reAlpha Tech Corp. 10-Q

ITEM 1. FINANCIAL STATEMENTS reAlpha Tech Corp. and Subsidiaries Condensed Consolidated Balance Sheet March 31, 2025 (Unaudited) and December 31, 2024 March 31, 2025 December 31, 2024 ASSETS (unaudited) Current Assets Cash $ 1,204,400 $ 3,123,530 Accounts receivable, net 164,693 182,425 Receivable from related parties 7,408 12,873 Prepaid expenses 5,183,968 180,158 Current assets of discontinued operations 56,931 56,931 Other current assets 278,422 487,181 Total current assets 6,895,822 4,043,098 Property and equipment, net 101,407 102,638 Other Assets Investments 214,128 215,000 Other long term assets 954,000 31,250 Intangible assets, net 3,256,713 3,285,406 Goodwill 7,010,689 4,211,166 Capitalized software development - work in progress 105,900 105,900 TOTAL ASSETS $ 18,538,659 $ 11,994,458 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current Liabilities Accounts payable $ 940,896 $ 655,765 Related party payables 9,380 9,287 Short term loans - related parties -current portion 245,292 261,986 Short term loans - unrelated parties -current portion 449,622 519,153 Note payable, current-net of discount 5,010,627 - Accrued expenses 994,728 1,164,813 Deferred liabilities, current portion 4,191,060 1,534,433 Total current liabilities 11,841,605 4,145,437 Long-Term Liabilities Embedded derivate liability 4,327,930 - Preferred stock liability 957,177 - Other long term loans - related parties - net of current portion 27,131 45,052 Other long term loans - unrelated parties - net of current portion 217,036 241,121 Note payable, net of discount - 4,909,376 Other long term liabilities 2,133,000 1,086,000 Total liabilities 19,503,879 10,426,986 Stockholders’ Equity (Deficit) Series A Convertible Preferred Stock ($ 0.001 par value; 5,000,000 shares authorized) 1,000,000 shares designated; 264,063 and 0 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively - - Common stock ($ 0.001 par value; 200,000,000 shares authorized, 46,230,934 shares outstanding as of March 31, 2025; 200,000,000 shares authorized, 45,864,503 shares outstanding as of December 31, 2024) 46,230 45,865 Additional paid-in capital 40,099,285 39,770,060 Accumulated deficit ( 41,110,855 ) ( 38,260,913 ) Accumulated other comprehensive income ( 6,920 ) 5,011 Total stockholders’ (deficit) equity of reAlpha Tech Corp. ( 972,260 ) 1,560,023 Non-controlling interests in consolidated entities 7,040 7,449 Total stockholders’ (deficit) equity ( 965,220 ) 1,567,472 TOTAL LIABILITIES AND STOCKOLDERS’ (DEFICIT) EQUITY $ 18,538,659 $ 11,994,458 1 reAlpha Tech Corp. and Subsidiaries Condensed Consolidated Statements of Operations and Comprehensive Loss For the Three Ended March 31, 2025 and 2024 (unaudited) For the Three Months Ended For the Three Months Ended March 31, 2025 March 31, 2024 Revenues $ 925,635 $ 20,426 Cost of revenues 406,968 18,249 Gross Profit 518,667 2,177 Operating Expenses Wages, benefits and payroll taxes 1,060,104 418,902 Repairs and maintenance 854 749 Utilities 5,213 1,663 Travel 60,991 46,964 Dues and subscriptions 52,232 12,113 Marketing and advertising 518,939 76,784 Professional and legal fees 742,159 468,725 Depreciation and amortization 179,149 71,453 Other operating expenses 321,284 211,482 Total operating expenses 2,940,925 1,308,835 Operating Loss ( 2,422,258 ) ( 1,306,658 ) Other Expense (income) Changes in fair value of contingent consideration 93,000 - Interest expense, net 205,247 10,445 Other expense, net 129,846 101,103 Total other expense 428,093 111,548 Net Loss from continuing operations before income taxes ( 2,850,351 ) ( 1,418,206 ) Net Loss from continuing operations ( 2,850,351 ) ( 1,418,206 ) Discontinued operations (Roost and Rhove) Loss from operations of discontinued Operations - ( 839 ) Loss on discontinued operations - ( 839 ) Net Loss $ ( 2,850,351 ) $ ( 1,419,045 ) Less: Net Loss Attributable to Non-Controlling Interests ( 409 ) ( 65 ) Net Loss Attributable to Controlling Interests $ ( 2,849,942 ) $ ( 1,418,980 ) Other comprehensive income Foreign currency translation adjustments ( 11,931 ) - Total other comprehensive loss ( 11,931 ) - Comprehensive Loss Attributable to Controlling Interests $ ( 2,861,873 ) $ ( 1,418,980 ) Basic loss per share Continuing operations $ ( 0.06 ) $ ( 0.03 ) Discontinued operations $ - $ ( 0.00 ) Net Loss per share — basic $ ( 0.06 ) $ ( 0.03 ) Diluted loss per share Continuing operations $ ( 0.06 ) $ ( 0.03 ) Discontinued operations $ - $ ( 0.00 ) Net Loss per share — diluted $ ( 0.06 ) $ ( 0.03 ) Weighted-average outstanding shares — basic 45,913,591 44,122,091 Weighted-average outstanding shares — diluted 47,662,152 44,122,091 2 reAlpha Tech Corp. and Subsidiaries Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) For the Three Months Ended March 31, 2025, and 2024 (unaudited) Series A Convertible Additional Accumulated Other ReAlpha Tech Corp. and Non- Total Common Stock Preferred Stock Paid-in Accumulated Comprehensive Subsidiaries Controlling Stockholders’ Shares Amount Shares Amount Capital Deficit Loss Equity Interests Equity Balance at December 31, 2023 44,122,091 $ 44,123 - $ - $ 36,899,497 $ ( 12,237,885 ) $ - $ 24,705,735 $ 3,050 $ 24,708,785 Net loss - - - - - ( 1,418,980 ) - ( 1,418,980 ) ( 65 ) ( 1,419,045 ) Balance at March 31, 2024 44,122,091 $ 44,123 - $ - $ 36,899,497 $ ( 13,656,865 ) $ - $ 23,286,755 $ 2,985 $ 23,289,740 Series A Convertible Additional Accumulated Other ReAlpha Tech Corp. and Non- Total Common Stock Preferred Stock Paid-in Accumulated Comprehensive Subsidiaries Controlling Stockholders’ Shares Amount Shares Amount Capital Deficit Loss Equity Interests Equity Balance at December 31, 2024 45,864,503 $ 45,865 - $ - $ 39,770,060 $ ( 38,260,913 ) $ 5,011 $ 1,560,023 $ 7,449 $ 1,567,472 Net loss - - - - - ( 2,849,942 ) - ( 2,849,942 ) ( 409 ) ( 2,850,351 ) Other Comprehensive loss - - - - - - ( 11,931 ) ( 11,931 ) - ( 11,931 ) Shares issue - AiChat10X Pte. 189,679 189 - - ( 189 ) - - - - - Shares issue through ATM 160,879 160 - - 231,075 - - 231,235 - 231,235 Shares issue to Streetville Capital, LLC 15,873 16 - - 19,984 - - 20,000 - 20,000 Stock-based compensation - - - - 78,355 - - 78,355 - 78,355 Balance at March 31, 2025 46,230,934 $ 46,230 $ - $ - $ 40,099,285 $ ( 41,110,855 ) $ ( 6,920 ) $ ( 972,260 ) $ 7,040 $ ( 965,220 ) 3 reAlpha Tech Corp. and Subsidiaries Condensed Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2025, and 2024 (unaudited) For the Three Months Ended For the Three Months Ended March 31, 2025 March 31, 2024 Cash Flows from Operating Activities: Net Loss $ ( 2,850,351 ) $ ( 1,419,045 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 130,399 71,453 Amortization of loan discounts 121,251 - Stock based compensation 78,355 - Change in fair value of contingent consideration 93,000 - Non cash commitment fee expenses 125,000 125,000 Non cash dividend payable Series A Convertible Preferred Stock 184 - Gain on sale of properties - ( 31,378 ) Loss from equity method investment 872 - Changes in operating assets and liabilities Accounts receivable 17,732 18,463 Receivable from related parties 5,465 - Payable to related parties 93 9,800 Prepaid expenses ( 3,810 ) 25,492 Other current assets ( 7,160 ) ( 1,788 ) Accounts payable 184,803 ( 28,263 ) Accrued expenses ( 187,813 ) ( 296,972 ) Deferred liabilities 24,877 - Total adjustments 583,248 ( 108,193 ) Net cash used in operating activities ( 2,267,103 ) ( 1,527,238 ) Cash Flows from Investing Activities: Additions to property and equipment ( 13,665 ) - Proceeds from sale of properties - 78,000 Net Cash paid to acquire business 349,529 - Cash used for additions to capitalized software ( 91,310 ) ( 97,700 ) Net cash provided by (used in) investing activities 244,554 ( 19,700 ) Cash Flows from Financing Activities: Proceeds from issuance of debt – related parties 155,481 - Payments of debt (283,71 1) ( 71,286 ) Proceeds from issuance of common stock 231,235 - Net cash provided by (used in) financing activities 103,005 ( 71,286 ) Net decrease in cash ( 1,919,544 ) ( 1,618,224 ) Cash - Beginning of Period 3,123,944 6,456,370 Cash - End of Period $ 1,204,400 $ 4,838,146 Noncash Investing and Financing Activities: Series A Convertible Preferred Stock issuance - MMC 5,000,000 - Series A Convertible Preferred Stock issuance - GTG Financial 284,922 - Deferred cash payments - GTG Financial 1,344,750 - Deferred issuance of common stock - GTG Financial 1,287,000 - 4 reAlpha Tech Corp. Notes to Condensed Consolidated Financial Statements (Unaudited) Note 1 - Organization and Description of Business reAlpha Tech Corp. was incorporated with the name reAlpha Asset Management, Inc. in the State of Delaware on April 22, 2021 , which was changed to reAlpha Tech Corp. as a result of the short-form merger with its former parent on March 21, 2023. reAlpha Tech Corp. and its subsidiaries are collectively referred to as “we,” “us,” “our” or the “Company.” Initially, our asset-heavy operational model centered on using proprietary artificial intelligence (“AI”) tools for real estate acquisition, converting properties into short-term rentals, and offering fractional interests to investors. However, due to macroeconomic challenges like higher interest rates and inflated property prices, we discontinued our rental segment operations. We are now focused on developing an end-to-end homebuying platform, named “reAlpha.” Utilizing the power of AI and an acquisition-led growth strategy, our goal is to offer a more affordable, streamlined experience for those on the journey to homeownership. The Company has transitioned into a technology-driven, integrated services company, leveraging AI to enhance the homebuying experience and streamline real estate transactions. At the core of the Company’s strategy is the reAlpha platform, an AI-powered solution designed to simplify the home purchase process while generating revenue through realty services, mortgage brokering services, and digital title and escrow services. To strengthen its AI capabilities, the Company has acquired Naamche, Inc. (“U.S. Naamche”) and Naamche, Inc. Pvt Ltd. (“Nepal Naamche” and together with U.S. Naamche, “Naamche”) and AiChat Pte Ltd. (“AiChat”),, expanding its software development expertise and AI-driven engagement tools. The Company operates through its subsidiaries, including reAlpha Realty, LLC, AiChat, Debt Does Deals, LLC (d/b/a Be My Neighbor) (“Be My Neighbor” or “BMN”), Hyperfast Title LLC (“Hyperfast”) and GTG Financial, Inc. (“GTG” or “GTG Financial”) with each playing a role in the Company’s vertically integrated ecosystem. These subsidiaries enable the Company to provide real estate brokerage and closing services, which enables us to capture value across multiple stages of the transaction process. With its focus on AI technology and integrated real estate services, the Company is creating a scalable, end-to-end, tech-enabled model for customers to buy a home. Through strategic acquisitions and innovations in its platform, the Company is expanding its market presence and diversifying revenue streams across real estate, mortgage services, and AI-powered solutions. The Company’s principal executive office is located at 6515 Longshore Loop, Suite 100, Dublin, OH 43017. Note 2 - Summary of Significant Accounting Policies Principles of Consolidation The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and entities that the Company holds a controlling financial interest of, and those in which it owns more than 50 % of the voting interest. All significant intercompany accounts and transactions have been eliminated in consolidation. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the SEC for Quarterly Reports on Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet as of December 31, 2024 has been derived from the Company’s audited consolidated financial statements as of that date. This summary of significant accounting policies is presented to assist in understanding the Company’s financial statements. These accounting policies conform to U.S. GAAP and have been consistently applied in the preparation of the financial statements. The financial statements include the operations, assets, and liabilities of the Company. In the opinion of the Company’s management, the accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary to fairly present the accompanying financial statements. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on April 2, 2025, as amended on May 13, 2025 (the “Form 10-K”). Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year or any other future periods. 5 Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the financial statements not misleading have been included. Actual results could differ from those estimates. Related Party Transactions The Company accounts for related party transactions in accordance with Accounting Standards Codification (“ASC”) 850. A related party is generally defined as (i) any person that holds 10 % or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. The Company conducts business with its related parties in the ordinary course of business. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Concentration of Credit Risks Financial instruments that potentially subject the Company to a significant concentration of credit risk primarily consist of cash, cash equivalents, and accounts receivable. As of December 31, 2024, the Company’s cash was held by financial institutions that management believes have acceptable credit. The Federal Deposit Insurance Corporation insures balances up to $ 250,000 . At times, the Company may maintain balances in excess of the federally insured limits. Accounts receivable are typically unsecured. The risk with respect to accounts receivable is mitigated by regular credit evaluations that the Company performs on its distribution partners and its ongoing monitoring of outstanding balances. In accordance with ASC 326, Investments - Financial Instruments—Credit Losses, (“ASC 326”) the Company applies the Current Expected Credit Losses (“CECL”) model to estimate expected credit losses over the lifetime of financial assets measured at amortized cost. The Company has determined that accounts receivable is the only financial asset subject to CECL assessment, as it does not have any loan receivables, held-to-maturity debt securities, or other financial instruments requiring CECL evaluation. The Company’s CECL methodology incorporates historical loss experience, current economic conditions, and forward-looking adjustments to assess credit risk and expected loss reserves. There were no changes in the Company’s credit risk exposure, CECL methodology, or reserve assumptions during the three months ended March 31, 2025. The Company continues to monitor its financial assets in accordance with ASC 326. As of March 31, 2025, the Company’s accounts receivable remains recoverable, and no adjustments were made to the previously recorded CECL reserve of 0.05 % applied to receivables attributable to AiChat, its Singapore subsidiary. No additional forward-looking credit loss provisions were deemed necessary based on current macroeconomic conditions and customer credit profiles. Accounts Receivable Opening Balance, January 1, 2025 $ 62 Current-period provision for expected credit losses - Release of allowance for expected credit losses - Ending Balance, March 31, 2025 $ 62 The condensed consolidated financial statements included herein have been prepared in accordance with U.S. GAAP and on a basis consistent with the accounting policies disclosed in the Form 10-K. There have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2025. 6 Revenue Recognition The Company 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, the Company generates revenue by providing monthly support services to Turnit related to the myAlphie platform, a digital platform we previously developed and sold on May 17, 2023. Revenue is recognized over time as the services are performed and the customer benefits from them. We recognized rental revenue upon customer control of the asset and recorded deferred revenue for book sales until the delivery obligation was met, both in accordance with ASC 606. AiChat, 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 funding. 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. GTG Financial, a mortgage brokerage company, complies with ASC 606 by recognizing revenue at the point of loan funding. This moment marks the transfer of control of the loan to the borrower, capturing the completion of GTG Financial’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, 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. Note 3 - Going Concern We assess going concern uncertainty in our condensed consolidated financial statements to determine if we have sufficient cash and cash equivalents on hand and working capital, including available loans or lines of credit, if any, to operate for a period of at least 12 months from the date our condensed consolidated financial statements are issued. As part of this assessment, based on conditions that are known and reasonably knowable to us, we consider various scenarios, forecasts, projections, and estimates, and we make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and our ability to delay or curtail those expenditures or programs, if necessary, among other factors. Management has reviewed our financial condition, focusing on liquidity sources and upcoming financial obligations. This assessment shows that our short-term obligations exceed the resources available under current operational plans that raise a substantial doubt about our ability to continue as a going concern for the next 12 months after the date that these condensed consolidated financial statements are issued. Additionally, while recent acquisitions are expected to increase operational expenses, we anticipate that they will increase revenue streams, contributing positively to our financial outlook. We believe these acquisitions will enhance product offerings and market reach, which we anticipate will drive higher revenue in the coming months. However, the revenue from our recent acquisitions and from our technology platforms do not yet offset our current obligations and expenses. Management anticipates continuing operating losses for the next 12 months due to growth initiatives, management expects to continue raising capital through additional debt and/or equity financings to fund its operations. Management believes that these actions will effectively mitigate the conditions that raise substantial doubt about our ability to continue as a going concern and to ultimately achieve profitability. However, management cannot provide assurance that their plans to add revenue streams, raise revenue or raise additional capital will be successful, and whether we will ultimately achieve profitability, become cash flow positive, or raise additional debt and/or equity capital. If we are unable to raise our revenues sufficiently to cover our obligations and expenses or raise additional capital in the near future, management expects that we will need to curtail operations, seek additional capital on less favorable terms, and/or pursue other remedial measures. As of March 31, 2025 , the Company had approximately $ 1.20 million in cash. 7 Note 4 - Business Combinations For comprehensive information regarding acquisitions completed in the fiscal year ended December 31, 2024, please refer to the Form 10-K. 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. The total purchase consideration under the GTG Purchase Agreement was up to $ 4.2 million, consisting of a combination of Series A Convertible Preferred Stock (the “Series A Preferred Stock”), shares of common stock, deferred cash payments and contingent earn-out consideration based on the achievement of certain financial metrics, as set forth in the GTG Purchase Agreement. However, management has assessed that, because the earn-out consideration arrangement is linked to the Seller’s continued employment, it is therefore treated as contingent compensation rather than consideration transferred under ASC 805, Business Combinations (“ASC 805”). As such, the earn-out consideration was excluded from the purchase price allocation. The total consideration transferred for the purpose of applying the acquisition method was $ 2,916,672 , based on a preliminary valuation report prepared by an independent third party in accordance with ASC 805 and ASC 820, Fair Value Measurement (“ASC 820”). The Company is in the process of finalizing the allocation of the purchase price to the assets acquired and liabilities assumed. These fair value determinations remain preliminary and are subject to adjustment within the one-year measurement period. The components of the consideration and their accounting treatment are as follows: (i) 14,063 shares of Series A Preferred Stock with an aggregate stated value of $ 281,250 (the “Preferred Consideration”). The Series A Preferred Stock is convertible into shares of common stock at a conversion price of $ 20 per share (the “Conversion Price”), in accordance with the terms and conditions of and subject to the adjustments set forth in the Certificate of Designation of Preferences, Rights and Limitations of Series A Voting Convertible Preferred Stock filed with the Secretary of State of the State of Delaware (the “COD”), and the GTG Purchase Agreement includes a contingent shortfall settlement feature, which obligates the Company to issue additional shares of common stock or cash if, upon the automatic conversion of the Series A Preferred Stock (an “Automatic Conversion”), the fair value of the shares of common stock issued upon such automatic conversion is less than the consideration paid for such shares of Series A Preferred Stock (the “shortfall feature”). The shares of Series A Preferred Stock were valued at $ 284,922 using the equity value method and recorded in additional paid-in capital. Due to the shortfall feature, a derivative liability was separately recognized under ASC 815, Derivatives and Hedging (“ASC 815”); (ii) 700,055 shares of common stock, valued at $ 1.84 per share based on the seven-day volume weighted average price of the common stock as reported on the Nasdaq Capital Market (“Nasdaq”) (the “VWAP”) prior to the GTG Closing Date. The total value of $ 1,287,000 was recorded to additional paid-in capital. These shares of common stock are expected to be issued within 90 days from the GTG Closing Date and are disclosed as “Common Stock to be Issued;” and (iii) deferred cash payments totaling $ 1,344,750 (the “Cash Portion”), scheduled to be paid in three tranches over 180 days following the GTG Closing Date. As the payment period is within one year, the Company applied the practical expedient under ASC 835-30, Interest – Imputation of Interest, and did not discount the liability. The amount is reflected in accrued liabilities. The Company will finalize the allocation of the purchase price and related disclosures in subsequent reporting periods, within the measurement period allowed under ASC 805. If the Company does not pay the Cash Portion within 180 days after the GTG Closing Date, then, beginning on the 181st day following the GTG Closing Date, the outstanding amount of the Cash Portion shall bear interest at a rate per annum equal to four percent ( 4.0 %); and (y) Seller shall have the unilateral right (at Seller’s sole discretion), to the extent permitted by applicable law, to rescind the transactions contemplated under the GTG Purchase Agreement, in which case the Seller would return any and all consideration paid by the Company in exchange for all the Acquired Shares, and the Company would 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, which includes sales of common stock through an “at the market” offering of the Company. Each share of Series A Preferred Stock shall be convertible into a number of Conversion Shares equal to the liquidation amount of such shares of Series A Preferred Stock, as set forth in the COD, divided by the Conversion Price, subject to the beneficial ownership limitation set forth in the COD; provided, however , that in the event that (i) the shares of Series A Preferred Stock are automatically converted in accordance with the terms of the COD and (ii) the aggregate value for the Conversion Shares issued upon such Automatic Conversion is less than the Preferred Consideration, as determined based on the VWAP of such Conversion Shares on the date of the Automatic Conversion (the “Automatic Conversion Date”), then the Company shall make up for such shortfall feature payment in cash or in common stock in the Company’s sole discretion, no later than 30 calendar days after the Automatic Conversion Date. 8 We estimated fair values on the acquisition date, for the preliminary allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in connection with the GTG acquisition, subject to measurement period adjustments. The table below represents the preliminary purchase price allocation to total assets acquired and liabilities assumed and the associated estimated useful lives as of the acquisition date. Preliminary Purchase Price Allocation Cash $ 349,529 Goodwill 2,799,523 Intangible assets 716 Other current liabilities ( 233,096 ) Net assets acquired $ 2,916,672 The determination of the fair value for the acquired business employed the income approach, specifically the discounted cash flow (“DCF”) method. This method involves assessing the present value of anticipated future cash flows from the acquired business. These cash flows are discounted at the weighted average cost of capital (“WACC”), which represents the necessary return on the combined entity’s equity and debt. The WACC is weighted by the respective proportions of equity and debt in the overall capital structure. For the fair valuation of domain name, the market approach was applied. The estimation of the economic useful life of these assets took into account factors outlined in ASC 350-30, Intangibles—Goodwill and Other. Due to the immaterial value of these intangibles and based on management’s judgment, the Company elected to amortize $ 716 immediately rather than assign a specific useful life based on future economic benefit. The impact of this amortization is not material to the consolidated financial statements. Assembled workforce is not recognized separately from goodwill, as it lacks separability and contractual nature. Business combinations are accounted for using the acquisition method of accounting in accordance with the ASC 805 . The purchase price allocation above was allocated to the tangible and intangible assets acquired and liabilities assumed based on management estimated fair values as of the acquisition date. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Note 5 - Property and Equipment, Net 1. Investments in property and equipment consisted of the following as of March 31, 2025. Accumulated Net Cost Additions Depreciation Investment Computer $ 69,951 $ 13,662 $ ( 56,016 ) $ 27,597 Furniture and fixtures 24,699 - ( 14,882 ) 9,818 Vehicles 96,961 - ( 32,969 ) 63,992 Total investment in property and equipment $ 191,611 $ 13,662 $ ( 103,866 ) $ 101,407 2. Investments in property and equipment consisted of the following as of December 31, 2024 . Accumulated Net Cost Depreciation Investment Computer $ 69,269 $ ( 50,648 ) $ 18,621 Furniture and fixtures 53,021 ( 24,380 ) 28,641 Vehicles 73,969 ( 18,593 ) 55,376 Total investment in property and equipment $ 196,259 $ ( 93,621 ) $ 102,638 The Company recorded depreciation expenses of $ 9,717 and $ 7,022 for the periods ended March 31, 2025 and March 31, 2024, respectively. 9 Note 6 - Capitalized Software Development Costs, Work In Progress The Company adheres to ASC 350-40, Intangibles – Goodwill and Other, Internal-Use Software for the capitalization of software development costs. As of March 31, 2025, the Company continues to assess the carrying amount of capitalized software for impairment, considering expected future benefits and cash flows to determine recoverability. March 31, 2025 December 31, 2024 Gross carrying amount Additions Net carrying value Gross carrying amount Additions Impaired Reclassified to Intangibles and Expenses Net carrying value Capitalized software development costs, work in progress $ 105,900 $ - $ 105,900 $ 839,085 $ 516,544 $ ( 202,968 ) $ ( 1,046,761 ) $ 105,900 Total $ 105,900 $ - $ 105,900 $ 839,085 $ 516,544 $ ( 202,968 ) $ ( 1,046,761 ) $ 105,900 As of March 31, 2025, there were no reclassifications of capitalized software costs from work-in-progress (“WIP”) to intangible assets. The WIP balance related to capitalized software amounted to $ 105,900 as of March 31, 2025, compared to $ 105,900 as of December 31, 2024. Note 7 - Goodwill and Intangible Assets Goodwill and intangible assets are primarily the result of business acquisitions. Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable assets acquired and liabilities assumed. Goodwill is tested for impairment at the reporting unit level at least annually, as of December 31, or more frequently when events occur and circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Additionally, the Company assessed the acquisition of Roost Enterprises, Inc. (“Rhove”) for impairment and determined that an impairment charge was necessary. The impairment evaluation considered factors such as changes in expected future cash flows and market conditions affecting the acquired assets. The impairment expense has been recognized in the financial statements accordingly. Changes in the carrying amount of goodwill were as follows: March 31, 2025 Technology Services Rental Business Total Balance at January 1, 2025 $ 4,211,166 $ - $ 4,211,166 Goodwill acquired, GTG Financial 2,799,523 - 2,799,523 Goodwill impairment - - - Goodwill measurement period adjustment - - - Balance at March 31, 2025 $ 7,010,689 $ - $ 7,010,689 December 31, 2024 Technology Services Rental Business Total Balance at January 1, 2024 $ - $ 17,337,739 $ 17,337,739 Goodwill acquired, net of purchase price adjustments 4,072,728 - 4,072,728 Goodwill impairment - ( 17,337,739 ) ( 17,337,739 ) Goodwill measurement period adjustment 138,438 - 138,438 Balance at December 31, 2024 $ 4,211,166 $ - $ 4,211,166 The components of intangible assets, all of which are finite-lived, are as follows: March 31, 2025 December 31, 2024 Opening balance Additions Amortization Net carrying value Opening balance Additions Impaired Amortization Net carrying value Definite-life Intangibles: Developed technology $ 1,540,510 $ 91,310 $ ( 85,816 ) $ 1,546,004 $ 1,119,000 $ 1,701,015 $ ( 688,886 ) $ ( 590,619 ) $ 1,540,510 Trademarks and trade names 1,677,168 716 ( 32,599 ) 1,645,285 34,000 1,714,500 - ( 71,332 ) 1,677,168 Customer relationships 67,728 - ( 2,304 ) 65,424 104,000 80,500 ( 77,885 ) ( 38,887 ) 67,728 Total $ 3,285,406 $ 92,026 $ ( 120,719 ) $ 3,256,713 $ 1,257,000 $ 3,496,015 $ ( 766,771 ) $ ( 700,838 ) $ 3,285,406 10 Following this reclassification, during the fourth quarter of 2024, the Company capitalized an additional $150,372 in significant platform improvements to the reAlpha platform. These improvements were enhancements without significant changes to the platform’s useful life, rather than costs incurred during the application development stage. The Company recorded amortization expenses of $ 120,717 and $ 0 for the period ended March 31, 2025 and March 31, 2024, respectively. The following table outlines the estimated future amortization expense related to intangible assets held as of March 31, 2025: Years Ending March 31: Amount 2025 (remaining period) 370,454 2026 493,938 2027 493,938 2028 493,938 2029 428,176 Thereafter 976,270 Total $ 3,256,713 Note 8 - Notes Payable The Company had the following outstanding notes payable as of March 31, 2025 and December 31, 2024: a. Summary of Notes payable: March 31, 2025 December 31, 2024 Secured promissory note to Streeterville Capital, LLC, $ 435,000 original issue discount $ 5,455,000 $ 5,455,000 Less: Repayment (Issued shares) ( 20,000 ) - Less: Unamortized debt issuance costs and original issue discount ( 424,375 ) ( 545,624 ) Total notes payable 5,010,623 4,909,376 Notes payable, current, net of discount ( 5,010,623 ) - Total notes payable – current- net of discount $ 5,010,625 $ 4,909,376 As of March 31, 2025, accrued interest under that certain outstanding secured promissory note (the “Note”) issued to Streeterville Capital, LLC (“Streeterville”) on August 14, 2024 was $ 279,652 , compared to $ 166,111 as of December 31, 2024. As of March 31, 2025 and December 31, 2024, unamortized debt issuance and original issue discount were reflected within long term liabilities on the condensed consolidated balance sheets, netted with the notes payable. On March 20, 2025, the Company and Streeterville, the holder of the Note, entered into an exchange agreement (the “Exchange Agreement”), pursuant to which the Company and Streeterville agreed to (i) partition a new secured promissory note in the form of the Note (the “Partitioned Note”) in the original principal amount of $ 20,000 (the “Exchange Amount”) and then cause the outstanding balance of the 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 was equal to the Minimum Price as defined in Nasdaq Listing Rule 5635(d) as of such date. Note 9 - Related Party Transactions Loans from Related Parties During the three months ended March 31, 2025, related party transactions involved loans provided to AiChat by Kester Poh, a director and the Chief Executive Officer of AiChat, Balaji Swaminathan, a member of our board of directors, and Sea Easy Capital Ltd. (“SEA”). All transactions were conducted on terms consistent with those offered to unrelated third parties. AiChat has a financing arrangement with SEA, a Singapore-based entity that the spouse of Balaji Swaminathan, a member of our board of directors, controls by virtue of her ownership or control of a majority ( 51 %) of the capital stock of SEA. During the quarter ended March 31, 2025, AiChat financed an aggregate of $ 155,481 through the SEA financing arrangements in the form of loans, and paid principal and interest of $ 146,900 . Each loan bears interest at a rate of 16.5 % per annum and are structured with an 89 to 120 -day repayment term. During the three months ended March 31, 2025, the outstanding balance of the loans as of December 31, 2024 of $ 146,900 was fully repaid. As of March 31, 2025, the total outstanding balance under these loans was approximately $ 155,481 , comprising $ 149,170 in principal and $ 6,311 in accrued interest. Subsequent to the three months ended March 31, 2025, AiChat drew additional loans under the same SEA financing arrangement for $ 33,085 (see “Note 19 – Subsequent Events” for more information). In addition to the financing arrangement with SEA, as of March 31, 2025, AiChat also has loans outstanding to Mr. Swaminathan personally. The original loan amount was $ 55,933 in short-term loans, with a remaining balance of $ 51,936 as of March 31, 2025. These loans are structured to be repaid over a one and a half year period through monthly installments of $ 1,750 until November 2025, bearing an interest rate of 6.9 % per annum. 11 As of March 31, 2025, the balance on loans due to Kester Poh was $ 86,992 , divided as follows: short-term loans of $ 54,942 and long-term loans of $ 32,050 . These loans are structured to be repaid over a two-year period until September 2026 through monthly installments of $ 6,098 , bearing an interest rate of 6.9 % per annum. a. Summary of Short-Term Loans to Related Parties Average Interest Rate as of March 31, 2025 March 31, 2025 December 31, 2024 Term Loan Facility 12.07 % $ 262,359 $ 277,307 Less: Interest Reserve ( 17,067 ) ( 15,321 ) Total Debt $ 245,292 $ 261,986 b. Summary of Other Long-Term Loans to Related Parties Maturity Year Average Interest Rate as of March 31, 2025 March 31, 2025 December 31, 2024 Term Loan Facility 2026 6.9 % $ 32,050 $ 54,881 Less: Interest Reserve ( 4,919 ) ( 9,829 ) $ 27,131 $ 45,052 Note 10 – Short-Term Loans Unrelated parties Short-Term Loans consisted of the following as of March 31, 2025, and December 31, 2024: a. Summary of Short-Term Loans to Unrelated Parties Average Interest Rate as of March 31, 2025 March 31, 2025 December 31, 2024 Term Loan Facility 11 % $ 366,249 $ 388,819 D&O Insurance 100,459 150,688 Less: Interest Reserve ( 17,086 ) ( 20,354 ) Total Debt $ 449,622 $ 519,153 Note 11 - Deferred Liabilities , Current Portion The Company had the following deferred liabilities as of March 31, 2025 and December 31, 2024: Gross carrying amount Additions/ (payments) Net carrying value Balance as on December 31, 2024 $ 1,534,433 $ 1,534,433 Deferred Revenue - AiChat - 24,877 24,877 Deferred Consideration – GTG Financial - 2,631,750 2,631,750 Balance as on March 31, 2025 $ 1,534,433 $ 2,656,627 $ 4,191,060 12 Note 12 – Embedded Derivative Liability In connection with the issuance of Series A Preferred Stock related to the GTG Financial acquisition and the media-for-equity transaction with Mercurius Media Capital LP (“MMC”), the Company assessed the contractual terms under ASC 480 - Distinguishing Liabilities from Equity (“ASC 480”), and ASC 815, to evaluate whether any embedded features should be accounted for separately as derivative liabilities. The Series A Preferred Stock is convertible into a number of shares of common stock equal to the liquidation amount of such shares of Series A Preferred Stock, as set forth in the COD, divided by the Conversion Price. Under the terms of the agreements entered into in connection with the GTG Financial acquisition and MMC transaction, if, upon Automatic Conversion (which occurs three years after issuance of each such share of Series A Preferred Stock), the aggregate value of the Conversion Shares issuable in connection therewith, determined based on the fair market value of the Company’s common stock at the Automatic Conversion Date based on the VWAP or closing price, as applicable, of the Company’s common stock on such date, as reported on Nasdaq, is less than the paid consideration for such shares of Series A Preferred Stock, the Company is obligated to settle the shortfall feature payment in cash or additional shares of common stock. Although the Series A Preferred Stock is not mandatorily converted, the shortfall feature represents a contingent obligation to transfer a variable number of shares or cash based on future market conditions. As a result, the embedded feature does not meet the criteria for equity classification under ASC 815-40 and was bifurcated from the host instrument and recorded as a separate derivative liability. The Company bifurcated the fair value of the Series A Preferred Stock between (i) the equity component, representing the initial value of the shares of Series A Preferred Stock, and (ii) a liability component, representing the fair value of the shortfall feature. The shortfall feature liability is measured at fair value at inception and subsequently remeasured at each reporting period, with changes in fair value recorded within “Other income (expense)” in the condensed consolidated statements of operations and comprehensive loss. This bifurcation ensures the appropriate accounting treatment under U.S. GAAP and reflects the economic substance of the shortfall feature embedded in the agreements relating to the issuance of the shares of Series A Preferred Stock to GTG Financial and MMC. The derivative liability was initially measured at fair value using the Black-Scholes option pricing model, incorporating assumptions such as stock price, expected volatility, risk-free rate, and the expected term until automatic conversion. For the GTG Financial acquisition, the derivative liability was recorded upon issuance of 14,063 shares of Series A Preferred Stock with an aggregate stated value of $ 281,250 . For the MMC transaction, 250,000 shares of Series A Preferred Stock were issued in exchange for media credits valued at $ 5,000,000 . The aggregate fair value of the derivative liability as of the issuance date of such shares of Series A Preferred Stock was recorded within non-current liabilities on the condensed consolidated balance sheet (see “Note 11 – Deferred Liabilities, Current Portion” for additional information). As of March 31, 2025, the Company estimated the fair value of the derivative liability using the Black-Scholes option pricing model with the following key assumptions: ● Common stock price at issuance : $ 1.84 at the closing date of the acquisition of GTG Financial; and $ 1.42 at the closing date of the MMC transaction. ● Risk-free interest rate : 4.3 % ● Expected volatility : 88.53 % ● Dividend yield : 3.00 % ● Expected term : 3 years The derivative liability was classified within Level 3 of the fair value hierarchy due to the use of unobservable inputs. The Company initially recorded a derivative liability of $ 4,327,930 , consisting of $ 225,430 for the GTG Financial acquisition and $ 4,102,500 for the MMC transaction measured at fair value of preferred stock using the Black-Scholes option pricing model and the key assumptions outlined above. As part of the valuation inputs, the Company used its own historical stock price volatility, calculated on an annualized basis, as a key assumption to reflect expected price fluctuations of its common stock over the term of the preferred stock. The embedded derivative liability is remeasured at fair value at each reporting period, with changes in fair value recognized in earnings as a component of other (income) expense. The fair value is determined using the most current inputs available, including the trading price of the Company’s common stock, remaining term, dividend yield, and market volatility. Gross amount Change in fair value Net value Balance as on December 31, 2024 $ - $ - Embedded Derivative Liability – GTG acquisition 225,430 - 225,430 Embedded Derivative Liability – MMC deal 4,102,500 - 4,102,500 Balance as on March 31, 2025 $ 4,327,930 $ - $ 4,327,930 Note 13 – Preferred Stock Liability In connection with the acquisition of GTG Financial and the transaction with MMC, the Company issued a total of 264,063 shares of Series A Preferred Stock with a stated value of $ 20 per share. These shares are subject to conversion features that include shortfall feature, whereby the Company may be required to deliver additional value in cash or common stock if the aggregate value of the conversion shares falls below the original consideration at the time of automatic conversion. In accordance with ASC 480 and ASC 815, the Company bifurcated the value of the issued Series A Preferred Stock between (i) the liability component of the Series A Preferred Stock and (ii) an embedded derivative liability representing the fair value of the shortfall feature. The classification was based on the fact that the instruments obligate the Company to potentially settle the conversion at a fixed monetary value through a variable number of common shares, which does not meet the criteria for equity classification. As of March 31, 2025, the bifurcated values are as follows: Gross amount Change in fair value Net value Balance as on December 31, 2024 $ - $ - Preferred stock liability – GTG Financial acquisition 59,492 - 59,492 Preferred stock liability – MMC deal 897,500 - 897,500 Accrued interest on preferred stock 185 - 185 Balance as on March 31, 2025 $ 957,177 $ - $ 957,177 13 The derivative liability was initially measured at fair value using the Black-Scholes option pricing model, incorporating assumptions such as stock price, expected volatility, risk-free rate, and the expected term until automatic conversion. For the GTG Financial acquisition, the derivative liability was recorded upon issuance of 14,063 shares of Series A Preferred Stock with an aggregate stated value of $ 281,250 . For the MMC transaction, 250,000 shares of Series A Preferred Stock were issued in exchange for media credits valued at $ 5,000,000 , also subject to the same shortfall feature terms. The aggregate fair value of the derivative liability as of the issuance date was recorded within non-current liabilities on the condensed consolidated balance sheet (see “Note 11 – Deferred Liabilities, Current Portion”) for additional information). The embedded derivative liability is remeasured at fair value at each reporting period, with changes in fair value recognized in earnings as a component of other (income) expense. The fair value is determined using the most current inputs available, including the trading price of the Company’s common stock, remaining term, dividend yield, and market volatility. The derivative liability is presented separately as “Derivative liability – embedded feature” in the consolidated balance sheet. Changes in fair value of the liability are presented as “Change in fair value of derivative liability” in the condensed consolidated statements of operations. Gross amount Change in fair value Net value Balance as on December 31, 2024 $ - $ - Embedded Derivative Liability – GTG Financial acquisition 225,430 - 225,430 Embedded Derivative Liability – MMC transaction 4,102,500 - 4,102,500 Accrued interest on Series A Convertible Preferred Stock 185 185 Balance as on March 31, 2025 $ 4,328,115 $ - $ 4,328,115 Note 14 - Other Long-Term Loans Other Long-Term Loans consisted of the following as of March 31, 2025, and December 31, 2024: a. Summary of Other Long-Term Loans to Unrelated Parties Maturity Year Average Interest Rate as of March 31, 2025 March 31, 2025 December 31, 2024 Term Loan Facility 2024-2028 6.5 % $ 186,837 $ 210,866 Vehicle Loan 2029 11 % 46,267 48,188 Less: Interest Reserve ( 16,068 ) ( 17,933 ) $ 217,036 $ 241,121 Note 15 - Stockholders’ Equity (Deficit) The total number of shares of capital stock that the Company has the authority to issue is up to 205,000,000 shares, consisting of: (i) 200,000,000 shares of common stock, having a par value of $ 0.001 per share; and (ii) 5,000,000 shares of preferred stock, having a par value of $ 0.001 per share. As of March 31, 2025, there were 46,230,934 shares of common stock and 264,043 shares of preferred stock issued and outstanding. As of December 31, 2024, there were 45,864,503 shares of common stock and 0 shares of preferred stock issued and outstanding. 14 Stock Based Compensation Equity Incentive Plan We maintain the reAlpha Tech Corp. 2022 Equity Incentive Plan (as amended, the “2022 Plan”), under which we may grant awards to our employees, officers and directors and certain other service providers. The compensation committee of our board of directors administers the 2022 Plan. The 2022 Plan permits grants of awards to eligible employees, consultants and other service providers. The aggregate number of shares of common stock that may be issued under the 2022 Plan may not exceed 4,000,000 shares of common stock of which 3,230,961 remain available for issuance. All of our current employees, consultants and other service providers are eligible to be granted awards under the 2022 Plan. Eligibility for awards under the 2022 Plan is determined by the board of directors at its discretion. Short-Term Incentive Plan On February 4, 2025, the compensation committee of the board of directors (the “Compensation Committee”) approved the Company’s 2025 Short-Term Incentive Plan (“STIP”), providing for quarterly awards of performance-based restricted stock units (“RSUs”) under the 2022 Plan. The STIP is designed to reward key employees and executives based on the achievement of quarterly performance targets tied to organic revenue, brokerage transactions, and the quality of acquisitions. Restricted Stock Units The Company measures compensation cost for all stock-based awards granted to employees, directors, and consultants based on the grant-date fair value of the award in accordance with ASC 718, Compensation – Stock Compensation (“ASC 718”). The fair value of restricted RSUs is based on the closing market price of the Company’s common stock on the date of grant. The Company accounts for stock-based compensation in accordance with ASC 718. For awards with graded vesting features, the Company recognizes compensation expense on a straight-line basis over the requisite service period for each separately vesting portion of the award, treating the award as, in-substance, multiple awards, in accordance with ASC 718. This method results in a front-loaded expense pattern that aligns more closely with the vesting schedule of the award. During the quarter ended March 31, 2025, the Company granted 550,000 RSUs under the 2022 Plan to certain of its employees, 50,000 of which RSUs were forfeited in connection with the termination of an employee of the Company. These awards are subject to time-based vesting, with 100 % of the RSUs vesting over a two-year period from the date of grant, subject to continued service and other terms and conditions. For the quarter ended March 31, 2025, the weighted-average grant-date fair value of RSUs granted during such period was $ 1.84 , based on the grant-date closing prices of the Company’s common stock. The weighted-average fair value was calculated by multiplying the number of RSU awards granted by their respective grant-date fair values, divided by the total number of RSU awards granted during the period. Summary of RSU activity for the three months ended March 31, 2025 follows: Number of RSUs Weighted Average Grant Price Balance as on December 31, 2024 - - RSUs granted 550,000 1.84 RSUs forfeited ( 50,000 ) 1.84 Balance as on March 31, 2025 500,000 1.84 Subject to the terms and conditions of the 2022 Plan and any related RSU award agreements, the RSUs will be scheduled to vest in accordance with the following schedule: (i) 50% will vest on the date that is 12 months from the date of grant, (ii) 12.5% will vest on the date that is 15 months from the date of grant, (iii) 12.5% will vest on the date that is 18 months from the date of grant, (iv) 12.5% will vest on the date that is 21 months from the date of grant and (v) 12.5% will vest on the date that is 24 months from the date of grant. Ending balances for the 2022 Plan as of March 31, 2025, is as follows: March 31, December 31, 2025 2024 Outstanding restricted stock units 500,000 -  Reserved but unissued shares under the 2022 Plan 3,780,961 3,780,961 Reserved but unissued shares at end of period 3,380,961 3,780,961 15 Warrants There were no changes to the classification of the Warrants (as defined below) during the three months ended March 31, 2025. Additional details regarding the initial classification and terms of the Warrants are provided in Note 14 to the consolidated financial statements included in the Form 10-K. The warrants issued in November 2023 to purchase up to 2,400,000 shares of our common stock, as adjusted from time to time (the “Follow-On Warrants”), to certain holders in connection with our follow-on public offering continue to meet the criteria for equity classification. As of March 31, 2025, as a result of anti-dilution adjustments in accordance with the terms of the Follow-On Warrants, the exercise price of the Follow-On Warrants was reduced to $ 1.44 per share, and the number of shares issuable upon exercise increased to approximately 8,333,336 . Subsequent to the quarter ended March 31, 2025, the exercise price of the Follow-On Warrants was further reduced to $ 0.75 in connection with the Warrant Inducement (as defined below) (see “Note 19 – Subsequent Events – Warrant Inducement Transaction” for more details). The warrants issued to GEM Yield Bahamas Limited (“GYBL”) in October 2023 (the “GEM Warrants,” and together with the Follow-On Warrants, the “Warrants”) in connection with that certain Share Purchase Agreement, dated as of December 1, 2022 (the “GEM Agreement”), by and among us, GYBL, and GEM Global Yield LLC SCS (“GEM Yield”, and together with GYBL, “GEM”), remain classified as equity instruments. The Company is currently involved in litigation regarding the enforceability and adjustment provisions of the GEM Warrants. As of March 31, 2025, no reclassification or adjustment to the exercise price of the GEM Warrants has been made. Rights In connection with the acquisition of Rhove on March 24, 2023, the Company granted certain sellers and participating investors the right to purchase up to 1,263,000 shares of the Company’s common stock (the “Rights”) at a fixed exercise price of $ 10.00 per share. The Rights were exercisable for a period of two years following the acquisition date and expired unexercised on March 24, 2025. The terms of the Rights were fixed at issuance and not modified during their contractual life. At inception, the Rights were determined to meet the criteria for equity classification under ASC 480 and ASC 815, and were recorded as a component of additional paid-in capital. In accordance with this classification, the Rights were not subject to remeasurement at each reporting period. The expiration of the Rights resulted in no impact to the Company’s condensed consolidated statements of operations or cash flows for the three months ended March 31, 2025. For details on the factors used in the calculation of the fair value of the Follow-On Warrants and Rights, refer to the audited consolidated financial statements included in the Form 10-K. As the warrants issued in connection with the follow-on offering and GEM Agreement are classified as equity instruments, they are not subject to fair value remeasurement at the end of each reporting period. Warrant activity as of March 31, 2025 were as follows: Issue date Period ended Contractual life (years) Warrants Outstanding Weighted Average Exercise Price Average Remaining Contractual Life (Years) GEM Warrants Issued on October 23, 2023 10/23/2023 03/31/2025 5 1,700,884 371.9 3.56 Follow-On Warrants Issued on November 21, 2023 11/21/2023 03/31/2025 5 8,333,336 1.44 3.64 Warrants outstanding on March 31, 2025 10,034,220 64.24 3.63 Shelf Registration Statement on Form S-3 On November 26, 2024, the Company’s shelf registration statement on Form S-3 (File No. 333-283284) was declared effective by the SEC. This registration statement allows the Company to offer and sell, from time to time, common stock, preferred stock, warrants, subscription rights, and units in one or more offerings, subject to market conditions and applicable regulatory limitations. The Company entered into an At the Market Sales Agreement (the “AGP Sales Agreement”) with A.G.P. as sales agent to establish an “at the market” offering program (an “ATM”) on December 19, 2024, under which we were able to offer and sell shares of our common stock having an aggregate offering price of up to $ 14,275,000 . The AGP Sales Agreement was terminated effective March 29, 2025. During the three months ended March 31, 2025, the Company issued 160,879 shares of its common stock under its ATM program at a weighted-average price of $ 1.44 per share pursuant to the AGP Sales Agreement, for total gross proceeds of approximately $ 231,235 . The net proceeds, after deducting sales commissions and other offering expenses, from such sales of our common stock under the AGP Sales Agreement was approximately $ 224,298 , which were used to fund working capital and general corporate purposes. In connection with the sale of the 160,789 shares of our common stock under the AGP Sales Agreement during the three months ended March 31, 2025, we paid A.G.P. a cash commission equal to $ 6,937 . There were no issuances under the ATM program during the fiscal year ended December 31, 2024. 16 As of March 31, 2025, the Company is subject to the SEC’s “baby shelf rules,” which prohibits companies with a public float of less than $ 75 million from issuing securities under a shelf registration statement in excess of one-third of such company’s public float in a 12-month period. These rules may limit future issuances of shares by the Company under its Form S-3, the ATM program and any related “at the market” offering sales agreement or other securities offerings. Note 16 - Commitments and Contingencies Pursuant to the terms of the “GEM Agreement, we are required to indemnify GEM for any losses it incurs as a result of a breach by us or of our representations and warranties and covenants under the GEM Agreement or for any misstatement or omission of a material fact in a registration statement registering those shares pursuant to the GEM Agreement. Also, GEM is entitled to be reimbursed for legal or other costs or expenses reasonably incurred in investigating, preparing, or defending against any such loss. To date, we have not raised any capital pursuant to the GEM Agreement and we may not raise any capital pursuant to the GEM Agreement prior to its expiration. Restrictions pursuant to terms of our future financings may also affect our ability to raise capital pursuant to the GEM Agreement. The Company maintains indemnification agreements with our directors and officers that may require the Company to indemnify these individuals against liabilities that arise by reason of their status or service as directors or officers, except as prohibited by law. Acquisition of USRealty, LLC On March 19, 2025, the Company entered into a Mutual Settlement and Release Agreement (the “Settlement Agreement”) with Unreal Estate Inc. (“Unreal Estate”) to resolve certain claims and disputes between us and Unreal Estate related to their respective obligations under (i) the Membership Interest Purchase Agreement, dated as of November 20, 2024 (the “MIPA”), with Unreal Estate LLC (“Unreal”), USRealty Brokerage Solutions, LLC (“US Realty”) and Unreal Estate, and (ii) the Letter Agreement, dated as of November 20, 2024 (the “Letter Agreement”), with Unreal and Unreal Estate, and the transactions contemplated thereby (the MIPA and Letter Agreement together, the “Unreal Agreements”). 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 MIPA. Further, upon execution of the Settlement Agreement, the Letter Agreement was terminated and related promissory note issued thereunder to us in the original principal amount of $ 60,000 was cancelled. These amounts were expensed in full as of December 31, 2024, and no further accounting impact was recorded in the quarter ended March 31, 2025. Acquisition Agreement – GTG Financial As part of the GTG Financial, Inc. acquisition, the Company agreed to pay deferred cash consideration totaling $ 1,344,750 in three tranches: 30 % on the 120th day, 30 % on the 150th day, and 40 % on the 180th day following the closing date. Contingent Consideration and Compensation Acquisition Agreement – Naamche The Company’s agreement with Naamche includes deferred payment provisions representing potential milestone payments for Naamche’s former owners. The provisions are made up of two general types of arrangements, contingent compensation and contingent consideration. The contingent compensation arrangement is contingent on the former owner’s future employment with the Company and the related amounts are recognized over the required employment period. The contingent consideration is not contingent on employment and was recorded as purchase consideration in other long-term liabilities on the condensed consolidated balance sheets at the time of the initial acquisition based on the fair value of the estimated liability. The amounts are paid over a three-year period, contingent on the achievement of certain revenue milestones. Acquisition Agreement – Be My Neighbor The Company’s agreement with Be My Neighbor includes deferred payment provisions representing potential milestone payments for its former owners. The provisions are made up of contingent consideration. The contingent consideration is not contingent on employment and was recorded as purchase consideration in other long-term liabilities on the condensed consolidated balance sheets at the time of the initial acquisition based on the fair value of the estimated liability. The amounts are paid over a three-year period, contingent on the achievement of certain revenue and EBITDA milestones. The Company primarily determines the contingent consideration liability based on the forecasted probability of achieving the respective milestones. The contingent consideration liability is measured at fair value each reporting period and changes in estimates of fair value are recognized in earnings. During the period ended March 31, 2025, the company performed fair value analysis for contingent consideration related to BMN acquisition and recorded $ 93,000 as loss from increase in fair value. 17 Acquisition Agreement – GTG Financial On February 20, 2025, the Company completed the acquisition of GTG Financial, a mortgage brokerage, for total consideration of up to $ 4.2 million, including preferred stock, restricted common stock, deferred cash payments, and performance-based earn-out payments. The earn-out payments, which are based on GTG’s achievement of specified revenue and EBITDA targets over three annual periods, may be settled in cash or stock at the Company’s discretion. As of March 31, 2025, the Company recorded the present value of the contingent consideration at $ 1,287,000 , classified as a Level 3 liability in the fair value hierarchy. As of March 31, 2025, the Company’s contingent consideration liabilities related to acquisitions are categorized as Level 3 within the fair value hierarchy. Contingent consideration was valued at March 31, 2025 using unobservable inputs, primarily internal revenue forecasts. Contingent consideration was valued at the time of acquisitions and have included using the Scenario based simulation method. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management with the assistance of a third-party valuation specialist. As of March 31, 2025, the Company’s contingent consideration liabilities, non-current balances were as follows: As of March 31, 2025 Contingent consideration at Purchase Date Consideration Paid Changes in Fair Value Contingent Consideration Level 3: Contingent consideration, non-current - Naamche $ 137,000 $ - $ - $ 137,000 Contingent consideration, non-current - GTG Financial 954,000 - - 954,000 Contingent consideration, non-current - BMN 949,000 - 93,000 1,042,000 Total contingent consideration $ 2,040,000 $ - $ 93,000 $ 2,133,000 Legal Matters Except as noted below, there have been no material changes to the legal proceedings disclosed in the Form 10-K. The Company continues to monitor the status of those proceedings, and developments will be disclosed in future filings as necessary. GEM Yield Bahamas Limited Litigation On November 1, 2024, we filed a lawsuit against GYBL in the United States District Court for the Southern District of New York (the “Court”), claiming that GYBL operated as an unregistered broker-dealer in violation of the Exchange Act. We are seeking to void the GEM Warrants, or alternatively, a declaratory judgment determining that the GEM Warrants’ terms govern the exercise price adjustment calculation rather than the related GEM Agreement’s terms. On January 17, 2025, GYBL moved to dismiss our complaint, and, on March 14, 2025, the Court granted GYBL’s motion to dismiss our complaint relating to the lawsuit against GYBL. On April 15, 2025, we filed an appeal of the Court’s decision dismissing our case to the United States Court of Appeals for the Second Circuit (the “Second Circuit”). The briefing schedule at the Second Circuit is being held in abeyance in order to allow two previously filed appeals, filed by two other public companies on identical issues against other similar investors, be resolved first. However, if and when the appellate briefing moves forward, there is no assurance that it will be successful. Following the lower Court’s dismissal of our complaint, on March 19, 2025, GYBL commenced a separate action against us in the Court (the “GYBL Action”). The GYBL Action concerns the GEM Warrants, and it asserts 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. Our time to respond to the complaint has not yet expired and we continue to vigorously defend against GYBL’s claims and litigate our legal rights to the fullest extent.” 18 Note 17 - Segment Reporting In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires additional disclosure of significant segment expenses included in the reported measure of segment profit or loss and regularly provided to the Chief Operating Decision Maker (the “CODM”). It also requires disclosure and a description of the composition of other amounts by reportable segment, disclosure of a reportable segment’s profit or loss and assets currently required by Topic 280 in interim periods and disclosure of the CODM’s title and process for assessing a reportable segment’s profit or loss. The new guidance was effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024. The Company adopted ASU 2023-07 in the fourth quarter of 2024, noting no material impact on its consolidated financial statements. We have one reportable segment based on our business units: technology services. Our CODM has been identified as the Chief Executive Officer and the Chief Operating Officer and President, each of which reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. The Company’s segment results are as follows: Three months Ended March 31, 2025 2024 Technology services Technology services Revenues $ 925,635 $ 20,426 Cost of revenues 406,968 18,249 Gross profit 518,667 2,177 Operating expenses Wages, benefits and payroll taxes $ 1,060,104 $ 418,902 Marketing and advertising 518,939 76,784 Professional and legal fees 742,159 468,725 All other segment items(1) 619,723 344,424 Total operating expenses 2,940,925 1,308,835 Income from operations $ ( 2,422,258 ) $ ( 1,306,658 ) (1) All other segment items include depreciation and amortization and other operating expenses. Note 18 - Discontinued Operations There have been no changes to the Company’s discontinued operations since the filing of its Form 10-K. As previously disclosed, during the year ended December 31, 2024, the Company made a strategic decision to fully discontinue its Rhove operations, which previously operated under the rental business segment. This decision was made due to the lack of future revenue potential and the absence of funding to further develop the platform. As of March 31, 2025, Rhove continues to be classified as a discontinued operation in accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations. The following table provides detail of the discontinued operations as of March 31, 2025 and December 31, 2024: Rhove Related Assets March 31, 2025 December 31, 2024 (transferred to reAlpha) Current Assets Cash $ 3,456 $ 3,456 Other Current Assets 53,474 53,474 $ 56,930 $ 56,930 Current Liabilities Accounts payable and other accrued liabilities Other Current liabilities Total liabilities - Rhove $ - $ - 19 The following table represents the statement of operations for discontinued operations as of each reporting period: For the Period Ended For the Period Ended March 31, 2025 March 31, 2024 Revenues $ - $ - Cost of revenues - - Gross Profit - - Discontinued Operating Expenses Dues and subscriptions - 247 Professional and legal fees - 578 Other operating expenses - 15 Total operating expenses - 840 Discontinued Operating Loss - ( 840 ) Discontinued Other expense (income) Other expense (income) - 1 Total other (expense) income - 1 Net Loss from discontinued operations before income taxes - ( 839 ) Note 19 - Subsequent Events Warrant Inducement Transaction On April 6, 2025, we entered into inducement offer letter agreements (the “Inducement Letters”) with certain holders (the “Holders”) of the Follow-On Warrants. Pursuant to the Inducement Letters, the Holders agreed to exercise for cash their Follow-On Warrants at a reduced exercise price from the then-current exercise price of $ 1.44 per share of $ 0.75 per share (the “Reduced Exercise Price”), which resulted in the issuance of 4,218,751 shares of common stock, in consideration for our agreement to issue in a private placement new common stock purchase warrants (the “New Warrants”) to purchase an aggregate of 8,437,502 shares of common stock (the “New Warrant Shares”) (such transaction, the “Warrant Inducement”). In connection with the Warrant Inducement, we also agreed to reduce the exercise price of the Follow-On Warrants to purchase an aggregate of 4,114,582 shares of common stock for all holders of the Follow-On Warrants not participating in the Warrant Inducement to the Reduced Exercise Price for the remaining term of the Follow-On Warrants. The exercise of the New Warrants and issuance of the New Warrant Shares is subject to stockholder approval in accordance with Nasdaq Listing Rule 5635(d). The closing of the Warrant Inducement occurred on April 8, 2025, and we received aggregate gross proceeds of approximately $ 3.1 million from the exercise of the Existing Warrants, before deducting related placement agent fees and other expenses payable by us. These transactions occurred subsequent to the reporting period and are not reflected in the accompanying condensed consolidated financial statements as of March 31, 2025. Debt Redemption Payment – Streeterville Capital, LLC On April 7, 2025, the Company received a written redemption notice (a “Redemption Notice”) under its outstanding Note issued pursuant to that certain Purchase Agreement, dated as of August 14, 2024 (the “Purchase Agreement”), with Streeterville, which requested payment for a redemption amount of $ 525,000 . The Company paid the full amount in cash on April 8, 2025 and April 9, 2025 . Following this payment, the outstanding principal balance under the Note was reduced to $ 5,202,328.25 as of April 7, 2025. As the event occurred after the reporting period, no adjustments have been made to the condensed consolidated financial statements as of March 31, 2025. On May 1, 2025, the Company received a Redemption Notice from Streeterville under its outstanding Note issued pursuant to the Purchase Agreement, which requested payment for a redemption amount of $ 545,000 . The Company paid $ 450,000 on May 2, 2025 and the remaining $ 95,000 on May 5, 2025. Following these payments, the outstanding principal balance under the Note was reduced to $ 4,665,104.98 as of May 1, 2025. As this event occurred after the March 31, 2025 balance sheet date, no adjustment was made to the condensed consolidated financial statements. RSU Awards to Executive Officers and Certain Employees On April 30, 2025, the Company issued an aggregate of 771,940 RSU awards for the quarter ended March 31, 2025 to certain of the Company’s employees, including its executive officers, under the 2022 Plan. These RSU awards were issued: (i) as additional equity compensation to certain employees of the Company, in accordance with the Compensation Committee approval of such additional equity compensation on April 28, 2025, and (ii) in connection with the Company’s achieved results during the quarter ended March 31, 2025, for each of the performance metrics set forth in the STIP and in accordance with the terms thereof. Subject to the terms and conditions of the 2022 Plan, any related RSU award agreement and the STIP, as applicable, the RSUs will vest in accordance with the following schedule: (i) 50% will vest on the date that is 12 months from the date of grant, (ii) 12.5% will vest on the date that is 15 months from the date of grant, (iii) 12.5% will vest on the date that is 18 months from the date of grant, (iv) 12.5% will vest on the date that is 21 months from the date of grant and (v) 12.5% will vest on the date that is 24 months from the date of grant. Sea Easy Capital Financing Arrangement Loans On April 20, 2025, AiChat drew additional loans under its financing arrangement with SEA in an aggregate amount of $$ 33,085 , which are subject to the same terms and conditions of previous loans drawn under such financing arrangement. 20 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION CONTAINED IN THIS REPORT This Quarterly Report on Form 10-Q, or this “report,” contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “may,” “will” or other similar expressions in this report. In particular, these include statements relating to future actions; prospective products, applications, customers and technologies; future performance or results of any products; anticipated expenses; and future financial results. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to: ● Our limited cash, history of losses, and our expectation that we will continue to experience operating losses and negative cash flows in the near future; ● Our ability to raise capital and to continue as a going concern; ● We are employing a business model with a limited track record, which makes our business difficult to evaluate; ● Our technology that is currently being developed may not yield expected results or be delivered on time; ● Failure to integrate any acquisitions successfully; ● We intend to utilize a significant amount of indebtedness and raise capital through public offerings for the operation of our business; ● The implementation of artificial intelligence (“AI”) into our technologies may prove to be more difficult than anticipated; ● The real estate and real estate technology industries in which we participate are highly competitive, and we may be unable to compete successfully with our current and/or future competitors; ● Our business depends significantly on the health of the U.S. residential real estate industry and changes in general economic conditions; ● Our ability to retain our executive officers and other key personnel; ● Our ability to attract or retain customers and users of our technologies; and ● The laws and regulations regarding privacy, data protection, consumer protection, and other matters are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, or otherwise harm to our business. Forward-looking statements may appear throughout this report, including without limitation, the following sections: “Part I, Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II, Item 1A. Risk Factors.” The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements included in this report. You should not place undue reliance on these forward-looking statements. Unless otherwise stated or the context otherwise requires, the terms “we,” “us,” “our” and the “Company” refer to reAlpha Tech Corp. and its subsidiaries, as applicable. 21