reAlpha Tech Corp. 10-Q

ITEM 1A. RISK FACTORS There have been no material changes to our risk factors since those disclosed in “Part I, Item 1A. Risk Factors” of our Form 10-K, except as set forth below. We have a history of operating losses, and we may not be able to generate sufficient revenue to achieve and sustain profitability. We have not achieved profitability and have incurred losses since inception. For the quarter ended June 30, 2025, we recorded a net loss of $4,110,016. For the year ended December 31, 2024, we recorded a net loss of $26,023,028, which included a loss of $18,339,635 from discontinued operations related to our former rental business and operations of our subsidiary, Rhove, and a loss of $7,682,714 from continuing operations. As of June 30, 2025, we had an accumulated deficit of $45,222,909 and outstanding indebtedness of $4,500,212. While we have experienced some revenue growth over recent periods, we may not be able to sustain or increase our growth or achieve profitability in the future. We intend to continue to invest diligently in sales and marketing efforts. In addition, we expect to incur significant additional legal, accounting, and other expenses related to our being a public company as compared to when we were a private company. While our revenue has grown since our inception, if our revenue declines or fails to grow at a rate faster than these increases in our operating expenses, we will not be able to achieve and maintain profitability in future periods. As a result, we may continue to generate losses. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, and other unknown factors that may result in losses in future periods. If these losses exceed our expectations or our revenue growth expectations are not met in future periods, our financial performance will be harmed. 38 Table of Contents Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern. We will be unable to continue to operate for the foreseeable future without additional capital. Our independent registered public accounting firm issued a report dated April 2, 2025, except for Notes 10 and 11 to our audited consolidated financial statements, as to which the date is May 13, 2025, in connection with the audit of our consolidated financial statements for the year ended December 31, 2024, which included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern, including our recurring losses, cash used in operations, and need to raise additional funds to meet our obligations and sustain our operations. In addition, the notes to our financial statements for the year ended December 31, 2024, contain a disclosure describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern. As of June 30, 2025, we had cash and cash equivalents of $0.58 million and an accumulated deficit of $45.2 million. Our ability to continue as a going concern is dependent upon our ability to obtain substantial additional funding in connection with our continuing operations. Adequate additional financing may not be available to us in the necessary timeframe, in the amounts we require, on terms that are acceptable to us, or at all. If we are unable to raise additional capital, our business, financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going concern. If we are not able to continue as a going concern, we may have to liquidate our assets and/or seek protection under federal bankruptcy law, and it is likely that holders of our capital stock and holders of securities convertible into our common stock will lose all of their investment. As such, there is uncertainty regarding our ability to maintain liquidity sufficient to operate our business effectively, which raises substantial doubt about our ability to continue as a going concern. If we are unable to satisfy the continued listing requirements of The Nasdaq Stock Market, our common stock could be delisted and the price and liquidity of our common stock may be adversely affected. Our common stock may lose value and could be delisted from Nasdaq due to several factors or a combination of such factors. While our common stock is currently listed on Nasdaq, we can give no assurance that we will be able to satisfy the continued listing requirements of Nasdaq in the future, including but not limited to the corporate governance requirements and the minimum closing bid price requirement or the minimum equity requirement. On May 20, 2025, we received a letter from the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market LLC indicating that, based upon the closing bid price of our common stock for the 30 consecutive business days ending on May 19 2025, we no longer met the requirement to maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided a period of 180 calendar days, or until October 1, 2025, in which to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the closing bid price of our common stock must be at least $1 per share for a minimum of ten consecutive business days during this 180-day period (subject to the Staff’s discretion to extend this ten consecutive business day period). On July 1, 2025, we received a letter from the Staff notifying us that, based on the market value of listed securities for the previous 30 consecutive business days, the listing of our common stock was not in compliance with Nasdaq Listing Rule 5550(b)(2), which requires companies listed on the Nasdaq Capital Market to maintain a minimum market value of listed securities of at least $35 million (the “MVLS Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), we have been provided a period of 180 calendar days, or until December 29, 2025, to regain compliance with the MVLS Requirement. To regain compliance, our market value of listed securities must close at $35 million or more for a minimum of ten consecutive business days (subject to the Staff’s discretion to extend this ten consecutive business day period). The above mentioned letters have no immediate effect on the listing of our common stock on the Nasdaq Capital Market. In the event that we do not regain compliance with the MVLS Requirement or the Minimum Bid Price Requirement prior to the expiration of their respective 180-day compliance periods, the Staff will provide written notice to us that our common stock will be subject to delisting. At that time, we may appeal the Staff’s delisting determination to a Nasdaq Hearing Panel. 39 Table of Contents We will continue to monitor our market value of listed securities and the closing bid price of our common stock as we consider our available options to regain compliance with the MVLS Requirement and the Minimum Bid Price Requirement. There can be no assurance that we will be able to regain compliance with the MVLS Requirement or the Minimum Bid Price Requirement or maintain compliance with the other continued listing requirements of Nasdaq. If we were to be delisted, we would expect our common stock to be traded in the over-the-counter market which could adversely affect the liquidity of our common stock. Additionally, we could face significant material adverse consequences, including: ● a limited availability of market quotations for our common stock; ● a decreased ability to issue additional securities or obtain additional financing in the future; ● reduced liquidity for our stockholders; ● potential loss of confidence by customers, collaboration partners and employees; and ● loss of institutional investor interest. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement, or prevent future non-compliance with Nasdaq’s listing requirements. Our business is subject to various laws and regulations, including financial protections and securities laws. We are subject to a variety of laws and regulations relating to financial protection, data privacy, and securities laws. These laws and regulations are constantly evolving and can be subject to significant change. Such laws and regulations are numerous, complex, and frequently changing. If we fail to satisfy such laws and regulations, we may face inquiries or investigations or other government actions, which may be costly to comply with, result in negative publicity, require management’s time and attention, and subject us to remedies that may harm our business, including fines or demands or orders that we modify or cease business practices. Additionally, as we depend on third parties for key services, we rely on such third-party service providers’ compliance with laws and regulations regarding privacy, data protection, consumer protection, securities regulation, and other matters relating to our customers and business activities. Should there be deficiencies in our compliance (including by third-party service providers), this could adversely impact our reputation and could also expose us to material liability and responsibility for damages, fines, or penalties. We are permanently barred from raising capital in Massachusetts pursuant to a Consent Order. On April 15, 2022, we entered into a consent order (the “Consent Order”) with the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts. Under the Consent Order, the Company is barred from offering or selling securities in the Commonwealth of Massachusetts, and ordered to cease and desist from committing future violations of Massachusetts Uniform Securities Act, Mass. Gen. Laws c. 110A (the “Act”), and the regulations promulgated thereunder at 950 Code Mass. Regs. 10.01-14.413. The National Securities Markets Improvement Act of 1996 (“NSMIA”) prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities,” including securities listed on a national securities exchange such as Nasdaq. Because our common stock is listed on Nasdaq, our common stock qualifies as covered securities under such statute. Although the states are preempted from regulating the sale of covered securities, NSMIA does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. The Consent Order expressly states that it is not intended to be a final order based upon violations of the Act that prohibit fraudulent, manipulative, or deceptive conduct. As a result, there is uncertainty as to whether the Consent Order’s prohibition on offers or sales of our securities in the Commonwealth of Massachusetts is enforceable under federal law. Regardless of this uncertainty, we have not undertaken a legal determination as to the preemption question and are continuing to comply with the Consent Order. To the extent that the Consent Order is enforceable, our ability to sell securities of the Company is limited to the remaining 49 states and expressly excludes natural persons or legal entities that are residents of the Commonwealth of Massachusetts. Based on information currently available to us, we are not aware of any sales that have been made by the Company in the Commonwealth of Massachusetts since we entered into the Consent Order. However, if an offering of our securities were to result in sales to residents of the Commonwealth of Massachusetts, even inadvertently, it could be viewed as a violation of the Consent Order and could subject us to additional regulatory actions or penalties. A regulatory action, even if it does not result in a finding of wrongdoing or penalty, could require substantial expenditures of time, resources, and money, and could potentially damage our reputation. Any such regulatory action or penalty could adversely affect our business, result of operations or access to capital markets. . 40 Table of Contents Our financial results are highly dependent on broader macroeconomic and U.S. residential real estate market conditions, which are seasonal and cyclical in nature. Our financial results are highly dependent on broader macroeconomic conditions and U.S. residential real estate market conditions, which are seasonal, cyclical and affected by changes in macroeconomic conditions beyond our control. Such macroeconomic conditions include, but are not limited to, increased interest rates, slow economic growth or recessionary conditions, supply chain disruptions, the pace of home price appreciation or the lack of it, housing affordability, changes in household debt levels, inflation and increased unemployment or consumer income levels, and credit availability and its impact on consumers’ ability and willingness to make loan payments. Such macroeconomic conditions also include competitive pressures and other market dynamics, including changes in consumer behavior, pricing strategies, customer acquisition costs, geographic expansion risks, marketing activity, or other operational factors, that may limit margin expansion even in periods of increased transaction activity. Some of these macroeconomic conditions, such as changes to interest rates and inflation, tend to be cyclical and may be influenced by actions taken by the U.S. Federal Reserve or other governmental authorities. Furthermore, national or global events including, but not limited to, geopolitical conflicts, natural disasters, natural events or man-made disruptions, may exacerbate such macroeconomic conditions and cyclical market conditions. During periods of rising interest rates, declining affordability or deteriorating economic conditions, refinancing activity and home purchase transactions generally decline and suppress housing turnover, in turn may negatively impact demand for our real estate brokerage, mortgage origination, and closing services. In contrast, lower interest rate environments or improved affordability may increase transaction volume, though competitive pressures and market dynamics may limit corresponding gains in margin or profitability. Given the cyclical and sometimes volatile nature of the loan origination activity and broader real estate market, we may experience significant fluctuations in our revenues from quarter to quarter or year to year. There can be no assurance that the current macroeconomic and real estate conditions will continue. New or increased tariffs could negatively affect U.S. national or regional economies, which could affect the demand for homes in the U.S., suppress housing activity, and lower demand for real estate transactions and related services. Such impacts could slow our mortgage origination business and reduce transaction volume across our brokerage and title operations. The current administration has announced its intent to adopt tariffs and potentially reform U.S. tax laws, both of which could negatively impact our business and financial results. Our business is subject to cyclical and seasonal fluctuations that may materially affect our results of operations and financial performance. The residential real estate and mortgage markets in which we operate are inherently cyclical and subject to seasonal trends, both of which may adversely impact our business, financial condition, and results of operations. Historically, home buying activity is strongest during the spring and summer months and declines in the fall and winter. These seasonal patterns affect transaction volumes and may influence demand across our real estate brokerage, mortgage origination, and title and closing services. As a result, our revenue and operating metrics may fluctuate significantly from quarter to quarter. Our results are also affected by broader macroeconomic conditions, including mortgage interest rates, employment levels, consumer confidence, housing affordability, inventory levels, and inflation. Prolonged periods of elevated interest rates or reduced affordability may limit consumer willingness or ability to purchase homes or refinance existing mortgages. These factors may reduce demand for our services and increase competitive pressure on pricing, margins, and customer acquisition costs. Our financial performance may also vary due to changes in consumer behavior, geographic expansion, marketing activity, or other operational factors that could mask or intensify the effects of seasonality or cyclicality. While our integrated model is intended to streamline the transaction process, our operations remain exposed to external housing market cycles and macroeconomic volatility. Accordingly, comparisons across reporting periods may not be meaningful and should not be relied upon as indicators of future performance. If adverse seasonal or cyclical conditions persist or worsen, or if we are unable to adjust our cost structure and operations accordingly, our business, financial condition, and results of operations could be materially and adversely affected. 41 Table of Contents Our ongoing disputes with GYBL may be costly, time consuming and, if adversely determined against us, could result in a significant downward adjustment of the GEM Warrants’ exercise price, and potentially other penalties and expenses, which could have a material adverse effect on our financial position and business operations. On November 1, 2024, we filed a lawsuit against GYBL in the Court (as defined above), pursuant to which we asserted two causes of action: (i) rescission of the GEM Warrants issued to GYBL pursuant to Section 29(b) of the Exchange Act due to GYBL’s underlying violation of Section 15(a) of the Exchange Act for effecting the GEM Warrants as an unregistered dealer, and (ii) in the alternative, a declaratory judgment that the exercise price adjustment calculation of the GEM Warrants is governed by the terms provided in the GEM Warrants, rather than the terms of the GEM Agreement. Following a motion to dismiss filed by GYBL on January 17, 2025, the Court granted such motion to dismiss on March 14, 2025. On April 15, 2025, we filed an appeal of the Court’s decision dismissing our case to the Second Circuit (as defined above). 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. Additionally, following the Court’s grant of GYBL’s motion to dismiss our lawsuit, GYBL filed a separate lawsuit against us, in which GYBL 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. On June 9, 2025, we filed a motion to dismiss this lawsuit from GYBL. GYBL responded to our motion to dismiss on June 23, 2025 asserting that our motion to dismiss should be denied, or, in the alternative, GYBL should be given leave to further amend its complaint. On June 30, 2025, the Company filed a reply in support of its motion to dismiss. Given the ongoing disputes with GYBL, including our pending appeal with the United States Court of Appeals for the Second Circuit and the recently filed motion to dismiss, the exercise price of the GEM Warrants have not been adjusted pursuant to the GEM Warrant’s terms while these disputes are pending, and, to the extent any shares of common stock are sold pursuant to an equity offering, for instance, at a price per share that is below the then-current exercise price of the GEM Warrants, we do not plan to adjust the exercise price of the GEM Warrants pending resolution of such disputes. A final adverse ruling against us in pending lawsuits and any subsequent appeals, or in any other claim or counterclaim, as applicable, sought by GYBL, could lead to a significant downward adjustment to the current exercise price of the GEM Warrants, additional expenses incurred related to the lawsuits during the ongoing disputes, including, but not limited to, attorney’s fees, and any other remedies the court may deem just. Further, any lawsuit and subsequent appeals may be expensive, may divert management’s time away from our operations, and may affect the availability and premiums of our liability insurance coverage, regardless of whether our claims are meritorious, or ultimately lead to a judgment against us. We cannot assure you that we will be able to be successful in lawsuits, or any subsequent appeal, against GYBL or resolve any current or future litigation matters, in which case those litigation matters, including the disputes with GYBL, could have a material and adverse effect on our business, financial condition, operating results and cash flows. If we incur penalties pursuant to the Registration Rights Agreement with GEM and GYBL, our business, results of operations and financial condition may be adversely affected . GEM and GYBL have certain registration rights, including “piggyback” registration rights, pursuant to that certain registration rights agreement entered into by and among us, GEM and GYBL concurrently with the GEM Agreement (the “Registration Rights Agreement”). The Registration Rights Agreement requires us to use reasonable best efforts to maintain an effective registration statement covering the resale of the shares of common stock issuable pursuant to the GEM Agreement and the shares of common stock underlying the GEM Warrants (collectively, the “Registrable Securities”), and the “piggyback” registration rights provide that, if we determine to prepare and file a registration statement relating to an offering of any of our equity securities for our own account or for the account of others (other than a registration statement on Form S-8 or Form S-4, or their equivalent relating to securities to be issued in exchange for other securities or equity securities to be issued solely in connection with equity securities issuable in connection with the Company’s option or other employee benefit plans) under the Securities Act of 1933, as amended (the “Securities Act”), then, in the absence of an effective registration statement covering the resale of the Registrable Securities, 42 Table of Contents we are required to deliver a written notice to GEM and GYBL to that effect. If, within five days after the delivery of such written notice, GEM and GYBL requests in writing to include in such registration statement all or any part of the Registrable Securities, then we are required to cause such requested Registrable Securities to be registered in the applicable registration statement. We have not maintained an effective registration statement covering the resale of the Registrable Securities. If we do not adhere to the registration rights set forth in the Registration Rights Agreement in connection with any offerings of our securities, there is no guarantee that GEM and/or GYBL will not seek penalties pursuant to the Registration Rights Agreement relating to their registration rights. If GEM and/or GYBL seek such penalties, our business, results of operations and financial condition may be adversely affected. In addition, if we ultimately determine to adhere to the registration rights, we may be required to expend significant resources to prepare and maintain a registration statement, respond to registration requests, and cover other associated costs, which would limit cash available for other business purposes. We expect our business model and pricing models to continue to evolve. Our business model has a limited track record, and as we continue growing our business and operations, we may continue to experiment with different pricing models and introduce new offerings and services. We expect that the services and technology offerings associated with our business model, including the reAlpha platform, will continue to rapidly evolve. Thus, in order to stay current with the industry, we may need to modify our offerings to remain relevant. Further, we have not yet made a final determination regarding how we will charge clients and how certain incentives we offer through the reAlpha platform, such as commission refunds, for example, will be applied to customers utilizing our offerings and the reAlpha platform, as applicable. We cannot guarantee we will be able to produce commercially successful offerings or develop a pricing model for such offerings that is acceptable to our customers and enable us to operate profitably. We cannot offer any assurance that modifications we make to our offerings or business model will be successful or will not harm our business. If the changes we make are not successful, or if we fail to make appropriate changes, it would have a material adverse effect on our business, prospects or operations and potentially on our ability to continue as a going concern. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS There are no transactions that have not been previously included in a Current Report on Form 8-K. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. MINE SAFETY DISCLOSURES Not applicable.