reAlpha Tech Corp. 10-K

ITEM 7. 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 the audited consolidated financial statements and related notes included elsewhere in this report. In addition to historical information, this discussion and analysis here and throughout this report contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements due to a number of factors, including but not limited to, the risks described in the section titled “Risk Factors.” 48 Overview We are a real estate technology company developing an end-to-end commission-free homebuying platform, which we have named reAlpha. Our goal is to offer through our AI-powered platform a more affordable, streamlined experience for those on the journey to homeownership. The reAlpha platform integrates AI-driven tools to offer, among others, tailored property recommendations, an intuitive visual interface, mortgage brokering, digital title and escrow services within the platform. Our tagline: “No fees. Just keys. TM” reflects our mission to eliminate traditional barriers to home ownership and make it more accessible and transparent. The reAlpha platform assists homebuyers with tasks such as mortgage pre-approval, booking tours, sending offer letters and completing property acquisitions. The reAlpha platform also provides market insights, detailed property data, and uses large language models to answer queries and facilitate the homebuying process via a user-friendly, 24/7 web platform and iOS application. The reAlpha platform’s capabilities are complemented and supported by licensed real estate agents with reAlpha Realty, LLC, our in-house brokerage firm, on a no-obligation and commission-free basis. Although the reAlpha platform is currently only available for homebuyers in 20 counties in Florida, we intend to expand its capabilities nationwide by the end of 2026 depending on numerous factors, including, among other things, our ability to acquire and maintain real estate and mortgage licenses in all 50 U.S. states and the District of Columbia, obtain additional MLS data, create and run successful marketing campaigns nationwide to gain brand recognition and increase our geographical reach and build a scalable technology infrastructure. Our Business Model and AI Technologies We are continuously working to commercialize, enhance and refine our AI technologies and the reAlpha platform to continue generating technology-derived revenue. Further, as part of our growth strategy, we intend to continue identifying and acquiring companies that are complementary to our business, and we intend to generate revenue from integrating such acquired companies and their capabilities into our business and our reAlpha platform. To advance such strategy, during 2024 we announced the acquisitions of Naamche, AiChat, Hyperfast and Be My Neighbor, and, since the beginning of 2025, GTG Financial. These acquisitions have added revenue, additional potential sources of revenue, technology services under our umbrella of product offerings, and, as further described below, additional operational and service-related capabilities to the reAlpha platform. For instance, as a result of the acquisition of Be My Neighbor and GTG Financial, our in-house mortgage brokerage that operates through the reAlpha platform is now licensed to operate, in 30 U.S. states. Additionally, because of our acquisition of Hyperfast, we now can offer title, closing and settlement services in 3 U.S. states. As a result of these acquisitions, consumers using the reAlpha platform have access to these services directly in the platform, both through the web platform and iOS application. We expect to continue seeking additional strategic acquisitions that we believe will add additional sources of potential revenue and services to homebuyers using the reAlpha platform, including, but not limited to, home-showing companies, wholesale mortgage lenders, companies providing services for post-closing services (such as utility hookups, among others) and real estate brokerages. Additionally, although we have already acquired two mortgage brokerage firms and a title company, we may consider further acquisitions of companies providing such services to increase the number of U.S. states we are licensed to operate in and the potential revenue opportunities associated with expanding our geographical markets and reach of the reAlpha platform. Before shifting our focus towards the development of our AI technologies and the reAlpha platform, our operational model was asset-heavy and built on utilizing our proprietary AI-powered technology tools for the acquisition of real estate, converting them into short-term rentals, and enabling individual investors to acquire fractional interests in these real estate properties, allowing such investors to receive distributions based on the property’s performance as a short-term rental. In the first quarter of 2024, we decided to halt these operations due to macroeconomic conditions, such as higher interest rates, inflation, and elevated property prices, which conditions persisted throughout the fiscal year 2024. This led us to sell our last real property asset for such operations, and to recognize the impairment of goodwill and intangible assets under the rental business segment . As a result, in the first quarter of 2025, our board of directors approved to discontinue our short-term rental business operations entirely. The discontinuation of our rental business segment operations meets the criteria to be reported as discontinued operations (see “Note 16 – Discontinued Operations” for more information). Business Segment The technology services segment is currently our only reportable segment following the approval by our board of directors to discontinue our rental business segment operations (see “Note 16 – Discontinued Operations” and “Note 17 – Segment Reporting” for more information). Our technology services segment offers and develops AI-based products and services to customers in various industries, including, but not limited to, real estate, retail, hospitality and education industries. Our technology development efforts are currently focused on the development and enhancement of the reAlpha platform. 49 Technology Services 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 technology services segment will benefit from the current 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 revenue model revolves around our mortgage services, title services and related homebuying services through the reAlpha platform, which is currently under limited availability, and services offered by our subsidiaries, such as AiChat, Naamche, Be My Neighbor, Hyperfast and GTG Financial. In order to expand the availability of the reAlpha platform, and services provided thereunder, nationwide, we will need to obtain the relevant real estate and mortgage licenses in the U.S. states we are not yet licensed in, and, until we obtain such licenses, the reAlpha platform will remain under limited availability for homebuyers in 20 counties in Florida. While the reAlpha platform is under limited availability, we will continue offering standalone mortgage brokerage services through our subsidiaries, Be My Neighbor and GTG Financial, in 30 U.S. States and digital title and escrow services through our subsidiary, Hyperfast, in 3 U.S. states. We also plan to continue acquiring companies in the real estate market that provide services relating to the homebuying process, including, but not limited to, mortgage brokerage firms, title and escrow service providers, home insurance providers and others that are complementary to our business, which we expect to generate revenues by offering such services through the reAlpha platform, or as standalone offerings to customers. We expect that our reAlpha platform will drive additional customers to these acquired companies through users interacting and buying homes on the reAlpha platform, which will expand their overall potential customer base. Recent Developments Acquisition of AiChat Pte. Ltd. On July 12, 2024, we entered into a Business Acquisition and Financing Agreement (the “Acquisition Agreement”) with AiChat, a company incorporated in the Republic of Singapore, AiChat10X Pte. Ltd., a Singaporean company (the “AiChat Seller”), and Kester Poh Kah Yong (the “Founder”). Under the Acquisition Agreement, we acquired 85% of the outstanding ordinary shares of AiChat, an AI-driven company specializing in conversational customer experience solutions, from the AiChat Seller. The remaining 15% of AiChat’s shares will be acquired on June 30, 2025 (the “Acquisition”). In exchange for all of the ordinary shares of AiChat outstanding immediately prior to the execution of the Acquisition Agreement, and pursuant to the terms and subject to the conditions of the Acquisition Agreement, we agreed to pay the AiChat Seller an aggregate purchase price of $1,140,000, consisting of: (i) $312,000 in restricted shares of our common stock, based on a 10% discount to the 10 day volume weighted average price (the “VWAP Share Price”) of our common stock as reported on the Nasdaq Capital Market (“Nasdaq”) and issuable to the AiChat Seller no later than January 1, 2025 (the “First Tranche Shares”); (ii) $588,000 in restricted shares of our common stock, based on a 10% discount to the VWAP Share Price, subject to any Base Case Adjustment (as defined in the Acquisition Agreement), issuable to the AiChat Seller no later than April 1, 2025 (the “Second Tranche Shares”); and (iii) $240,000 in restricted shares of our common stock, calculated at a 5% discount to the VWAP Share Price, issuable to the AiChat Seller no later than December 1, 2025 (the “Third Tranche Shares,” and together with the First Tranche Shares and the Second Tranche Shares, the “Tranche Shares”). In addition, we agreed to subscribe for and purchase from AiChat: (i) 55,710 ordinary shares of AiChat as of the Acquisition’s closing date, for a subscription price of $60,000; and (ii) 222,841 ordinary shares of AiChat in accordance with a disbursement scheduled to be determined and agreed to by us, AiChat and the Founder, for a total subscription price of $240,000. Streeterville Capital, LLC Note Purchase Agreement and Secured Promissory Note On August 14, 2024, we entered into a note purchase agreement (the “Purchase Agreement”) with Streeterville Capital, LLC (“Lender”) pursuant to which we issued and sold to the Lender a secured promissory note in the original principal amount of $5,455,000 (the “Note”). The Note carries an original issue discount of $435,000 and we agreed to pay $20,000 to the Lender to cover its legal fees, accounting costs, due diligence, monitoring and other transaction costs, each of which were deducted from the proceeds of the Note received by us resulting in a purchase price received by us of $5,000,000. Interest under the Note accrues at a rate of 8% per annum, and the unpaid amount of the Note, and any interest, fees, charges and late fees are due 18 months following the date of issuance. The Note and Purchase Agreement include certain material terms, including the Lender’s ability to redeem a portion of the Note from time to time beginning seven months after issuance, events of default and penalties associated therewith, restrictive covenants on our ability to issue securities, subject to exceptions set forth therein, a “most favored nation” provision, among others. In connection with the Note and Purchase Agreement, we, Rhove, and subsequently Be My Neighbor, also entered into security agreements and intellectual security agreements in favor of the Lender, and our U.S. subsidiaries entered into a guaranty in favor of the Lender. In connection with the issuance of the Note, we also paid Maxim Group LLC (“Maxim”), as the lead placement agent of the sale of the Note and any additional notes, a cash fee equal to 3.75% of the gross proceeds received by us for the Note and any additional notes and to reimburse Maxim for its reasonable accountable expenses, including legal fees, up to an aggregate amount of $10,000. In addition, if within nine months of a closing of a sale of the Note or any additional notes, we complete any financing of equity or equity-linked capital-raising activity with, or receive proceeds from, any of the investors that were introduced to us by Maxim in connection with the Placement, then we will pay Maxim a cash fee of 3.75% of the proceeds received from such financing. 50 Acquisition of Debt Does Deals, LLC (d/b/a Be My Neighbor) On September 8, 2024 (the “Closing Date”), we entered into a Membership Interest Purchase Agreement (the “BMN Acquisition Agreement”) with Be My Neighbor, a Texas limited liability company, along with Christopher Bradley Griffith and Isabel Williams (collectively, the “BMN Sellers” and individually, a “BMN Seller”). Under this agreement, we acquired 100% of the outstanding membership interests in Be My Neighbor, a mortgage brokerage firm (the “BMN Acquisition”). In exchange for all of the membership interests of Be My Neighbor outstanding immediately prior to the execution of the BMN Acquisition Agreement, and pursuant to the terms and subject to the conditions of the BMN Acquisition Agreement, we agreed to pay the BMN Sellers an aggregate purchase price of up to $6,000,000, subject to the adjustments described below to each of the Earn-Out Payments (as defined below) provided in the BMN Acquisition Agreement, consisting of: (i) $1,500,000 in cash paid on the Closing Date, with each BMN Seller receiving a cash amount in proportion to each of their membership interest percentage in Be My Neighbor; (ii) $1,500,000 in restricted shares of our common stock, or 1,146,837 shares of restricted common stock at a price of $1.31 per share, calculated based on the volume weighted average price of the common stock as reported on Nasdaq for the seven consecutive trading days ending on the trading day immediately prior to the Closing Date, to be issued within 90 days from the Closing Date and with each BMN Seller receiving an amount of shares of common stock in proportion to each of their membership interest percentage in Be My Neighbor (the “Buyer Shares”); and (iii) up to an aggregate of $3,000,000 in potential earn-out payments, payable in three tranches of up to $500,000, $1,000,000 and $1,500,000, respectively, in cash or restricted shares of common stock, at our sole discretion, each of which is calculated based on a formula set forth in the BMN Acquisition Agreement and subject to the achievement of certain financial metrics by Be My Neighbor for three successive measurement periods of 12 months, with the first measurement period ending 12 months after the Closing Date (collectively, the “Earn-Out Payments,” and each, an “Earn-Out Payment”). Specifically, each Earn-Out Payment will be payable in full if Be My Neighbor achieves certain revenue and earnings before interest, taxes, depreciation and amortization (“EBITDA”) thresholds for each of the measurement periods, each of which is payable within 120 days of the end of a measurement period. If Be My Neighbor does not meet the revenue and EBITDA threshold in a measurement period, a pro-rated amount of the Earn-Out Payment for such measurement period will be paid to Be My Neighbor based on the actual revenue and EBITDA achieved and in accordance with the formula set forth in the BMN Acquisition Agreement. Further, if Be My Neighbor exceeds such revenue and EBITDA thresholds during any measurement period, the Earn-Out Payment for such measurement period will not be capped and will be increased accordingly based on the formula set forth in the BMN Acquisition Agreement. The Buyer Shares and any Earn-Out Payment shares (collectively, the “Shares”) will be restricted for 180 days from issuance, during which time the BMN Sellers cannot sell, assign, or transfer them. To comply with Nasdaq Listing Rule 5635(a), the total Shares issued cannot exceed 19.99% of our outstanding common stock (the “Cap Amount”) immediately before the BMN Acquisition, or 8,880,383 shares. If the Shares exceed this Cap Amount, we will compensate the BMN Sellers in cash for the excess, according to a formula in the BMN Acquisition Agreement. Cryptocurrency Investment Policy On December 19, 2024, our board of directors approved a cryptocurrency investment policy and the adoption of certain cryptocurrencies as our primary treasury reserve assets. In accordance with our cryptocurrency investment policy, we intend to acquire cryptocurrencies in an amount not to exceed 25% of our cash and cash equivalents, if any, in excess of our estimated operating expenses for the 6-month period from the date of the proposed purchase, which estimated operating expenses include our allocation for acquisition expenses and estimated future current liabilities for such 6-month period, and to hold such cryptocurrencies we purchase as our primary treasury reserve assets until such time we deem it appropriate, subject to market conditions and our operating needs. ATM Program On December 19, 2024, we entered into an At the Market Sales Agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P.”). In accordance with the terms of the Sales Agreement, we may offer and sell from time to time through A.G.P., acting as sales agent, shares of our common stock having an aggregate offering price of up to $14,275,000 (the “Placement Shares”). The Placement Shares will be issued pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-283284) filed with the Securities and Exchange Commission (the “SEC”) on November 15, 2024, and declared effective on November 26, 2024. On January 31, 2025, we entered into Amendment No. 1 to the Sales Agreement, to reduce the floor price from $5.00 to $3.90 per Placement Share. Then, on February 27, 2025, we entered into Amendment No. 2 to the Sales Agreement to, among other things, reduce the floor price from $3.90 to $0.01 per Placement Share. On March 24, 2025, we provided notice to A.G.P. of our election to terminate the Sales Agreement, which termination was effective on March 29, 2025 in accordance with the terms of the Sales Agreement. Through March 24, 2025, the Company had sold an aggregate of 160,879 shares of common stock pursuant to the Sales Agreement, resulting in gross proceeds of $231,236. 51 Designation of Series A Convertible Preferred Stock On February 20, 2025, the Company filed the Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Delaware, designating 1,000,000 shares of the 5,000,000 shares of the authorized but unissued class of the Company’s stock known as preferred stock as Series A Convertible Preferred Stock (the “Series A Preferred Stock”). The Series A Preferred Stock has a stated value of $20 per share (the “Stated Value”), and a conversion price per share of $20 per share, subject to adjustments provided in the Certificate of Designation (the “Conversion Price”). The holders of outstanding shares of Series A Preferred Stock will be entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of Series A Preferred Stock held by such holder are convertible at the Conversion Price as of the record date for determining stockholders entitled to vote on any matter presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting). Further, commencing on the issuance date of a share of Series A Preferred Stock, each such share of Series A Preferred Stock outstanding and not converted into Common Stock will accrue dividends on a daily basis at a per annum rate of 3.0% of the Stated Value, which dividends will be payable no later than 60 calendar days after the end of each Dividend Period (as defined in the Certificate of Designation) in accordance with and subject to the terms and conditions of the Certificate of Designation (the “Preferred Dividends”). If any shares of Series A Preferred Stock are converted in accordance with and subject to the terms and conditions of the Certificate of Designation on a Conversion Date (as defined in the Certificate of Designation) during the period after the last day of a Dividend Period and prior to the close of business on the corresponding Dividend Record Date (as defined in the Certificate of Designation) for such Dividend Period, and the Company has not paid the entire amount of the Preferred Dividends payable for such corresponding Dividend Period, then the amount of Preferred Dividends with respect to such shares of Series A Preferred Stock will be added to the Liquidation Amount (as defined below) for purposes of such conversion, which Liquidation Amount is the amount, as of any date and with respect to any share of Series A Preferred Stock, equal to the sum of (x) the Stated Value and (y) accrued but unpaid dividends, if any, on such share of Series A Preferred Stock (the “Liquidation Amount”). If any shares of Series A Preferred Stock are instead converted in accordance with and subject to the terms and conditions of the Certificate of Designation on a Conversion Date during the period after the close of business on any Dividend Record Date and prior to the close of business on the corresponding Dividend Payment Date (as defined in the Certificate of Designation), then the amount of Preferred Dividends with respect to such shares of Series A Preferred Stock (the “Residual Payments”), at the Company’s option, will either (x) be paid in cash on or prior to the date of such conversion or (y) if not paid in cash, be added to the Liquidation Amount for purposes of such conversion. The Series A Preferred Stock ranks: (i) senior to all of the Common Stock, (ii) senior to any class or series of capital stock of the Company hereafter created specifically ranking by its terms junior to any Series A Preferred Stock (“Junior Securities”), (iii) on parity with any class or series of capital stock of the Company hereafter created specifically ranking by its terms on parity with the Series A Preferred Stock (“Parity Securities”) and (iv) junior to any class or series of capital stock of the Company hereafter created specifically ranking by its terms senior to any Series A Preferred Stock (“Senior Securities”), in each case, as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether voluntarily or involuntarily. In the event of the Company’s liquidation, dissolution or winding up, holders of the Series A Preferred Stock will be entitled to, subject to the superior rights of the holders of any Senior Securities, (i) receive, in preference to any distributions of any of the assets, whether capital or surplus, of the Company to the holders of the Common Stock and Junior Securities and pari passu with any distribution to the holders of Parity Securities, (a) any Residual Payments and (b) the Liquidation Amount with respect to such shares of Series A Preferred Stock, in each case, before any payments shall be made or any assets distributed to holders of any class of Common Stock or Junior Securities; and (ii) participate pari passu with the holders of Common Stock (on an as-converted to Common Stock basis and disregarding for such purpose any Beneficial Ownership Limitation (as defined in the Certificate of Designation)) in the remaining distribution of the net assets of the Company available for distribution. The Series A Preferred Stock is convertible at the option of the holder at any time during the period beginning on the date of issuance of such Series A Preferred Stock and ending on the date that is 3 years following the respective issuance date thereof (the “Conversion Period”) into a number of Conversion Shares (as defined below) equal to the Liquidation Amount of such share of Series A Preferred Stock divided by the Conversion Price, subject to any Beneficial Ownership Limitation. On the business day after the expiration of the Conversion Period of a Series A Preferred Stock, each such share of Series A Preferred Stock will automatically convert into a number of Conversion Shares equal to the Liquidation Amount of such shares of Series A Preferred Stock divided by the Conversion Price, subject to any Beneficial Ownership Limitation. 52 Acquisition of GTG Financial, Inc. On February 20, 2025, we entered into a Stock Purchase Agreement (the “GTG Purchase Agreement”) with GTG Financial and Glenn Groves, an individual (the “Seller”), pursuant to which the Company acquired from the Seller 100% of the issued and outstanding shares of common stock of GTG (the “Acquired Shares”), a mortgage brokerage company, the closing of which transaction (the “Closing” and the date of the Closing, the “GTG Closing Date”) took place simultaneously with the execution of the GTG Purchase Agreement. Pursuant to and subject to the terms and conditions of the GTG Purchase Agreement, the Company agreed to pay to the Seller an aggregate purchase price of up to $4,200,000 for the Acquired Shares, subject to the adjustments described below, consisting of: (i) $281,250 (the “Preferred Consideration”) in 14,063 shares of Series A Preferred Stock (as defined below) (the “Preferred Shares”), each of which is convertible into shares of our common stock at a conversion price of $20 per share of Series A Preferred Stock (the “Conversion Shares”), in accordance with the terms and conditions of and subject to the adjustments set forth in the Certificate of Designation; (ii) $1,287,000 in 700,055 restricted shares of Common Stock (the “Company Shares”), at a price per share of $1.84 calculated based on the volume weighted average price of the Common Stock as reported on the Nasdaq Capital Market (the “VWAP”) for the 7 calendar days immediately prior to the GTG Closing Date and payable to the Seller within 90 days from the GTG Closing Date; (iii) $1,344,750 payable in cash (the “Cash Portion”) to the Seller as follows: (A) 30% of the Cash Portion payable on the 120-day anniversary of the GTG Closing Date, (B) 30% of the Cash Portion payable on the 150-day anniversary of the GTG Closing Date and (C) 40% of the Cash Portion payable on the 180-day anniversary of the GTG Closing Date; and (iv) up to an aggregate of $1,287,000 in potential earn-out payments, payable in three tranches of up to $429,000 in cash or restricted shares of Common Stock (the “Earn-Out Shares”), at the Company’s sole discretion and subject to the adjustments described below, each of which is calculated based on a formula set forth in the GTG Purchase Agreement and subject to the achievement of certain financial metrics by GTG for three successive measurement periods of 12 months, with the first measurement period ending 12 months following the 1st of the month after the GTG Closing Date (collectively, the “GTG Earn-Out Payments,” and each, an “GTG Earn-Out Payment”). Specifically, each GTG Earn-Out Payment will be payable in full if GTG achieves certain revenue and EBITDA thresholds for each of the measurement periods, each of which is payable within 120 days after the end of a measurement period. If GTG does not meet the revenue and EBITDA threshold for a measurement period, a pro-rated amount of the GTG Earn-Out Payment for such measurement period will be paid to GTG based on the actual revenue and EBITDA achieved in accordance with the formula set forth in the GTG Purchase Agreement. Further, if GTG exceeds the revenue and EBITDA thresholds for any measurement period, the GTG Earn-Out Payment for such measurement period will not be capped and will be increased accordingly based on the formula set forth in the GTG Purchase Agreement. 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 Conversion Shares on the Automatic Conversion Date (as defined in the Certificate of Designation) is less than the Preferred Consideration, as determined based on the VWAP of such Conversion Shares on the Automatic Conversion Date, then the Company will pay for such difference in value in cash or in shares of Common Stock (the “Shortfall Shares,” and together with the Conversion Shares, Company Shares and Earn-Out Shares, the “GTG Shares”), at the Company’s sole discretion, payable or issuable to the holder, as applicable, no later than 30 calendar days after the Automatic Conversion Date. Further, to the extent that the Company does not pay the Cash Portion in full by the date that is 180 days of the GTG Closing Date, then, beginning on the 181st day following the GTG Closing Date, the outstanding amount of the Cash Portion will bear interest at a rate per annum equal to 4% and the Seller will have the right, at the Seller’s sole discretion and to the extent permitted by law, to rescind the transactions contemplated under the GTG Purchase Agreement, in which case the Seller will return any and all consideration paid by the Company in exchange for all the Acquired Shares, and the Company will return the Acquired Shares to the Seller, in each case in accordance with and subject to the terms and conditions of the GTG Purchase Agreement. The Cash Portion outstanding at any time will also become due and payable no later than 60 days after the Company’s consummation of a bona fide transaction or series of transactions with the principal purpose of raising capital in the minimum amount of $10,000,000, whether through loans provided to the Company or through the sale of the Company’s equity securities. The aggregate amount of GTG Shares issuable under the GTG Purchase Agreement, for purposes of complying with Nasdaq Listing Rule 5635, may in no case exceed the Cap Amount immediately prior to the execution of the GTG Purchase Agreement, or 9,206,230 shares, without stockholder approval of any shares exceeding such amount. In the event the GTG Shares issuable pursuant to the GTG Purchase Agreement exceed the Cap Amount, the Company will pay the Seller cash in lieu of such excess shares of Common Stock, based on a formula set forth in the GTG Purchase Agreement. Advertising Agreement and Investment Agreement with Mercurius Media Capital LP On March 7, 2025, we simultaneously entered into an Advertising Agreement (the “Advertising Agreement”) and an Investment Agreement (the “Investment Agreement,” and together with the Advertising Agreement, the “Transaction Documents”) with Mercurius Media Capital LP (“MMC”). In accordance with the Transaction Documents, the Company agreed to issue and sell to MMC 250,000 shares of Series A Preferred Stock for an aggregate purchase price of $5,000,000 (the “Consideration”). The Consideration was paid to the Company in the form of a Credit (as defined in the Advertising Agreement) issued by MMC to the Company at the closing Date in accordance with the terms and subject to the conditions set forth in the Advertising Agreement. 53 Under the Advertising Agreement, the Company will have until December 31, 2025, or, if extended pursuant to the terms of the Advertising Agreement at the request of the Company (the “Extension Period”), March 31, 2026 (such term, as extended pursuant to the terms of the Advertising Agreement, the “Credit Term”), to utilize its Credit with MMC to purchase advertisements in the Media (as defined in the Advertising Agreement) related to the Company’s products, services, brands and business, on the terms and subject to the conditions set forth in the Advertising Agreement. Any unused portion of the Credit at the expiration of the Credit Term will be forfeited by the Company, subject to the compliance of MMC with the terms and obligations set forth in the Advertising Agreement. To the extent the original Credit Term is extended in accordance with the terms of the Advertising Agreement, the Company will only be able to utilize a maximum of $1,000,000 of the remaining Credit during such Extension Period. In order to purchase advertisements in the Media, the Company will be required to submit Media Credit Orders (as defined in the Advertising Agreement) to MMC, and, upon receipt of those Media Credit Orders by MMC, the Credit relating to those will be deemed used, provided that all advertisements relating to such Media Credit Order run on the Media in accordance therewith no later than 90 days after the last date specified in the applicable Media Credit Order, and, to the extent the advertisements do not run in the applicable Media, such Credit shall be re-added to the Company’s overall Credit to be used during the Credit Term. Each of MMC and the Company may terminate the Advertising Agreement at any time in the event of a Material Breach (as defined in the Advertising Agreement) by the Company or MMC, provided that such Material Breach, if capable of cure or remedy, has not been cured or remedied by such defaulting party within 60 days of the receipt of written notice of such Material Breach by the defaulting party. 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 (the “MMC Shortfall Shares,” and together with the Conversion Shares, the “MMC Shares”), 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 $5,000,000 in the aggregate in the Company on the same terms and conditions as those set forth in the Transaction Documents. The aggregate amount of MMC Shares issuable under the Investment Agreement, for purposes of complying with Nasdaq Listing Rule 5635, may in no case exceed the Cap Amount immediately prior to the execution of the Investment Agreement, or 9,228,411 shares, without stockholder approval of any MMC Shares exceeding such amount. In the event the MMC Shares issuable pursuant to the Investment Agreement exceed the Cap Amount, the Company will pay MMC cash in lieu of such excess MMC Shares, based on a formula set forth in the Investment Agreement. Mutual Settlement and Release Agreement with Unreal Estate Inc. On November 29, 2024: (i) we entered into a Membership Interest Purchase Agreement (the “MIPA”), with Unreal Estate LLC (the “Unreal”), USRealty Brokerage Solutions, LLC (“US Realty”) and Unreal Estate Inc. (“Unreal Estate”), pursuant to which, on November 20, 2024 we acquired from the Unreal 100% of the membership interests of US Realty that were outstanding immediately prior to the execution of the MIPA; (ii) we entered into a Letter Agreement (the “Letter Agreement”), with Unreal and Unreal Estate, pursuant to which we agreed to purchase an aggregate amount of $600,000 of convertible promissory notes from Unreal Estate in a series of six installments; and (iii) Unreal Estate issued and sold to us, pursuant to the terms of the Letter Agreement, a convertible promissory note in the original principal amount of $60,000 (the “Note,” and together with the Purchase Agreement and the Letter Agreement, the “Agreements”). On March 19, 2025, we entered into a Mutual Settlement and Release Agreement (the “Settlement Agreement”), with Unreal Estate, to resolve certain claims and disputes between us and Unreal Estate related to their respective obligations under the Agreements and the transactions contemplated thereby. Pursuant to the Settlement Agreement, we agreed to pay Unreal Estate a total sum of $80,000 in cash within one business day following Unreal Estate’s execution and delivery of the Settlement Agreement, and the parties agreed that we will retain full ownership of and control over the membership interests of US Realty that we had acquired pursuant to the Purchase Agreement. The Settlement Agreement also includes a mutual release of claims whereby each of the Company and Unreal Estate agreed (on behalf of themselves and their respective affiliates, successors and assigns) to release the other party of any known and unknown claims arising out of or related to the Agreements and other specified agreements entered into in connection therewith, subject to certain exceptions only with respect to the release of claims given by us. Pursuant to and as a result of the Settlement Agreement, the Note was cancelled and the parties confirmed the termination of the Letter Agreement. Streeterville Capital, LLC Exchange Agreement On March 20, 2025, the Company and the Lender (as defined above), the holder of that certain outstanding Note (the “Original Note”), entered into an exchange agreement (the “Exchange Agreement”), pursuant to which the Company and the Lender agreed to (i) partition a new secured promissory note in the form of the Original Note (the “Partitioned Note”) in the original principal amount of $20,000 (the “Exchange Amount”) and then cause the outstanding balance of the Original Note to be reduced by the Exchange Amount; and (ii) exchange the Partitioned Note for the delivery of 15,873 shares (the “Exchange Shares”) of our common stock at an effective price per Exchange Share equal to $1.26, which is the Minimum Price as defined in Nasdaq Listing Rule 5635(d). 54 Recent Legal Challenges to Sales Agents’ Commission Structure Recent developments in the real estate industry have seen increased scrutiny and legal challenges related to the structure of real estate agent commissions. Legal actions and regulatory inquiries have been initiated to examine the fairness, transparency, and potential anticompetitive practices associated with the traditional commission model. Courts and regulatory bodies may be increasingly focused on ensuring transparency in commission structures, potentially leading to reforms that impact the earnings and business models of real estate professionals. Changes in legislation or legal precedents could impact the standard practices of commission-sharing between listing agents and buyer’s agents and may adversely affect our business model and revenues. On October 31, 2023, a federal jury in Missouri found that the NAR and certain companies conspired to artificially inflate brokerage commissions, which violates federal antitrust law. The judgment was appealed on October 31, 2023, while these and other plaintiffs have filed similar lawsuits against a number of other large real estate brokerage companies. On or about March 15, 2024, NAR agreed to settle these lawsuits, by agreeing to pay $418 million over approximately four years, and changing certain of its rules surrounding agent commissions. This settlement resolves claims against NAR and nearly every NAR member; all state, territorial and local REALTOR® associations; all association-owned MLSs; and all brokerages with an NAR member as principal whose residential transaction volume in 2022 was $2 billion or below and is subject to court approval. Due to this litigation, and effective as of August 17, 2024, NAR has implemented a new rule that prohibits offers of compensation on MLS listings and requires written agreements between buyers and buyer’s agents. Early indications suggest that these changes are already prompting shifts in industry practices as a result of the NAR lawsuit. For instance, discussions are underway regarding potential changes to rules established by local or state real estate boards or multiple listing services. These changes may necessitate adjustments in brokers’ business models, including alterations in agent and broker compensation structures, as well as requiring buyers to sign separate agreements to compensate their agents. We believe that we are well-positioned to take advantage of some of these potential industry changes. Given that the reAlpha platform offers zero-commission when purchasing a property, we believe that homebuyers that have access to the reAlpha platform will choose our platform over seeking agents to conduct their property search and acquisition to avoid paying additional buyer’s agents fees through these separate agreements. Additionally, we expect that our competitors will need to develop mechanisms and plans to enable buyers to negotiate commissions, which may add another layer of complexity into real estate transactions. We believe that the reAlpha platform will remove such layer by offering all these services – including negotiations of fees through our AI negotiation helper – in one platform, while providing buyers with zero-commission fees on all homes purchased through the reAlpha platform. The NAR litigation and its ramifications, however, remain uncertain and could cause unforeseen turmoil in our industry, the impacts of which could have a negative effect on us as an industry participant. Significant Accounting Policies and Estimates The following discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations. These policies and estimates require the application of significant judgment by management. These estimates can be materially affected by changes from period to period as economic factors and conditions outside of our control change. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, our management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. See “Note 2 – Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this report for a more complete description of our significant accounting policies. Critical accounting policies are defined as those that involve significant judgment and potentially could result in materially different results under different assumptions and conditions. Management believes the following critical accounting policies are affected by our more significant judgments and estimates used in the preparation of our consolidated financial statements. Revenue Recognition We recognize revenue and related cost of goods sold in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). A significant portion of our revenues are derived from products and services offered by AiChat, Be My Neighbor and Naamche. reAlpha Tech Corp. (“reAlpha”) recognizes revenue in accordance with ASC 606 – Revenue from Contracts with Customers (“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. 55 AiChat, a company specializing in AI conversational customer experience solutions, 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. Naamche, a company that provides services related to the development of technology, AI and applications,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. Goodwill Impairment Testing 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. Discontinued Operations A business is classified as discontinued when it meets the criteria in ASC 205-20, Presentation of Financial Statements – Discontinued Operations (“ASC 205”). Assets and liabilities of discontinued operations are presented separately in our consolidated balance sheets, and results are reported as a separate component of “consolidated net loss” in the consolidated statements of loss, for all periods presented. Business Combinations Business combinations are accounted for using the acquisition method of accounting in accordance with the ASC 805, Business Combinations (“ASC 805”) . The purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values. Fair value of the acquired assets and liabilities is measured in accordance with the guidance of ASC 820, Fair Value Measurements (“ASC 820”) , using discounted cash flows and other applicable valuation techniques. To assist the Company in making these fair value determinations, the Company may engage third-party valuation specialists or internal specialists who generally assist the Company in the fair value determination of identifiable assets such as customer relationships, Trade Marks and any other significant asset or liabilities. Any acquisition related costs incurred by the Company are expensed as incurred. Any excess purchase price over the fair value of the net identifiable assets acquired is recorded as goodwill if the definition of a business is met. Operating results of an acquired business are included in our results of operations from the date of acquisition. 56 For software acquired in a business combination, capitalization occurs when its fair value is determined using the discounted cash flow (“DCF”) method, as per ASC 820. This fair value assessment involves significant inputs and assumptions, including projected cash flows, expected growth rates, discount rates, and other relevant market data. The Company exercises careful judgment in selecting these inputs, based on historical performance, market conditions, and the specific technological characteristics of the software, to ensure that the valuation accurately reflects its economic potential. Capitalization of Software Development Costs The Company adheres to ASC 350-40, Intangibles – Goodwill and Other, Internal-Use Software (“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 U.S. 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 us and the rate of technological change. Recent Accounting Pronouncements Accounting Pronouncements Issued But Not Yet Adopted In November 2024, the FASB issued Accounting Standards Update (“ASU”) No. 2024-03, Income Statement – Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires additional disclosures about the nature of expenses included in the income statement, such as purchases of inventory, employee compensation and depreciation. ASU 2024-03 is effective for public business entities for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of ASU 2024-03 on its financial statements and related disclosures. In December 2023, the FASB issued ASU 2023-09, “ Income Taxes (Topic 740): Improvements to Income Tax Disclosures ” (“ASU 2023-09”), which enhances the transparency and decision usefulness of income tax disclosures, including jurisdictional information, by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 and early adoption is permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial statements and related disclosures from the adoption of this guidance. Reclassification Presentation Certain amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations for the periods presented in this report. Change in Fiscal Year On December 12, 2023, our board of directors approved the change of our fiscal year end from April 30 to December 31 of each year. In connection with this change, we previously filed a transition report on Form 10-KT to report the results of the eight-month transition period from May 1, 2023 to December 31, 2023 (which we sometimes refer to as the “eight-month transition period ended December 31, 2023”). The periods presented in the accompanying consolidated financial statements included in this report are the year ended December 31, 2024, the eight-month transition period ended December 31, 2023 and the year ended April 30, 2023. For comparison purposes, we have also included unaudited comparative data for the year ended December 31, 2023, and for the eight-months ended December 31, 2022. 57 Results of Operations The discussion of our results of operations below provides a comparison of (1) the twelve months ended December 31, 2024, to the twelve months ended December 31, 2023 and (2) the eight-months ended December 31, 2023 to the eight-month period ended December 31, 2022. All information for the twelve months ended December 31, 2023, and the eight-month period ended December 31, 2022, is unaudited. For comparison of our results of operations for the fiscal years ended April 30, 2023 and 2022, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our transition report on Form 10-KT for the eight-month transition period ended December 31, 2023, filed with the SEC on March 12, 2024. Fiscal Year Ended December 31, 2024, compared to Fiscal Year Ended December 31, 2023 (Unaudited) Twelve Months Ended December 31, 2024 December 31, 2023 (unaudited) Revenue $ 948,420 $ 256,436 Cost of Revenue (302,084 ) (149,518 ) Gross Profit $ 646,336 $ 106,918 Operating Expense (7,548,950 ) (7,522,178 ) Operating (Loss) Income (6,902,614 ) (7,415,260 ) Other (Expense) Income (834,360 ) 4,953,300 Net Loss from Continuing Operations (7,682,714 ) (2,145,055 ) Loss from Discontinued Operations (18,339,635 ) (316,904 ) Revenues. Revenues were $948,420 for the fiscal year ended December 31, 2024, an increase of $691,984, or 270%, from the comparable 2023 period, which increase was primarily driven by revenue generated by our recently acquired companies in the technology services segment, which have been fully integrated in our business and operations. Our revenues currently consist of the revenues generated in our technology services segment that we receive directly from, or from services related to, our technologies and acquired companies. The acquisition of AiChat, our AI conversational platform, and Be My Neighbor, our mortgage brokerage, generated $140,328 and $604,128, respectively, during the fiscal year ended December 31, 2024. These revenues were mainly comprised of the revenue generated from AiChat’s conversational AI technology to enterprise clients, and the mortgage brokerage services from Be My Neighbor. We expect to continue seeking acquisitions to continue growing our revenues. There was no revenue recorded in our rental business segment during the fiscal year ended December 31, 2024, compared to $83,268 for the comparable 2023 period, which decrease was due to the sale of all properties we previously held for the rental business segment’s operations as a result of discontinuing such operations. As of the date hereof, these operations have been fully shut down and we will not generate any revenues in such segment in the future (see “Note 16 – Discontinued Operations” for additional information on our discontinued operations). Cost of revenues. Cost of revenues were $302,084 for the fiscal year ended December 31, 2024, an increase of $152,566, or 102%, from the comparable 2023 period. Cost of revenue primarily includes direct expenses associated with delivering our loan brokerage services and technology solutions, such as compensation-related expenses for roles supporting loan origination and customer interactions, along with other direct costs incurred in connection with services provided by AiChat. This increase is mainly due to the costs incurred by AiChat and Be My Neighbor in their ordinary course of business and operations, which amounted to $101,490 and $127,597, respectively. Operating expenses . Operating expenses were $7,548,950 for the fiscal year ended December 31, 2024, an increase of $26,772, or 0.4%, from the comparable 2023 period. This increase is mainly due to increased salary expenses associated with our acquisitions. Marketing and advertising expenses decreased to $793,004, compared to $299,447 in the comparable 2023 period, $194,197 of which was for advertising the reAlpha platform. 58 Other (expense) income . Other expenses were $834,360 for the fiscal year ended December 31, 2024, a decrease of $5,787,660, or 117%, from the comparable 2023 period. This decrease was primarily due to the one-time gain on the sale of the myAlphie platform, which contributed to other income in the 2023 period. Additionally, we incurred an amortization of a $500,000 commitment fee related to our equity facility with GEM and stock compensation expenses of $207,453. Loss from discontinued operations . Loss from discontinued operations was $18,339,635 for the fiscal year ended December 31, 2024, compared to $316,904 for the comparable 2023 period. This increase is mainly attributable to the goodwill impairment of Rhove (see “Note 8 – Goodwill and Intangible Assets” and “Note 16 – Discontinued Operations” for more information) during our fiscal year ended December 31, 2024. Net loss from continuing operations. Net loss from continuing operations was $7,682,714 for the fiscal year ended December 31, 2024, compared to $2,145,055 for the comparable 2023 period. The increase in net loss was primarily due to a one-time gain of $5,502,774 from the sale of myAlphie, a technology platform we previously developed and sold, that was recognized in the comparable 2023 period, which was not present in 2024. 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 this non-GAAP financial measures may be helpful to investors because it provides consistency and comparability with past financial performance. However, this non-GAAP financial measures is presented for supplemental informational purposes only, have 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 a similarly titled non-GAAP measure differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measure as a tool for comparison. A reconciliation is provided below for our 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 measure and the reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure, and not to rely on any single financial measure to evaluate our business. We use Adjusted EBITDA, a non-GAAP financial measure, to evaluate our operating performance and facilitate comparisons across periods and with peer companies. We reconcile our Adjusted EBITDA to our net income (loss) adjusted to exclude interest expense, depreciation and amortization, share-based compensation, and other non-cash, non-operating, or non-recurring items that we believe are not indicative of our core business operations. We believe this measure provides useful insight into our ongoing performance; however, it should not be considered a substitute for, or superior to, net income or other financial information prepared in accordance with U.S. GAAP. The following table provides a reconciliation of net income to Adjusted EBITDA for the periods presented below: For the Twelve Months Ended December 31 2024 2023 Net (Loss) Income $ (26,022,349 ) $ (2,462,407 ) Adjusted to exclude the following Depreciation and Amortization 282,095 346,171 Gain on Sale of myAlphie - (5,502,774 ) Interest Expense 333,759 128,268 Share-Based Compensation (1) 316,183 - GEM Commitment Fee (2) 500,000 - Acquisition Related Expenses (3) 517,251 103,519 Gain on Previously Held Equity (4) (20,663 ) - Amortization of Loan Discounts and Origination Fees (5) 181,875 - Loss from Discontinued Operations (6) 18,339,635 - Adjusted EBITDA $ (5,572,214 ) $ (7,387,223 ) (1) Reflects share-based compensation provided to non-executive officer employees and certain members of our board of directors for services rendered to us, which is recognized as a non-cash expense. 59 (2) Reflects the commitment fee of $1,000,000 incurred in connection with the equity facility we have in place with GEM pursuant to the GEM Agreement. (3) Reflects expenses related to acquisitions, including professional and legal fees, which are excluded to provide a clearer view of ongoing operational performance. (4) Reflects the gain from the fair value measurement of previously held equity interests, which is recognized as a non-operational item and treated as a non-GAAP measure. (5) Reflects the amortized original issue discount related to the Note (as defined above). (6) Reflects the loss from the discontinuation of our rental business segment operations, which is mainly comprised of the goodwill impairment of Rhove. Eight-Months Ended December 31, 2023, compared to Eight-Months Ended December 31, 2022 (Unaudited) Eight-Months Ended December 31, 2023 Eight-Months Ended December 31, 2022 (unaudited) Revenues $ 121,690 $ 284,666 Cost of revenues 94,665 219,916 Gross Profit 27,025 64,750 Operating Expenses Wages, benefits and payroll taxes 710,737 785,149 Repairs and maintenance 51,436 14,641 Utilities 12,321 24,619 Travel 45,276 57,621 Dues and subscriptions 24,581 69,328 Marketing and advertising 193,612 1,897,067 Professional and legal fees 4,619,480 997,029 Depreciation and amortization 289,067 98,256 Other operating expenses 419,137 265,790 Total operating expenses 6,365,647 4,209,500 Operating Loss (6,338,622 ) (4,144,750 ) Other Income (Expense) Interest income 557 208 Other income 89,860 48,322 Gain on sale of myAlphie 5,502,774 - Interest expense (70,676 ) (111,625 ) Other expense (230,866 ) (33,710 ) Total other income (expense) 5,291,649 (96,805 ) Net Loss before income taxes $ (1,046,973 ) $ (4,241,555 ) Revenues. Revenue for the eight months ended December 31, 2023 was $121,690, compared to $284,666 for the eight months ended December 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 directly from, or services related to, our technologies. This decrease in revenues is mainly attributed to lower rental income segment due to the disposal of properties during the eight months ended December 31, 2023, and lower platform services segment revenue compared to the eight months ended December 31, 2022 as a result of the sale of myAlphie. 60 Cost of revenues. Cost of revenues was $94,665 for the eight months ended December 31, 2023, compared to $219,916 for the eight months ended December 31, 2022. Cost of revenues consists of payments for property management fees of listed properties, payments to vendors for work completed through myAlphie, associated payment processing fees to Stripe, which is a payment platform. The decrease in cost of revenues is mainly attributed due to the sale of myAlphie, since we no longer incur any direct costs related to operating the myAlphie platform. Marketing and Advertising. Marketing and advertising expenses were $193,612 for the eight months ended December 31, 2023, compared to $1,897,067 for the eight months ended December 31, 2022. The decrease in expenses is mainly attributable to no longer incurring marketing and advertising expenses related to our Regulation A campaign, which closed on January 19, 2023. Professional and Legal Fees. Professional and legal fees were $4,619,480 for the eight months ended December 31, 2023, compared to $997,029 for the eight months ended December 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 at an aggregate fair market value of approximately $3,050,000. Depreciation and Amortization. Depreciation and amortization expenses were $289,067 for the eight months ended December 31, 2023, compared to $98,256 for the eight months ended December 31, 2022. This increase is mainly attributed to the inclusion of intangible asset amortization in the depreciation and amortization expenses for the eight months ended December 31, 2023. Other Operating Expenses. Other operating expenses were $419,137 for the eight months ended December 31, 2023, compared to $265,790 for the eight months ended December 31, 2022. This increase is mainly attributed to an increase in directors’ and officers’ insurance expenses, and an increase in commission and title expenses occurred in connection with the sale of properties during the eight months ended December 31, 2023. Other Income. Other income was $89,860 for the eight months ended December 31, 2023, compared to $48,322 for the eight months ended December 31, 2022. This increase is mainly attributed to the gain on sale of certain properties sold during the eight months ended December 31, 2023. Gain on Sale of myAlphie . Gain on sale of myAlphie was $5,502,774 for the eight months ended December 31, 2023, compared to $0 for the eight months ended December 31, 2022. This increase is attributed to the sale of the myAlphie platform on May 17, 2023. This reported gain due to the sale of myAlphie may not reflect our current business and may be abnormally high for this period. Other Expenses. Other expenses were $230,866 for the eight months ended December 31, 2023, compared to $33,710 for the eight months ended December 31, 2022. This increase is mainly due to the amortization expenses of the commitment fee paid in connection with the credit facility we have in place with GEM and a legal settlement expense. This legal settlement expense of $125,000 was paid on February 20, 2024 pursuant to a settlement agreement between us and Valentina Isakina (see “Legal Proceedings” above for more details), and this expense was recorded as a one-time operating expense charge in fiscal year 2023 as a recognized subsequent event Net Loss. Net loss was $1,046,973 for the eight months ended December 31, 2023, compared to a net loss of $4,241,555 for the eight months ended December 31, 2022. This decrease in net loss is mainly attributable to the sale of myAlphie. This decrease in net loss may not accurately represent our current business operations and may be unusually elevated for this period due to the sale of myAlphie. Analysis of Segment Results: The following is an analysis of our results by reportable segment for the eight-months ended December 31, 2023 compared to the eight-months ended December 31, 2022. For further information regarding our reportable business segments, please refer to our consolidated financial statements and “Note 17 – Segment Reporting” and other related notes included elsewhere in this report. Platform Services 2023 2022 Change in $ Change in % Total revenue $ 99,028 $ 204,151 $ (105,123 ) (51 )% Cost of revenues (93,380 ) (203,013 ) 109,633 (54 )% Operating expenses - - - - Segment earnings (loss) $ 5,648 $ 1,138 $ 4,510 396 % Revenues. Revenues for the platform services segment was $99,028 for the eight months ended December 31, 2023, compared to $204,151 for the eight months ended December 31, 2022. This decrease in revenue is attributable to the sale of myAlphie. We have not generated other platform services revenue since the sale of myAlphie, except for providing technical support services to Turnit during the transition period after the sale of myAlphie. 61 Cost of revenues. Cost of revenues for the platform services segment was $93,380 for the eight months ended December 31, 2023, compared to $203,013 for the eight months ended December 31, 2022. This decrease in cost of revenues is mainly attributed to the sale of myAlphie. After the sale, we no longer incur any payments to vendors or Stripe previously associated with myAlphie’s platform. The cost of revenues now consists only of costs incurred in connection with the technical support services provided to Turnit. Segment earnings . Segment earnings was $5,648 for the eight months ended December 31, 2023, compared to $1,138 for the eight months ended December 31, 2022. This increase in segment earnings is mainly due to an increase in support services provided to Turnit and a decrease in payments to vendors and Stripe. Rental Business 2023 2022 Change in $ Change in % Total revenue $ 22,662 $ 80,515 $ (57,853 ) (72 )% Cost of revenues (1,285 ) (16,903 ) 15,618 (92 )% Operating expenses (2,598,124 ) (4,209,500 ) 1,611,376 (38 )% Segment earnings (loss) $ (2,576,747 ) $ (4,145,888 ) $ 1,569,141 (38 )% Revenues . Revenues for the rental business segment was $22,662 for the eight months ended December 31, 2023, compared to $80,515 for the eight months ended December 31, 2022. This decrease is mostly attributable to a decrease in the number of properties listed compared to the eight months ended December 31, 2022, as we are in the process of selling the properties we held for this segment’s operations as a result of putting these operations on hold. Cost of revenues . Cost of revenues for the rental business segment was $1,285 for the eight months ended December 31, 2023, compared to $16,903 for the eight months ended December 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 $2,598,124 for the eight months ended December 31, 2023, compared to $4,209,500 for the eight months ended December 31, 2022. This decrease is mainly attributed to the decrease in professional and legal fees and marketing and advertising expenses for this segment. Segment earnings . Segment loss was $2,576,747 for the eight months ended December 31, 2023, compared to a segment loss of $4,145,888 for the eight months ended December 31, 2022. This decrease is mainly attributable to reduction in expenses for professional and legal fees and marketing and advertising expenses for this segment. The following table provides a concise overview of properties that have been sold during the eight months ended December 31, 2023. The table below includes the reasons they are no longer listed, the dates of their acquisition, and the dates when they ceased contributing to revenues: 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 08/15/2023 Sale of Property 07/31/2023 790 Pebble Beach Drive 2/11/2022 09/7/2023 Sale of Property 08/31/2023 612 Jasmine Lane 2/11/2022 10/16/2023 Sale of Property 10/01/2023 7676 Amazonas Street 2/11/2022 10/11/2023 Sale of Property 10/11/2023 62 Non-GAAP Financial Measures To supplement our financial information presented in accordance with 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 eight-months ended December 31, 2023 and December 31, 2022, we did not have any restructuring expenses and non-recurring acquisition-related compensation expenses. The following table provides a reconciliation of net income to Adjusted EBITDA: For the Eight Months Ended December 31, 2023 2022 Net loss (1,251,259 ) (4,241,555 ) Adjusted to exclude the following: - - Depreciation and amortization 289,067 98,256 gain on sale of myAlphie (5,502,774 ) - Interest expense 70,676 111,625 Legal settlement expenses 125,000 - Non-recurring direct listing expenses (1) 3,767,524 - Income tax expenses, current 204,286 - Adjusted EBITDA (2,297,480 ) (4,031,674 ) (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 $0.72 million. 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. Our liquidity and capital resources are critical to our ability to execute our business plan and achieve our strategic objectives. The cost of capital and historically high-interest rates can also have a direct impact on our ability to raise capital through debt or equity offerings or to pursue acquisitions. 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 may have fewer acquisitions overall. 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. 63 We had cash and cash equivalents of approximately $3.1 million as of December 31, 2024, and approximately $6.4 million as of December 31, 2023. Based on our estimates, we believe we do not have sufficient working capital to meet our financial needs for the 12-month period following December 31, 2024. Further, based on our current operating plans, to the extent the Lender (as defined above) does not redeem any portions of the Note (as further described below) and we do not consummate any offerings of our securities for the purpose of raising capital, we estimate that our cash and cash equivalents as of December 31, 2024, will be sufficient to fund our operating expenses and capital expenditure requirements into the second quarter of 2025. Accordingly, to the extent that collections from our operations in the technology services segment cannot fund our operations, we intend to utilize equity or debt offerings to raise additional funds, although volatility in the capital markets may negatively affect our ability to do so. As part of these efforts, we have utilized our At the Market (“ATM”) program with A.G.P. to raise working capital, and as of the date of this report, we raised approximately $231,235 in gross proceeds through such ATM program prior to its termination (see “Recent Developments – ATM Program” and “Note 14 – Stockholders’ Equity (Deficit)” for more information). Additionally, we are contemplating to raise capital through offerings of our securities during the year ending December 31, 2025, and we expect that, to the extent such offerings are consummated, we will not need additional capital for a period beyond the 12-month period following the consummation of such offerings. While we anticipate continued operating losses in the near future, we remain confident in our strategy to continue investing in the commercialization of our products and technologies and acquisition of complementary businesses and our ability to continue operations. We may also receive proceeds from the cash exercises of the warrants in connection with our public offering from November 2023 (the “Follow-On Warrants”), which currently have an exercise price of $1.44 per share. We believe the likelihood that any Follow-On 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. We believe that if the trading price for our common stock is less than $1.44 per share, it is unlikely that the holders of the Follow-On Warrants will exercise them. Further, due to the ongoing disputes with GYBL regarding the GEM Warrants, including our claims that the GEM Warrants are void and subject to rescission under Section 29(b) of the Exchange Act, there is uncertainty about the enforceability of the GEM Warrants and its terms. On January 17, 2025, GYBL moved to dismiss our complaint relating to this dispute, and, on March 14, 2025, such motion to dismiss our complaint relating to our complaint was granted. Further, on March 19, 2025, GYBL filed a lawsuit against us, which is asserting two causes of action against us: (1) breach of the terms of the GEM Warrants, and (2) declaratory relief concerning the validity and enforceability of the GEM Warrants. In addition to the declaratory relief, GYBL is seeking monetary damages in an amount to be determined at trial, specific performance of the GEM Warrants and attorneys’ fees and litigation costs. As of the date of this report, there has been no adjustment to the exercise price of the GEM Warrants in connection with the dismissal of our complaint, and our position regarding the GEM Warrants, including the exercise price and subsequent adjustments thereof, remains the same pending resolution of these disputes with GEM. As a result, we do not expect that the GEM Warrants will be exercised while these disputes are pending, however, if these disputes are not resolved through negotiations and these lawsuits are adversely determined against us, we may be required to adjust the GEM Warrants’ exercise price downward significantly, and we may incur penalties under the GEM Agreement and/or other litigation expenses related to these disputes, which could materially adversely impact our financial statements, cash flows and results of operations. 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. 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. Contractual Commitments and Obligations On August 14, 2024, we entered into the Purchase Agreement with the Lender (each as defined above) to issue and sell a secured promissory note worth $5,455,000 (see “Recent Developments – Streeterville Capital, LLC Note Purchase Agreement and Secured Promissory Note” for further information). As of December 31, 2024, we have incurred $435,000 original issue discount expenses related to the Note. Further, in accordance with the Note and related Purchase Agreement, the Lender may redeem up to $545,000 of the Note per month at any time, subject to premiums, which amount will be due and payable in cash within three trading days of our receipt of a redemption notice from the Lender. The redemption feature of the Note may require us to make redemption payments at the request of the Lender, and those redemptions may have a material adverse effect on our cash flows, results of operations and ability to pay our debts as they come due, and we may not have the required funds to pay such redemptions, which could result in an event of default under the Note. The Note and related Purchase Agreement also contain restrictive covenants on our ability to issue securities, which may further impact our ability to raise capital to meet our redemption payments or other obligations and expenses as they are due. 64 Cash Flows The following table summarizes our cash flows from operating, investing and financing activities for the periods presented. Year Ended Particulars December 31, 2024 December 31, 2023 Net cash used in operating activities $ (6,042,238 ) $ (5,116,748 ) Net cash (used in) provided by investing activities $ (1,554,400 ) $ 893,717 Net cash provided by financing activities $ 4,263,798 $ 7,689,619 Cash Flows from Operating Activities For the fiscal year ended December 31, 2024, net cash used in operating activities was $(6,042,238), compared to $(5,116,748) for the same period in 2023. The increase is primarily due to higher operating expenses, including salaries of $2,634,138 and professional and legal fees of $1,845,041, most of which were acquisition-related costs. Cash Flows from Investing Activities For the fiscal year ended December 31, 2024, net cash used in investing activities was $(1,554,400), compared to net cash provided by investing activities of $893,717 for the same period in 2023. This change in cash flows from investing activities is mainly attributable to cash paid to acquisitions of $1,282,197 and capitalization of software development costs during the twelve months ended December 31, 2024. Cash Flows from Financing Activities For the fiscal year ended December 31, 2024, net cash provided by financing activities was $4,263,798, compared to $7,689,619 for the same period in 2023. This mainly consists of the issuance of the Note. In contrast, during the comparable period in 2023, proceeds from our public offering and Regulation A offering contributed to financing activities, which were not present in 2024. Off-Balance Sheet Arrangements We do not have any off-balance sheet transactions. Emerging Growth Company Status The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to apply this extended transition period and, as a result, we will not adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for public entities. Accordingly, our financial statements may not be comparable to other public companies that do not elect the extended transition period.