reAlpha Tech Corp
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
AIRE$0.39+2.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-04-19.
0001213900-24-034518
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001213900-24-069180
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 83 previous paragraphs and 101 current paragraphs.
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Tables are not compared: 5 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (50)
Current report
We are a real estate technology company developing an end-to-end commission-free homebuying platform, which we have named Claire. 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. Claire integrates AI-driven tools to offer tailored property recommendations, an intuitive visual interface, and included digital title and escrow services. The tagline: “No fees. Just keys. TM” reflects our dedication to eliminating traditional barriers and making homebuying more accessible and transparent.
Current report
Claire was announced on April 24, 2024, and it assists homebuyers with tasks such as mortgage pre-approval, booking tours, sending offer letters and completing property acquisitions. Claire also provides market insights, detailed property data, and uses large language models to answer queries and facilitate the homebuying process via a user-friendly, 24/7 web platform. Claire’s capabilities are complemented and supported by reAlpha Realty, LLC, our in-house brokerage firm, on a no-obligation and commission free basis. Although Claire is currently only available for homebuyers in 20 counties in Florida, we intend to expand its capabilities nationwide by the end of 2026 depending on numerous factors, including, among other things, our ability to scale the platform, obtain additional data and successfully market the platform.
Current report
Due to current macroeconomic conditions, such as higher interest rates, inflation, and elevated property prices, our real estate acquisition operations have been halted. Instead, our current focus will be directed towards the continuous enhancement and refinement of Claire and our AI technologies for commercial use to generate technology-derived revenue. Further, as part of our growth strategy, we intend to continue identifying target companies that may be complementary to our business, and we intend to generate revenue from integrating such acquisitions that we may complete from time to time into our business. For instance, in May 2024, we announced the completion of the acquisition of Naamche (as defined below), and in July 2024, we announced the acquisition of AiChat (as defined below), both of which added additional sources of potential technology services revenue. Going forward, we expect to complete additional strategic acquisitions that we believe will add additional sources of potential revenue and services to homebuyers using Claire, including, but not limited to, mortgage brokerages, home insurance, title companies, AI product companies, and real estate brokerages.
Current report
Technology Services (formerly “Platform Services”)
Current report
On December 3, 2023, we entered into a Stock Purchase Agreement (the “First Purchase Agreement”), pursuant to which we agreed to acquire from the selling shareholders (the “Sellers”) and representative of the Sellers named therein (the “Sellers’ Representative”) the issued and outstanding shares of capital stock of Naamche, Inc., a Delaware corporation (“U.S. Naamche”), not already owned by us (the “First Acquisition”). Concurrently with the First Purchase Agreement, we entered into a second Stock Purchase Agreement, which was subsequently amended, restated and superseded on February 2, 2024 (the “Amended and Restated Purchase Agreement,” together with the First Purchase Agreement, the “Purchase Agreements”), pursuant to which we agreed to acquire all the issued and outstanding shares of capital stock of Naamche, Inc. Pvt. Ltd., a corporation formed in the country of Nepal (“Nepal Naamche,” together with U.S. Naamche, “Naamche”) (the “Second Acquisition,” and together with the First Acquisition, the “Acquisitions”). The closing of the Acquisitions was subject to the satisfaction or waiver of certain closing conditions set out in the Purchase Agreements, including the receipt of regulatory approval from the Department of Industries of Nepal.
Current report
Acquisition of AiChat Pte. Ltd.
Current report
On July 12, 2024, we entered into a Business Acquisition and Financing Agreement (the “Acquisition Agreement”) with AiChat Pte. Ltd., a company incorporated in the Republic of Singapore (“AiChat”), AiChat10X Pte. Ltd., a Singaporean company (the “Seller”), and Kester Poh Kah Yong (the “Founder”). Pursuant to the Acquisition Agreement, we acquired 85% of the outstanding ordinary shares of AiChat, an AI-driven company specializing in conversational customer experience solutions, from the Seller. The remaining 15% of AiChat’s shares will be acquired on June 30, 2025 (the “Acquisition”).
Current report
In exchange for the shares, we agreed to pay the Seller a total purchase price of $1,140,000, comprising of: (i) $312,000 in restricted shares of our common stock, priced at a 10% discount to the 10-day volume weighted average price (VWAP) of the common stock on the Nasdaq Capital Market (“Nasdaq”), to be issued no later than January 1, 2025 (the “First Tranche Shares”); (ii) $588,000 in restricted shares of common stock, also priced at a 10% discount to the VWAP, subject to any Base Case Adjustment (as defined in the Acquisition Agreement), to be issued no later than April 1, 2025 (the “Second Tranche Shares”); and (iii) $240,000 in restricted shares of common stock, calculated at a 5% discount to the VWAP, to be issued no later than December 1, 2025 (the “Third Tranche Shares,” collectively with the First Tranche Shares and the Second Tranche Shares, the “Tranche Shares”). Additionally, we agreed to subscribe to and purchase from AiChat: (i) 55,710 ordinary shares of AiChat at the closing of the Acquisition, for $60,000; and (ii) 222,841 ordinary shares of AiChat according to a disbursement schedule to be agreed upon by the Company, AiChat, and the Founder, for a total subscription price of $240,000.
Current report
The Tranche Shares will be subject to a 90-day restrictive period (the “Restricted Period”) following issuance, during which the Seller cannot sell, transfer, or otherwise dispose of the shares or request their registration under the Securities Act. After the Restricted Period, the shares will be deposited into the Seller’s designated account and then transferred to the Founder based on his beneficial ownership in the Seller. In order to comply with Nasdaq Listing Rule 5635(a), the total Tranche Shares issued cannot exceed 19.99% of our outstanding common stock immediately before the Acquisition Agreement, which equates to 8,860,213 shares (the “Cap Amount”). Any shares issued in excess of this amount will be paid in cash to the Seller, as specified in the Acquisition Agreement.
Current report
Additionally, we agreed to guarantee certain Singaporean bank loans from AiChat totaling approximately 862,092 Singapore Dollars (SGD). The Acquisition Agreement also includes the assignment of AiChat’s intellectual property rights from the Seller to us. Post-acquisition, the Seller will indemnify us and our affiliates against any liabilities, damages, losses, costs, or expenses arising from third-party claims related to us and the Acquisition. The Acquisition Agreement contains customary representations, warranties, covenants, and conditions for transactions of this nature.
Current report
Acquisition of Controlling Interest of Hyperfast Title LLC
Current report
On July 24, 2024, we entered into a Membership Interest Purchase Agreement (the “Hyperfast Purchase Agreement”) with David R. Breschi and Kristen Britton (the “Hyperfast Sellers”). Pursuant to this agreement, we acquired 85% of the outstanding membership interests in Hyperfast Title LLC (“Hyperfast”), a Florida-based company specializing in real estate closings and title insurance. Hyperfast was founded by the owners of Madison Settlement Services, LLC, a national title agency (the “Hyperfast Acquisition”). The Hyperfast Purchase Agreement includes standard representations, warranties, and covenants typical for transactions of this nature.
Current report
In conjunction with the Hyperfast Acquisition, we, the Hyperfast Sellers, and Hyperfast signed an Amended and Restated Operating Agreement (as amended from time to time, the “Operating Agreement”). The Operating Agreement outlines several key provisions, including: annual license fees to be paid to the Hyperfast Sellers, contingent on their continued service with Hyperfast; annual management fees based on Hyperfast’s operating margin; a right of first refusal for each Hyperfast member to purchase the interests of any member wishing to sell; and various rights for us, as the managing member, to acquire the Hyperfast Sellers’ membership interests, and for the Hyperfast Sellers to sell their respective interests in Hyperfast, all in accordance with the terms specified in the Operating Agreement.
Current report
Streeterville Capital, LLC Note Purchase Agreement and Secured Promissory Note
Current report
On August 14, 2024, we entered into a note purchase agreement (the “Purchase Agreement”) with Streeterville Capital, LLC (“Lender”) pursuant to which we issued and sold to the Lender a secured promissory note in the original principal amount of $5,455,000 (the “Note”). The Note carries an original issue discount of $435,000 and we agreed to pay $20,000 to the Lender to cover its legal fees, accounting costs, due diligence, monitoring and other transaction costs, each of which were deducted from the proceeds of the Note received by us resulting in a purchase price received by us of $5,000,000. Interest under the Note accrues at a rate of 8% per annum, and the unpaid amount of the Note, and any interest, fees, charges and late fees are due 18 months following the date of issuance. The Note and Purchase Agreement include certain material terms, including the Lender’s ability to redeem a portion of the Note from time to time beginning seven months after issuance, events of default and penalties associated therewith, restrictive covenants on our ability to issue securities, subject to exceptions set forth therein, a “most favored nation” provision, among others. In connection with the Note and Purchase Agreement, we and Rhove also entered into security agreements and intellectual security agreements in favor or the Lender, and our U.S. subsidiaries entered into a guaranty in favor of the Lender.
Current report
We also entered into a placement agency agreement (the “Placement Agency Agreement”) with Maxim Group LLC (“Maxim”), pursuant to which Maxim agreed to serve as lead placement agent on a “reasonable best efforts basis” in connection with the sale of the Note and any additional notes (the “Placement”). Pursuant to the Placement Agency Agreement, we agreed to pay Maxim a cash fee equal to 3.75% of the gross proceeds received by us for the Note and any additional notes and to reimburse Maxim for its reasonable accountable expenses, including legal fees, up to an aggregate amount of $10,000. In addition, if within nine months of a closing of a sale of the Note or any additional notes, we complete any financing of equity or equity-linked capital-raising activity with, or receives proceeds from, any of the investors that were introduced to us by Maxim in connection with the Placement, then we will pay Maxim a cash fee of 3.75% of the proceeds received from such financing.
Current report
See “Part II – Item 5. Other Information” of this report for more information on the Note, Purchase Agreement and related agreements.
Current report
Critical Accounting Policies
Current report
The following discussion and analysis of financial condition and results of operations is based upon our financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States. Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations. These policies and estimates require the application of significant judgment by management. These estimates can be materially affected by changes from period to period as economic factors and conditions outside of our control change. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, our management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. We believe the current assumptions and other considerations used to estimate amounts reflected in the condensed consolidated financial statements included in this Form 10-Q are appropriate.
Current report
Three months ended June 30, 2024 compared to three months ended June 30, 2023
Current report
Revenues. For the three months ending June 30, 2024, revenue was $62,353, compared to $54,827 for the same period in 2023. Our revenues consist of the technology services segment income that we receive directly from, or services related to, our technologies. This increase in revenue is primarily due to revenue generated by Naamche, which we acquired on May 6, 2024, from providing technology services to third-parties.
Current report
Cost of Revenues. For the three months ending June 30, 2024, the cost of revenues was $18,250, compared to $30,442 for the same period in 2023. This decrease is mainly attributed to the elimination of property management fees associated with properties that we no longer own.
Current report
**Repairs and Maintenance.**For the three months ending June 30, 2024, repair and maintenance costs amounted to $846, a notable reduction from $24,645 for the same period in 2023. This decrease is mainly attributed to us currently holding no properties and having no repair and maintenance costs associated with properties during this period, while we had done repair work on certain properties in the previous comparable period to get them ready for sale.
Current report
**Marketing and Advertising.**For the three months ending June 30, 2024, marketing and advertising expenses totaled $130,378, up from $57,569 during the same period in 2023. This increase is mainly attributable to changes in certain cost classifications and higher marketing expenses related to Claire promotions.
Current report
Wages, Benefits and Payroll Taxes.** For the three months ending June 30, 2024, wages, benefits, and payroll taxes totaled $476,179, compared to $296,186 for the same period in 2023. This increase is primarily due to retroactive salary adjustments for our executive officers, and the appointment of a new executive officer position and his associated salary.
Current report
**Depreciation and Amortization.**For the three months ending June 30, 2024 depreciation and amortization expenses were $69,331, compared to $23,242 for the same period in 2023. The increase is attributable to the amortization of identifiable intangible assets resulting from the purchase price allocation of the Rhove acquisition.
Current report
**Other Operating Expenses.**For the three months ended June 30, 2024, other expenses amounted to $176,162, up from $47,947 for the same period in 2023. This increase is mainly attributed to directors’ and officers’ insurance costs and changes in certain cost classifications.
Current report
**Other Income.**For the three months ended June 30, 2024, other income was $129,388 compared to $2,140 for the three months ended June 30, 2023. This increase is mainly attributed to fair value measurement of our previously held investment in Naamche, which was incurred in connection with Naamche’s acquisition.
Current report
Gain on Sale of myAlphie. For the three months ended June 30, 2024, gain on the sale of myAlphie was $0, compared to $5,502,774 for the same period in 2023. This decrease is a result of the one-time gain from the sale of the myAlphie platform in the previous reporting period.
Current report
Interest Expense. For the three months ended June 30, 2024, interest expense was $1,041, compared to $49,379 for the same period in 2023. This reduction in interest expense is attributable to the repayment of mortgage loans following the sale of our properties.
Current report
Technology (formerly “Platform”) Services
Current report
*Revenues.***For the three months ended June 30, 2024, revenue for the technology services segment was $62,353, compared to $32,253 for the same period in2023. This increase in revenue is mainly attributed to revenue generated by Naamche, which we acquired on May 6, 2024, from providing technology services to third-parties.
Current report
Six months ended June 30, 2024, compared to six months ended June 30, 2023
Current report
**Repairs and Maintenance.**For the six months ended June 30, 2024, repair and maintenance costs amounted to $1,595 compared to $29,106 for the same period in 2023. This decrease is mainly attributable to us currently holding no properties and having no repair and maintenance costs associated with any properties during this period, while we had done repair work on certain properties in the previous comparable period to get them ready for sale.
Current report
**Marketing and Advertising.**For the six months ended June 30, 2024, marketing and advertising expenses were $207,740 compared to $146,669 for the same period in 2023. This increase is mainly attributable to minor changes in certain cost classifications and higher marketing expenses related to Claire promotions.
Current report
**Depreciation and Amortization.**For the six months ended June 30, 2024, depreciation and amortization were $140,784 compared to $71,245 for the same period in 2023. The increase is attributable to the amortization of identifiable intangible assets resulting from the purchase price allocation of the Rhove acquisition.
Current report
**Other Operating Expenses.**For the six months ended June 30, 2024, other expenses were $314,029 compared to $113,582 for the same period in 2023. This increase is primarily attributable to directors’ and officers’ insurance costs and changes in certain cost classifications.
Current report
**Other Income.**For the six months ended June 30, 2024, other income was $129,388 compared to $2,140 for the same period in 2023. This increase is mainly attributed to fair value measurement of our previously held investment in Naamche, which was incurred in connection with Naamche’s acquisition.
Current report
**Gain on Sale of myAlphie.**For the six months ended June 30, 2024, gain on sale of myAlphie was $0 compared to $5,502,774 for the same period in 2023, because this was a one-time gain from the sale of the myAlphie platform during such period.
Current report
Analysis of Segment Results:
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Removed paragraphs (35)
Previous report
Due to current macroeconomic conditions, such as escalating interest rates, inflation, and elevated property prices, our real estate acquisition operations have been halted. Instead, our current focus will be directed towards the continuous enhancement and refinement of our AI technologies for commercial use to generate technology-derived revenue. For instance, in November 2023 we announced the commercial launch of GENA, an AI-powered technology that develops or enhances already existing personalized listing descriptions for residential properties to be listed in real estate online platforms, such as Airbnb, Inc.’s (Airbnb), Zillow and others. Since then, GENA’s subscription has been under limited availability to a select group of real estate professionals to ensure the platform’s scalability to a larger number of users. Although we have not yet generated revenue through GENA since its launch, we intend to continue commercializing our technologies to further add technology-derived revenue streams.
Previous report
Platform Services
Previous report
Sale of myAlphie LLC
Previous report
Effective May 17, 2023, we entered into a Second Side Letter Amendment (the “Second Amendment”) to that certain Membership Interest Purchase Agreement between us and turnit Holdings, LLC (“Turnit”), dated as of December 31, 2022 (the “Purchase Agreement”) to finalize a transaction that was originally contemplated through the Purchase Agreement. Turnit is an indirect subsidiary of Crawford Hoying, which is owned and partially controlled by Brent Crawford, the former chairman of our board of directors. CH REAlpha Investments, LLC, and CH REAlpha Investments II, LLC are also managed by Mr. Crawford. The Purchase Agreement was previously amended by a First Side Letter Agreement dated March 11, 2023 (the “First Amendment”), which was entered into between the Turnit and us. The Purchase Agreement provided for Turnit’s acquisition of all the issued and outstanding membership interests of myAlphie, LLC (the “Subsidiary”). Since the sale of myAlphie, we have provided Turnit with technical support services related to myAlphie.
Previous report
Prior to the execution of the Purchase Agreement and pursuant to the Downstream Merger, we held myAlphie LLC as a subsidiary, along with (a) all its technology and intellectual property, and (b) two on-demand promissory notes in the amounts of $975,000 and $4,875,000 payable to CH REAlpha Investments, LLC, and CH REAlpha Investments II, LLC, respectively (together, the “Promissory Notes”). Upon closing of the Purchase Agreement (a) the Seller sold all of its interests in myAlphie LLC, and (b) Turnit assumed our remaining liabilities and outstanding obligations under the Promissory Notes.
Previous report
Launch of GENA
Previous report
On March 21, 2024, we made GENA available to users. Initially announced on November 1, 2023, GENA, formerly known as “BnBGPT,” is an AI-powered technology designed to develop or enhance personalized listing descriptions for residential properties intended for online platforms such as Airbnb, Zillow, VRBO, and others. Previously utilized for internal purposes, GENA currently operates under a revenue model based on pay-per-use, with an initial free credit offered to new users.
Previous report
Follow-On Offering
Previous report
On November 21, 2023, we entered into a placement agency agreement with Maxim Group LLC (“Maxim”), pursuant to which we agreed to sell 1,600,000 units on a best-efforts basis at a price of $5.00 per unit for aggregate gross and net proceeds of $8.0 million and $7.16 million, respectively. Each unit was comprised of one share and one and a half warrant to purchase one and a half share of common stock, with each warrant being exercisable for a five-year period to purchase an additional share at a price of $5.00, subject to adjustments specified therein (the “Common Warrants”). The securities were issued on November 24, 2023, and were registered pursuant to a Form S-11 registration statement (File No. 333-275604). Maxim was paid 7% of the gross proceeds from this offering and was also reimbursed $107,500 for its expenses.
Previous report
On December 3, 2023, we entered into the First Purchase Agreement by and among us, Naamche, the Sellers and Sellers’ Representative, pursuant to which we agreed to acquire all of the issued and outstanding shares of capital stock of Naamche not already owned by us (the “First Acquisition”), in exchange for: (i) 225,000 shares (the “Shares”) of the our restricted common stock to be issued to the Sellers within 9 months from the closing date of the Acquisitions (as defined below) (the “Closing Date”), with each Seller receiving a number of Shares based on such Seller’s Relative Share (as defined in the First Purchase Agreement); and (ii) $450,000 in cash, payable to the Sellers in the 3 year period following the Closing Date based on the achievement of specified revenue-based targets (the “Contingent Payments,” and together with the Shares, the “U.S. Naamche Purchase Price”). The Shares will be subject to vesting over a 3 year period commencing from the date of issuance (the “Vesting Period”), provided that the Sellers remain actively involved in the management and operations of Naamche and Nepal Naamche during the Vesting Period. As of the date of execution of the First Purchase Agreement, we owned 25% of the issued and outstanding capital stock of Naamche.
Previous report
Concurrently with the execution of the First Purchase Agreement, we also entered into the Second Purchase Agreement by and among us, Nepal Naamche, the Sellers and the Sellers’ Representative, pursuant to which we agreed to acquire all of the issued and outstanding shares of capital stock of Nepal Naamche (the “Second Acquisition,” and together with the First Acquisition, the “Acquisitions”), in exchange for $50,000 in cash payable to each Seller based on such Seller’s Relative Share (as defined in the Second Purchase Agreement) (the “Nepal Naamche Purchase Price,” and together with the U.S. Naamche Purchase Price, the “Purchase Price”).
Previous report
Subsequently, on February 2, 2024, the Company, Nepal Naamche, the Sellers and Sellers’ Representative entered into the Amended and Restated Purchase Agreement, which amends, restates and supersedes the Second Purchase Agreement in its entirety. The Amended and Restated Agreement provides for, in addition to the transactions contemplated by the Second Purchase Agreement, a post-closing covenant of the Company to subscribe for and purchase from Nepal Naamche an aggregate of 135,000 shares of its common stock during the one-year period following the Closing Date, at a price per share of Nepalese Rupees 100, pursuant to the terms of one or more subscription agreements to be entered into between the Company and Nepal Naamche. As of the date of this report, we have not yet entered into any such subscription agreements with Nepal Naamche.
Previous report
In accordance with the Purchase Agreements, we also have the right to set-off any amount owed by the Sellers in connection with the Purchase Agreements, including any Losses (as defined in the Purchase Agreements) for which we are entitled to indemnification, against any amount owed by us to any Seller under the Purchase Agreement (including, but not limited to, any portion of the Purchase Price).
Previous report
Letter of Intent
Previous report
On December 13, 2023, we entered into a non-binding letter of intent (the “LOI”) to acquire United Software Group and certain of its affiliates (collectively, “USG”) an Ohio-based privately-held, multi-industry information technology consulting company (the “Acquisition”), pursuant to which, we intended to purchase USG for an aggregate purchase price of up to $40,000,000, payable as follows: (i) $11,700,000 in cash at closing; (ii) $16,700,000 in shares of our common stock, at an initial value of $10 per share, subject to adjustments based on the common stock’s performance 18 months after closing; and (iii) an additional $11,600,000 in cash, subject to performance based earn-out measures set forth in the LOI.
Previous report
The proposed Acquisition was subject to conditions, including negotiation of definitive documentation and completion of our due diligence. On February 19, 2024, in accordance with the LOI, we notified USG of our intention to extend the due diligence period for another 60 days. On April 12, 2024, after completion of our due diligence investigations, we terminated negotiations to acquire USG and will not enter into a definitive agreement.
Previous report
Change in fiscal year
Previous report
On December 12, 2023, our board of directors approved a change to our fiscal year end from April 30 to December 31, effective as of December 31, 2023. Accordingly, references to our fiscal year 2022 and prior years, if any, mean the fiscal year ended on April 30 of such year, and references to our fiscal year 2023 and beyond mean the fiscal year ended on December 31 of such year.
Previous report
Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023.
Previous report
Depreciation and Amortization. Depreciation and amortization were $71,453 for the three months ended March 31, 2024, compared to $48,003 for the three months ended March 31, 2024. This increase is mainly attributed to the inclusion of intangible asset amortization in the depreciation and amortization expensesfor the three months ended March 31, 2024.
Previous report
Other Operating Expenses. Other operating expenses were $211,497 for the three months ended March 31, 2024, compared to $96,476 for the three months ended March 31, 2023. This increase is mainly attributed to an increase in directors’ and officers’ insurance expenses, and an increase in commission and title expenses occurred in connection with the sale of one of our properties during the three months ended March 31, 2024.
Previous report
**Other Income.**Other income was $31,392 for the three months ended March 31, 2024, compared to $90 for the three months ended March 31, 2023. This increase is mainly attributed to the gain on sale of property sold during the three months ended March 31, 2024.
Previous report
Professional and Legal Fees. Professional and legal fees were $468,725 for the three months ended March 31, 2024, compared to $325,161 for the three months ended March 31, 2023. The change in periods is mainly due to an increase in general legal advisory services and related fees.
Previous report
Net Loss. Net loss was $1,419,045 for the three months ended March 31, 2024, compared to a net loss of $864,913 for the three months ended March 31, 2023. This increase in loss is mainly attributable to increase in wages, Professional and legal fees and amortization of commitment fee.
Previous report
Platform Services
Previous report
***Revenues.***Revenues for the platform services segment was $20,426 for the three months ended March 31, 2024, compared to $62,810 for the three months ended March 31, 2023. This decrease in revenue is attributable to the sale of myAlphie. We have not generated other platform services revenue since the sale of myAlphie, except for providing technical support services to Turnit during the transition period after the sale of myAlphie.
Previous report
Segment earnings*.*Segment earnings was $2,177 for the three months ended March 31, 2024, compared to $282 for the three months ended March 31, 2023. This increase in segment earnings is mainly due to an increase in support services provided to Turnit and a decrease in payments to vendors and Stripe.
Previous report
Operating expenses*.* Operating expenses of the rental business segment was $39,135 for the three months ended March 31, 2024, compared to $62,567 for the three months ended March 31, 2023. This decrease is mainly attributed to the depreciation and amortization expense.
Previous report
Other income (expense). Other income (expense) of the rental business segment was $20,590 for the three months ended March 31, 2024, compared to $(55,532) for the three months ended March 31, 2023. This difference is mainly attributed to the gain on the sale of the properties we disposed of and the reduction in interest expenses resulting from us paying the corresponding mortgage loans for such properties.
Previous report
Segment loss*.*Segment loss was $18,545 for the three months ended March 31, 2024, compared to a segment loss of $77,705 for the three months ended March 31, 2023. This decrease is mainly attributable to decrease in interest expense and decrease in depreciation and amortization expense.
Previous report
On November 21, 2023, we entered into a placement agency agreement with Maxim Group LLC (“Maxim”) and a securities purchase agreement for the purposes of completing a best-efforts financing with Maxim resulting in the issuance of 1,600,000 shares of common stock and warrants to purchase common stock at an exercise price of $5.00 per share, subject to adjustments. As a result of this offering, we raised aggregate gross and net proceeds of $8.0 million and $7.6 million, respectively.
Previous report
Net cash used in investing activities was $(19,700) for the three months ended March 31, 2024, compared to $(138,973) of net cash used for the three months ended March 31, 2023. The difference in cash flows from investing activities was primarily due to gain on sale of property.
Previous report
Net cash provided by financing activities was $(71,286) for the three months ended March 31, 2024, compared to $282,577 for the three months ended March 31, 2023. The difference in cash flows from financing activities is primarily due to issuance of stock in our Regulation A offering.
Previous report
Smaller Reporting Company
Previous report
We qualify as a “smaller reporting company” under the rules of the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As a result, we may choose to take advantage of certain scaled disclosure requirements available specifically to smaller reporting companies. We will remain a smaller reporting company until the last day of the fiscal year in which the aggregate market value of our common stock held by non-affiliated persons and entities, or our public float, is more than $700 million as of the last business day of our most recently completed second fiscal quarter, or until the fiscal year following the year in which we have at least $100 million in revenue and at least $250 million in public float as of the last business day of our most recently completed second fiscal quarter.
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Previous wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this report, as well as our audited financial statements and related notes included in our most recent Transition Report on Form 10-KT. In addition to historical information, this discussion and analysis here and throughout this report contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements due to a number of factors, including but not limited to, the risks described in the section titled “Risk Factors” in our Transition Report on Form 10-KT for the eight months ended December 31, 2023.
Current wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this report, as well as our audited financial statements and related notes included in our most recent Transition Report on Form 10-KT for the eight months ended December 31, 2023 (the “Form 10-KT”). In addition to historical information, this discussion and analysis here and throughout this report contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements due to a number of factors, including but not limited to, the risks described in the section titled “Risk Factors” in our Form 10-KT.
Previous wording
Originally, our operational model was asset-heavy and built on utilizing our proprietary AI-powered technology tools for the acquisition of real estate, converting them into short-term rentals, and enabling individual investors to acquire fractional interests in these real estate properties, allowing such investors to receive distributions based on the property’s performance as a short-term rental.
Current wording
Before shifting our focus towards the development of our AI technologies, our operational model was asset-heavy and built on utilizing our proprietary AI powered technology tools for the acquisition of real estate, converting them into short-term rentals, and enabling individual investors to acquire fractional interests in these real estate properties, allowing such investors to receive distributions based on the property’s performance as a short-term rental.
Previous wording
Our reportable segments consist of (i) platform services and (ii) rental business. Our platform services segment offers and develops AI-based products and services to customers in the real estate industry. We are actively developing four operating technologies that are in varying stages of development: reAlpha BRAIN, reAlpha HUMINT, GENA, AIRE and reAlpha App. Our rental business segment, to the extent we resume operations, focuses on purchasing properties for syndication, which process is powered by our platform services technologies.
Current wording
Our reportable segments consist of (i) technology services (formerly named “platform services”) and (ii) rental business. Our technology services segment offers and develops AI based products and services to customers in the real estate industry. We are actively developing four operating technologies that are in varying stages of development: GENA, reAlpha BRAIN, reAlpha App and our main AI-powered platform, Claire. Our rental business segment, to the extent we resume operations, focuses on purchasing properties for syndication, which process is powered by this segment’s technologies and products.
Previous wording
We seek to differentiate ourselves from competitors primarily through the integration of AI into our technologies for the real estate industry. We expect that our platform services segment will benefit from the current exponential growth of the AI industry, and we believe that we are well-positioned to take advantage of these current trends due to our early adoption of AI for the development of our technologies.
Current wording
We seek to differentiate ourselves from competitors primarily through the integration of AI into our technologies for the real estate industry. We expect that our technology services segment will benefit from the current exponential growth of the AI industry, and we believe that we are well-positioned to take advantage of these current trends due to our early adoption of AI for the development of our technologies.
Previous wording
Our platform services segment technologies include: (i) reAlpha BRAIN, (ii) reAlpha HUMINT, (iii) GENA, (iv) AIRE, (v) reAlpha App and (vi) myAlphie.
Current wording
Our current technology services segment technologies include: (i) reAlpha BRAIN, (ii) reAlpha HUMINT, (iii) GENA, (iv) Claire and (v) reAlpha App.
Previous wording
myAlphie was sold on May 17, 2023, and it stopped contributing to our revenues as of such date, except for the revenue generated for the ongoing technical support we are providing to the buyer of myAlphie. Although we have not yet generated revenues from our developed technologies, we expect that once our technologies are fully operational and available for commercial use by customers, we will generate revenue through subscriptions, licensing fees, pay-per-use basis or other fee arrangements. To the extent we resume operations of our short-term rental operations, we expect to receive fee based revenues from conducting Syndications on the reAlpha App.
Current wording
Although we have not yet generated revenues from our technologies, we expect that once our technologies are fully operational and available for commercial use by customers, we will generate revenue through subscriptions, licensing fees, pay-per-use basis or other fee arrangements. To the extent we resume operations of our short-term rental operations, we expect to receive fee-based revenues from customers that would utilize the reAlpha App for participating and investing in our Syndications (as defined below).
Previous wording
Syndicate Members differ significantly to the holders of our common stock. Rights among Syndicate Members may also vary among each other depending on the specific terms and conditions agreed to in the offering documents pursuant to which the holder becomes a Syndicate Member. By becoming a Syndicate Member, the holder will not acquire any rights to the Company’s common stock and, therefore, will not be entitled to vote, receive a dividend or exercise any other rights of a stockholder of the Company. Likewise, acquiring shares of our common stock will not provide the stockholders the status of Syndicate Member. Both Syndicate Members and our stockholders will receive the same quarterly financial metric information of our listed properties through the reAlpha App and the reAlpha website, which will also be available to the general public without a login, concurrently with our condensed consolidated quarterly results (as more fully described under “Segments – Platform Services” above), tothe extent we resume these operations. Syndicate members that have access to the reAlpha App will only receive personalized financial information respective to their individual holdings in each of our Syndications. To date, we have not developed a secondary trading market for equity interests in our Syndication LLCs. While the potential establishment of such a market may be considered in the future, we have not made any decisions to develop a secondary trading market at this time.
Current wording
Syndicate Members differ significantly to the holders of our common stock. Rights among Syndicate Members may also vary among each other depending on the specific terms and conditions agreed to in the offering documents pursuant to which the holder becomes a Syndicate Member. By becoming a Syndicate Member, the holder will not acquire any rights to the Company’s common stock and, therefore, will not be entitled to vote, receive a dividend or exercise any other rights of a stockholder of the Company. Likewise, acquiring shares of our common stock will not provide the stockholders the status of Syndicate Member. Both Syndicate Members and our stockholders will receive the same quarterly financial metric information of our listed properties through the reAlpha App and the reAlpha website, which will also be available to the general public without a login, concurrently with our condensed consolidated quarterly results (as more fully described under “Segments – Platform Services” above), to the extent we resume these operations. Syndicate members that have access to the reAlpha App will only receive personalized financial information respective to their individual holdings in each of our Syndications. To date, we have not developed a secondary trading market for equity interests in our Syndication LLCs. While the potential establishment of such a market may be considered in the future, we have not made any decisions to develop a secondary trading market at this time.
Previous wording
Execution of Purchase Agreements to Acquire Naamche, Inc. and Naamche, Inc. Pvt. Ltd.
Current wording
Acquisition of Naamche, Inc. and Naamche, Inc. Pvt. Ltd.
Previous wording
The closing of the Acquisitions is subject to the satisfaction or waiver of certain closing conditions set out in the Purchase Agreements, which with respect to the Amended and Restated Agreement, includes the receipt of regulatory approval from the Department of Industries of Nepal for the transactions contemplated by the Second Purchase Agreement, which was received on March 27, 2024. However, the closing of the First Acquisition is still contingent upon the satisfaction or waiver of all of the remaining closing conditions set out in the Second Purchase Agreement and Amended and Restated Agreement. As a result of the Acquisitions, to the extent we satisfy the foregoing closing conditions, we will own 100% of the issued and outstanding shares of capital stock of Naamche and Nepal Naamche, and both entities will be our wholly-owned subsidiaries.
Current wording
On May 6, 2024, we completed the Acquisitions upon the satisfaction of the closing conditions set forth in the Purchase Agreements, including the regulatory approval by the Department of Industries of Nepal, which was received on March 6, 2024, except for the closing conditions requiring (i) the Sellers to deliver to us documentation issued by the appropriate authority in Nepal confirming contributions to the social security fund accounts of Sellers’ current employees in full and (ii) the written confirmation from the Sellers to remove the persons authorized to draw on or to have access to Nepal Naamche’s bank accounts and replace with the persons identified by us, both of which closing conditions were waived by us. As a result of the Acquisitions, we now own 100% of the issued and outstanding shares of capital stock of Naamche, and both entities are our wholly-owned subsidiaries.
Previous wording
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current wording
This Form 10-Q and our Form 10-KT include discussions of our accounting policies, as well as methods and estimates used in the preparation of our audited consolidated financial statements. For further information on our critical accounting policies and estimates, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-KT, the notes to our audited consolidated financial statements included in our Form 10-KT and “Note 2 – Summary of Significant Accounting Policies” of our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q. Since the filing of our Form 10-KT, we have not experienced a material change to our critical accounting policies or the methods and applications used to develop our accounting estimates.
Previous wording
Pursuant to the merger (the “Downstream Merger”) between reAlpha Tech Corp. (the “Former Parent”) and reAlpha Asset Management, Inc. (the “Former Subsidiary”), our Former Parent merged with and into the Former Subsidiary, with the Company surviving the Downstream Merger. Because the Company acquired the Former Parent’s assets and liabilities upon consummation of the merger, the Former Parent’s financials became a part of the consolidated financial statements of the Company. As a result, the financial statements included in this report and discussed herein reflect the operating results of both our Former Parent and the Company prior to March 21, 2023, which was the date on which the Downstream Merger closed, and our combined results, including those of the Former Parent, following the Downstream Merger closing date.
Current wording
Pursuant to the merger (the “Downstream Merger”) between reAlpha Tech Corp. (the “Former Parent”) and reAlpha Asset Management, Inc. (the “Former Subsidiary”), our Former Parent merged with and into the Former Subsidiary, with the Company surviving the Downstream Merger. Because the Company acquired the Former Parent’s assets and liabilities upon consummation of the merger, the Former Parent’s financials became a part of the consolidated financial statements of the Company. As a result, the financial statements included in this prospectus and discussed herein reflect the operating results of both our Former Parent and the Company prior to March 21, 2023, which was the date on which the Downstream Merger closed, and our combined results, including those of the Former Parent, following the Downstream Merger closing date.** **
Previous wording
Other Expenses. Other non-operating expenses were $132,494 for the three months ended March 31, 2024, compared to $29,843 for the three months ended March 31, 2023. This increase is mainly due to the amortization expenses of the commitment fee incurred in connection with the equity facility we have in place with GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, “GEM”).
Current wording
*Other Expenses.For the three months ended June 30, 2024 ***other non-operating expenses were $396,756, compared to $16,179 for the same period in 2023. This increase is mainly attributed to the amortization expenses of the commitment fee incurred in connection with the equity facility we have in place with GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, “GEM”) and stock-based compensation issued to employees and certain directors.
Previous wording
***Cost of revenues.***Cost of revenues for the platform services segment was $18,249 for the three months ended March 31, 2024, compared to $62,528 for the three months ended March 31, 2023. This decrease in cost of revenues is mainly attributed to the sale of myAlphie. After the sale, we no longer incur any payments to vendors or Stripe previously associated with myAlphie’s platform. The cost of revenues now consists only of costs incurred in connection with the technical support services provided to Turnit.
Current wording
*Cost of revenues.***For the three months ended June 30, 2024, cost of revenues for the technology services segment was $18,250, compared to $26,644 for the same period in 2023. The cost of revenues consists of costs incurred in connection with the technical support services provided to Turnit in connection with myAlphie’s sale. The decrease in cost of revenues was attributed to the limited technical support provided to Turnit.
Previous wording
Revenues*.*Revenues for the rental business segment was $0 for the three months ended March 31, 2024, compared to $48,641 for the three months ended March 31, 2023. This decrease is attributable to the decrease in the number of properties listed compared to the three months ended March 31, 2023, as we sold the properties we held for this segment’s operations as a result of putting these operations on hold.
Current wording
Revenues*.*For the three months ended June 30, 2024, revenue for the rental business segment was $0 compared to $22,574 for the same period in 2023 as the decrease is attributable to sale of the properties we previously held for this segment’s operations as a result of putting these operations on hold.
Previous wording
Cost of revenues*.*Cost of revenues for the rental business segment was $0 for the three months ended March 31, 2024, compared to $8,247 for the three months ended March 31, 2023. This difference is attributed to the decrease in the number of properties listed, which decreased the associated costs of maintaining those properties.
Current wording
Cost of revenues*.*For the three months ended June 30, 2024, cost of revenue for the rental business segment was $0 compared to $3,798 for the same period in 2023. This decrease is mainly attributed to the sale of properties, which decreased the associated costs of maintaining those properties.
Previous wording
Revenues. Revenues were $20,426 for the three months ended March 31, 2024 compared to $111,451 for the three months ended March 31, 2023. Our revenues consist of both the short-term rental revenue that we receive from our listed properties and platform services income that we receive directly from, or services related to, our technologies. This decrease in revenues is mainly attributed to lower rental income segment due to the disposal of our properties during and subsequent to the fiscal year 2023, as well as lower platform services segment revenue compared to the three months ended March 31, 2023 as a result of the sale of myAlphie.
Current wording
Revenues. For the six months ended June 30, 2024, revenue was $82,779 compared to $166,278 for the same period in 2023. Our revenues consist of the technology services segment income that we receive directly from, or services related to, our technologies and revenue that we receive from short-term rental properties, if any. This decrease in revenue is mainly attributable due to the sale of our properties, and deriving no income from such rental segment during the six months ended June 30, 2024, since we currently hold no properties, and the sale of myAlphie which was generating technology services revenue during the six months ended June 30, 2023.
Previous wording
Cost of Revenues. The cost of revenues was $18,249 for the three months ended March 31, 2024, compared to $70,775 for the three months ended March 31, 2023. Cost of revenues consists of payments for property management fees of listed properties, previous payments to vendors for work completed through myAlphie and associated payment processing fees to Stripe, a payment platform. The decrease in cost of revenues is mainly attributed due to the sale of myAlphie, since we no longer incur any direct costs related to operating the myAlphie platform.
Current wording
Cost of Revenues. For the six months ended June 30, 2024, the cost of revenues were $36,499 compared to $119,158 for the same period in 2023. The decrease in cost of revenues is mainly attributed due to the sale of myAlphie, since we no longer incur any direct costs related to operating the myAlphie platform.
Previous wording
Wages, Benefits, and Payroll Taxes. Wages, benefits, and payroll taxes totaled $418,902 for the three months ended March 31, 2024, compared to $204,196 for the three months ended March 31, 2023. This increase is attributed to the recent salary adjustments to our executive officers, which were retroactive to January 1, 2024, in addition to the creation of a new executive officer position and associated salary therewith.
Current wording
Wages, Benefits, and Payroll Taxes. For the six months ended June 30, 2024, wages, benefits, and payroll taxes were $895,084 compared to $482,443 for the same period in 2023. This increase is mainly attributable to the recent retroactive salary adjustments to our executive officers, in addition to the creation of a new executive officer position and the associated salary therewith.
Previous wording
Interest Expense. Interest expense was $10,802 for the three months ended March 31, 2024, compared to $41,812 for the three months ended March 31, 2023. This decrease in interest expense is attributable to a decrease in outstanding mortgage loans after the sale of certain properties.
Current wording
Interest Expense. For the six months ended June 30, 2024, interest expense was $11,843 compared to $91,191 for the same period in 2023. This decrease in interest expense is attributable to repayments of mortgage loans upon the sale of certain properties.
Previous wording
The following is an analysis of our results by reportable segment for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. For further information regarding our reportable business segments, refer to ourcondensed consolidated financial statements and related notes included elsewhere in this report.
Current wording
The following is an analysis of our results by reportable segment for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. For further information regarding our reportable business segments, refer to our unaudited condensed financial statements and related notes included elsewhere in this report.
Previous wording
To supplement our financial information presented in accordance with U.S. GAAP (“GAAP”), we believe “Adjusted EBITDA,” a “non-GAAP financial measure”, as such term is defined under the rules of the SEC, is useful in evaluating our operating performance. We use Adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that Adjusted EBITDA may be helpful to investors because it provides consistency and comparability with past financial performance. However, Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Current wording
To supplement our financial information presented in accordance with U.S. GAAP (“GAAP”), we believe “Adjusted EBITDA” and “Net income per share,” both “non-GAAP financial measures”, as such term is defined under the rules of the SEC, are useful in evaluating our operating performance. We use Adjusted EBITDA and Net income per share to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that these non-GAAP financial measures may be helpful to investors because it provides consistency and comparability with past financial performance. However, these non-GAAP financial measures are presented for supplemental informational purposes only, have limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Previous wording
We reconcile our non-GAAP financial measure of Adjusted EBITDA to our net income, adjusted to exclude interest expense, provision for (benefit from) income taxes, depreciation and amortization and certain charges or gains resulting from non-recurring events, if any. For the three-months ended March 31, 2024 and March 31, 2023, we did not have any non-recurring event.
Current wording
We reconcile our non-GAAP financial measure of Adjusted EBITDA to our net income, adjusted to exclude interest expense, provision for (benefit from) income taxes, depreciation and amortization and certain charges or gains resulting from non-recurring events.
Previous wording
The following table provides a reconciliation of net income to Adjusted EBITDA:
Current wording
The following tables provide a reconciliation of net income to Adjusted EBITDA and Net income per share, respectively:
Previous wording
Our liquidity and capital resources are critical to our ability to execute our business plan and achieve our strategic objectives. Accordingly, to the extent that we may need to raise additional working capital to fund operations, we will need to secure additional financing. The timing, size, and terms of any such offering have not yet been determined. To the extent that we require additional funds more than 12 months from the date hereof, and collections from our short-term rentals and technologies, to the extent commercialized, cannot fund our needs, we may utilize equity or debt offerings to raise these funds. We cannot provide any assurance that we will be able to raise additional funds on acceptable terms, if at all. Our ability to raise additional capital will depend on various factors, including market conditions, investor demand, and our financial performance.
Current wording
Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt services, acquisitions, contractual obligations and other commitments. Our liquidity and capital resources are critical to our ability to execute our business plan and achieve our strategic objectives. Accordingly, to the extent that collections from our short-term rentals, if any, and technologies cannot fund our operations, we intend to utilize equity or debt offerings to raise these funds, although volatility in the capital markets may negatively affect our ability to do so. We cannot provide any assurance that we will be able to raise additional funds on acceptable terms, if at all. Our ability to raise additional capital will depend on various factors, including market conditions, investor demand, and our financial performance.
Previous wording
We had cash and cash equivalents of approximately $4.8 million as of March 31, 2024 and approximately $6.5 million as of December 31, 2023. We believe we have sufficient working capital to fund our operations for the next 12 months.
Current wording
We had cash and cash equivalents of approximately $3.7 million as of June 30, 2024 and approximately $6.5 million as of December 31, 2023. Based on our estimates, we believe we do not have sufficient working capital to meet our financial needs for the 12-month period following June 30, 2024. Further, while we anticipate continued operating losses in the near future, we are confident in our strategy to continue investing in the commercialization of our products and technologies and our ability to continue operations. If we are unable to cover our operating expenses for the next 12-month period through the commercialization of our technologies, or if we are unable to raise sufficient capital through additional debt or equity arrangements, to the extent needed, there will be uncertainty regarding our ability to maintain liquidity sufficient to operate the business effectively, which raises substantial doubt as to our ability to continue as a going concern within one year from the date of issuance of these condensed consolidated financial statements. We believe we have alleviated the substantial doubt of our ability to continue operations by securing funding of approximately $5.45 million in gross proceeds pursuant to the issuance of a secured note on August 14, 2024, pursuant to which we raised approximately $5.0 million in net proceeds, after paying related expenses and fees (see “Note 3 – Going Concern” above and “Item 5. Other Information” below for additional information).
Previous wording
We believe the likelihood that any warrant holders will exercise their warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of our common stock. If the trading price for our common stock is less than $371.90 per share, in the case of the warrants issued to GEM in accordance with the GEM Agreement (the “GEM Warrants”), we believe holders of the GEM Warrants will be unlikely to exercise them. While current conditions influencing the exercise of the GEM Warrants make such exercise unlikely, further adjustments to its exercise price may make the GEM Warrants more attractive for investors to exercise. Our analysis is based on the trading price of our common stock as of the date of this report, with a threshold set at $371.90 per share for the GEM warrants. On April 15, 2024, the closing price of our common stock was $0.85 per share.
Current wording
We may also receive proceeds from the cash exercises of the warrants issued in connection with the GEM Agreement (the “GEM Warrants”) and the warrants issued in connection with our public offering from November 2023 (the “Follow-On Warrants,” and together with the GEM Warrants, the “Warrants”). We believe the likelihood that any Warrant holders will exercise their warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of our common stock. Unless the trading price for our common stock is less than $371.90 per share, in the case of the GEM Warrants, or $5.00 per share in the case of the Follow-On Warrants, we believe holders of the Warrants will be unlikely to exercise them. While current conditions influencing the exercise of the Warrants make such exercise unlikely, further adjustments to their exercise price may make the Warrants more attractive for investors to exercise. Further, the Follow-On Warrants contain “full ratchet” anti-dilution provisions that provide for a downward adjustment to its exercise price, subject to a floor price of $1.44 per share, as a result of subsequent offerings, and the share amount issuable pursuant to such warrants would increase such that the aggregate exercise price payable thereunder would equal the aggregate exercise price prior to such adjustment. Our analysis is based on the reported closing price of our common stock as August 13, 2024, which was $1.21 per share.
Previous wording
Net cash used in operating activities was $(1,527,238) for the three months ended March 31, 2024, compared to $(1,585,918) for the three months ended March 31, 2023. The difference in net cash flows from operating activities in not significant.
Current wording
Net cash used in operating activities was $2,550,879 for the six months ended June 30, 2024, compared to $2,358,359 for the six months ended June 30, 2023. The difference in net cash flows from operating activities was mainly attributable to increase in accounts payable and the decrease in prepaid expenses during the six months ended June 30, 2024.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
myAlphie was a previously developed technology included in our technology services segment that was sold on May 17, 2023, and it stopped contributing to our revenues as of such date, except for the revenue generated for the ongoing technical support we are providing to the buyer of myAlphie, Turnit.
Current report — wording carried from elsewhere
** **The following is an analysis of our results by reportable segment for the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023. For further information regarding our reportable business segments, refer to our unaudited condensed financial statements and related notes included elsewhere in this report.
Current report — wording carried from elsewhere
*Other Expenses.***For the six months ended June 30, 2024, other non-operating expenses were $571,488 compared to $76,772 for the same period in 2023. This increase is mainly attributable to the amortization expenses of the commitment fee incurred in connection with the equity facility we have in place with GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, “GEM”) and stock-based compensation issued to employees and certain directors.
Current report — wording carried from elsewhere
We reconcile our non-GAAP financial measure of Net income per share to our net income, adjusted to exclude provision for depreciation and amortization of certain intangible assets, share-based compensation and certain charges or gains resulting from non-recurring events.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt services, acquisitions, contractual obligations and other commitments. As of the date of this report, we have yet to generate meaningful revenue from our business operations and have funded acquisitions, capital expenditure and working capital requirement through equity and debt financing.