time, we do not intend to draw down on the GEM Agreement, but we will continuously evaluate our cash on hand position and business operations needs going forward. We, in our sole discretion, may draw down from the GEM Agreement in the future as our business operations evolve and more working capital to fund operations is needed. We believe the likelihood that any warrant holders will exercise their warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of our common stock. If the trading price for our common stock is less than $371.90 per share, in the case of the GEM Warrants, we believe holders of the GEM Warrants will be unlikely to exercise them. On December 14, 2023, the closing price of the Company’s common stock was $2.25 per share. Our liquidity and capital resources are critical to our ability to execute our business plan and achieve our strategic objectives. Accordingly, to the extent that we may need to raise additional working capital to fund operations, we will need to secure additional financing. The timing, size, and terms of any such offering have not yet been determined. To the extent that the Company requires additional funds more than 12 months from the date hereof, and collections from our short-term rentals and technologies, to the extent commercialized, cannot fund our needs, the Company may utilize equity or debt offerings to raise these funds. We cannot provide any assurance that we will be able to raise additional funds on acceptable terms, if at all. Our ability to raise additional capital will depend on various factors, including market conditions, investor demand, and our financial performance. Further, the cost of capital and historically high-interest rates can have a direct impact on the volume of real estate acquisitions the company plans to complete. Economic environments yielding higher interest rates with more stringent debt terms such as today’s market environment require larger equity commitments. This means that, as larger equity commitments are required, we will have less leverage and will have fewer acquisitions overall. 29 Our business model requires significant capital expenditures to build and maintain the infrastructure and technology required to support our operations. In addition, we may incur additional costs associated with research and development of new products and services, expansion into new markets or geographies, and general corporate overhead. As a result, we may require additional financing in the future to fund these initiatives, which may include additional equity or debt financing or strategic partnerships. We currently do not have any commitments or arrangements for additional financing, and there can be no assurance that we will be able to obtain additional financing on terms acceptable to us, or at all. If we are unable to obtain additional financing when required, we may be forced to reduce the scope of our operations, delay the launch of new products or services, or take other actions that could adversely affect our business, financial condition, and results of operations. We may also be required to seek additional financing on terms that are unfavorable to us, which could result in the dilution of our stockholders’ ownership interests or the imposition of burdensome terms and restrictions. Cash Flows The following table summarizes our cash flows from operating, investing, and financing activities for the periods presented. Six-month period Particulars October 31, 2023 October 31, 2022 Net cash used in operating activities $ (1,169,470 ) $ (1,646,283 ) Net cash provided by investing activities $ 504,633 $ 132,514 Net cash provided by financing activities $ 13,329 $ 170,215 Cash flows from operating activities Net cash used in operating activities was $1,169,470 for the six months ended October 31, 2023, compared to $1,646,283 for the six months ended October 31, 2022. The difference in net cash flows from operating activities was mainly attributable to the gain on sale of myAlphie and the decrease of prepaid expenses. Cash flows from investing activities Net cash provided by investing activities was $504,633 for the six months ended October 31, 2023, compared to $132,514 for the six months Ended October 31, 2022. This difference in cash flows from investing activities is mainly attributable to an increase in proceeds from the sale of properties and software development capitalization. Cash flows from financing activities Net cash provided by financing activities was $13,329 for the six months ended October 31, 2023, compared to $170,215 for the six months ended October 31, 2023. The difference in cash flows from financing activities is mainly attributable to the closing of the Regulation A offering on January 19, 2023. 30 Contractual and Obligations and Commitments Our contractual obligations as of October 31, 2023, include existing mortgage loans of the 1 property currently owned by the Company. Properties City & State Mortgage Loan Amount Interest Rate Maturity 825 Austrian Grand Prairie, Texas $ 247,000 7.50 % 1/01/2053 Total $ 247,000 We have no off-balance sheet arrangements, including arrangements that would affect the liquidity, capital resources, market risk support, and credit risk support, or other benefits. Off-Balance Sheet Transactions We do not have any off-balance sheet transactions. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide this information.