reAlpha Tech Corp
For the period ended Sep 30, 2024. Filed Nov 12, 2024.
View on SEC.govAbout this filing
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.
Sep 30, 2024 · Filed Nov 12, 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 2024-06-30; filed 2024-08-14.
0001213900-24-069180
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001213900-24-096140
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.
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A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (43)
Current report
We expect to continue seeking additional strategic acquisitions that we believe will add additional sources of potential revenue and services to homebuyers using reAlpha, including, but not limited to, home insurance, AI product companies, and real estate brokerages. Additionally, we have already acquired a mortgage brokerage and a title company, but we may consider further acquisitions in these verticals to add additional U.S. state licenses and potential revenue opportunities.
Current report
Acquisition of Debt Does Deals, LLC (d/b/a Be My Neighbor)
Current report
On September 8, 2024 (the “Closing Date”), we entered into a Membership Interest Purchase Agreement (the “BMN Acquisition Agreement”) with Be My Neighbor (as defined above), a Texas limited liability company, along with Christopher Bradley Griffith and Isabel Williams (collectively, the “BMN Sellers” and individually, a “BMN Seller”). Under this agreement, we acquired 100% of the outstanding membership interests in Be My Neighbor, a mortgage brokerage firm (the “BMN Acquisition”).
Current report
In exchange for all of the membership interests of Be My Neighbor outstanding immediately prior to the execution of the BMN Acquisition Agreement, and pursuant to the terms and subject to the conditions of the BMN Acquisition Agreement, we agreed to pay the BMN Sellers an aggregate purchase price of up to $6,000,000, subject to the adjustments described below to each of the Earn-Out Payments (as defined below) provided in the BMN Acquisition Agreement, consisting of: (i) $1,500,000 in cash paid on the Closing Date, with each BMN Seller receiving a cash amount in proportion to each of their membership interest percentage in Be My Neighbor; (ii) $1,500,000 in restricted shares of our common stock, or 1,146,837 shares of restricted common stock at a price of $1.31 per share, calculated based on the volume weighted average price of the common stock as reported on Nasdaq for the seven consecutive trading days ending on the trading day immediately prior to the Closing Date, to be issued within 90 days from the Closing Date and with each BMN Seller receiving an amount of shares of common stock in proportion to each of their membership interest percentage in Be My Neighbor (the “Buyer Shares”); and (iii) up to an aggregate of $3,000,000 in potential earn-out payments, payable in three tranches of up to $500,000, $1,000,000 and $1,500,000, respectively, in cash or restricted shares of common stock, at our sole discretion, each of which is calculated based on a formula set forth in the BMN Acquisition Agreement and subject to the achievement of certain financial metrics by Be My Neighbor for three successive measurement periods of 12 months, with the first measurement period ending 12 months after the Closing Date (collectively, the “Earn-Out Payments,” and each, an “Earn-Out Payment”). Specifically, each Earn-Out Payment will be payable in full if Be My Neighbor achieves certain revenue and earnings before interest, taxes, depreciation and amortization (“EBITDA”) thresholds for each of the measurement periods, each of which is payable within 120 days of the end of a measurement period. If Be My Neighbor does not meet the revenue and EBITDA threshold in a measurement period, a pro-rated amount of the Earn-Out Payment for such measurement period will be paid to Be My Neighbor based on the actual revenue and EBITDA achieved and in accordance with the formula set forth in the BMN Acquisition Agreement. Further, if Be My Neighbor exceeds such revenue and EBITDA thresholds during any measurement period, the Earn-Out Payment for such measurement period will not be capped and will be increased accordingly based on the formula set forth in the BMN Acquisition Agreement.
Current report
The Buyer Shares and any Earn-Out Payment shares (collectively, the “Shares”) will be restricted for 180 days from issuance, during which time the BMN Sellers cannot sell, assign, or transfer them. To comply with Nasdaq Listing Rule 5635(a), the total Shares issued cannot exceed 19.99% of our outstanding common stock immediately before the BMN Acquisition, or 8,880,383 shares (the “Cap Amount”). If the Shares exceed this Cap Amount, we will compensate the BMN Sellers in cash for the excess, according to a formula in the BMN Acquisition Agreement.
Current report
Launch of reAlpha AI Labs and Investment in Xmore AI
Current report
On August 15, 2024, we announced the launch of reAlpha AI Labs (“AI Labs”), a research and development initiative to develop, partner with and potentially invest in artificial intelligence (“AI”) startups. We believe that this initiative will provide a platform for early-stage companies, enabling them to accelerate their development and growth. We expect that the products and technologies developed from the partnership and collaboration with such early-stage companies will be used to enhance reAlpha, our generative-AI powered, commission-free home buying platform. Additionally, we plan to partner with universities through AI Labs to further enhance its research and development capabilities.
Current report
Subsequent to its launch, on September 30, 2024, we announced that AI Labs invested in Xmore AI (“Xmore AI”), a company that provides AI-driven cybersecurity solutions that is developing a software that will consolidate multiple cybersecurity tools into one platform. The aggregate investment amount was $125,000, consisting of $100,000 in cash and $25,000 in the form of in-kind services, as determined by the parties. We believe that this investment in Xmore AI will enhance the cybersecurity capabilities of reAlpha, as well as provide Xmore AI additional funds to continue the development of its cybersecurity software, which will provide AI-driven cybersecurity solutions to enterprises in multiple industries.
Current report
Recent Legal Challenges to Sales Agents’ Commission Structure
Current report
Recent developments in the real estate industry have seen increased scrutiny and legal challenges related to the structure of real estate agent commissions. Legal actions and regulatory inquiries have been initiated to examine the fairness, transparency, and potential anticompetitive practices associated with the traditional commission model. Courts and regulatory bodies may be increasingly focused on ensuring transparency in commission structures, potentially leading to reforms that impact the earnings and business models of real estate professionals. Changes in legislation or legal precedents could impact the standard practices of commission-sharing between listing agents and buyer’s agents and may adversely affect our business model and revenues. On October 31, 2023, a federal jury in Missouri found that the National Associations of Realtors (the “NAR”) and certain companies conspired to artificially inflate brokerage commissions, which violates federal antitrust law. The judgment was appealed on October 31, 2023, while these and other plaintiffs have filed similar lawsuits against a number of other large real estate brokerage companies.
Current report
On or about March 15, 2024, NAR agreed to settle these lawsuits, by agreeing to pay $418 million over approximately four years, and changing certain of its rules surrounding agent commissions. This settlement resolves claims against NAR and nearly every NAR member; all state, territorial and local REALTOR® associations; all association-owned MLSs; and all brokerages with an NAR member as principal whose residential transaction volume in 2022 was $2 billion or below and is subject to court approval. Due to this litigation, and effective as of August 17, 2024, NAR has implemented a new rule that prohibits offers of compensation on MLS listings and requires written agreements between buyers and buyer’s agents.
Current report
Early indications suggest that these changes are already prompting shifts in industry practices as a result of the NAR lawsuit. For instance, discussions are underway regarding potential changes to rules established by local or state real estate boards or multiple listing services. These changes may necessitate adjustments in brokers’ business models, including alterations in agent and broker compensation structures, as well as requiring buyers to sign separate agreements to compensate their agents. We believe that we are well-positioned to take advantage of some of these potential industry changes. Given that reAlpha will serve as a zero-commission real estate buyer’s agent, we believe that buyers that have access to the platform will choose our platform over seeking agents to conduct their property search and acquisition to avoid paying additional buyer’s agents fees through these separate agreements. Additionally, we expect that our competitors will need to develop mechanisms and plans to enable buyers to negotiate commissions, which may add another layer of complexity into real estate transactions. We believe that reAlpha will remove such layer by offering all these services – including negotiations of fees through our AI negotiation helper – in one platform, while providing buyers with zero-commission fees on all homes purchased through the platform.
Current report
The NAR litigation and its ramifications, however, remain uncertain and could cause unforeseen turmoil in our industry, the impacts of which could have a negative effect on us as an industry participant.
Current report
Summary Results of Operations
Current report
Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023
Current report
Revenue. Revenue was $339,227 during the three months ended September 30, 2024, an increase of $280,205, or 475%, from the comparable 2023 period, which was primarily driven by the growth and integration of recent acquisitions in our technology services segment. This technology service segment growth was mainly due to the performance of our AI conversational platform and mortgage brokerage services, which were recently acquired and integrated into our operations, and which generated $92,595 and $183,128, respectively, during the three months ended September 30, 2024. We have no revenue in our rental business segment. The decrease in revenue compared to the same period in 2023 was due to the sale of properties previously held for the segment’s operations, as a result of putting those operations on hold.
Current report
Cost of revenue. Cost of revenue was $113,361 for the three months ended September 30, 2024, an increase of $83,001, or 273%, from the comparable 2023 period. The increase was primarily due to the integration of the newly acquired businesses within the technology segment. A significant portion of this increase is attributed to the costs associated with the delivery of our loan brokerage services and AI conversational platform solutions that accounted for $60,145 and $34,967, respectively, for the three months ended September 30, 2024.
Current report
Operating Expenses. Operating expenses were $1,915,486 during the three months ended September 30, 2024, an increase of $1,157,985, or 153%, from the comparable 2023 period. The increase in operating expenses was primarily due to the integration of the newly acquired businesses within the technology segment. A significant portion of this increase is attributed to salaries of the new employees added as a result of our recent acquisitions of $507,501, marketing, advertising expenses related to our advertising campaign for the reAlpha platform of $212,386, and professional and legal services expenses of $210,670 incurred in connection with our recent acquisitions.
Current report
Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023
Current report
Revenue. Revenue was $422,006 for the nine months ended September 30, 2024, an increase of $196,706, or 87%, from the comparable 2023 period. This growth was driven by the expansion and integration of recent acquisitions within our technology services segment, offset by a decline in revenues from the myAlphie platform following its sale and from the rental business following the sale of properties. The technology services segment’s growth was mainly driven by the contributions of our AI conversational platform and mortgage brokerage services, which generated $92,595 and $183,128, respectively. There was no revenue recorded in our rental business segment during the nine months ended September 30, 2024, which was due to the sale of properties previously held for the segment’s operations as a result of putting those operations on hold.
Current report
Cost of revenue. Cost of revenue was $139,687 for the nine months ended September 30, 2024, a decrease of $9,831, or 7%, from the comparable 2023 period. A significant portion of the cost of revenue consists of the costs associated with the integration of newly acquired businesses within the technology segment, including expenses for the loan brokerage services and AI conversational platform solutions, which amounted to $60,145 and $34,967, respectively. This increase was partially offset by significant reductions in expenses related to the sale of the myAlphie platform and properties, which lowered related costs.
Current report
Operating expenses. Operating expenses were $4,406,394 for the nine months ended September 30, 2024, an increase of $2,049,359, or 87%, from the comparable 2023 period. This increase was due to the integration of newly acquired businesses within the technology segment. A significant portion of this increase is attributed to salary expenses, including $920,144 for new employees and additional expenses from the salary adjustments for executive officers, marketing and advertising expenses of $273,458 for the reAlpha platform campaign, and $340,889 in professional and legal services associated with these acquisitions.
Current report
Other (Expense) Income. Other expenses were $871,856 for the nine months ended September 30, 2024, a decrease of $6,165,045, or 707%, from the comparable 2023 period. This decrease was largely due to a one-time gain of $5,502,774 from the sale of the myAlphie platform during the nine months ended September 30, 2023. Additionally, increases in amortization of the commitment fee of $375,000 incurred in connection with the equity facility we have in place with GEM, interest expenses of $95,473 and an original issue discount of $36,250 related to the Note contributed to our other expenses. These increases were partially offset by a decrease in mortgage interest following the sale of our previously held properties.
Current report
Segment Results of Operations
Current report
Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023
Current report
Technology Services
Current report
Revenue. Revenue was $339,227 during the three months ended September 30, 2024, an increase of $291,753, or 615%, from the comparable 2023 period. This increase was primarily driven by revenue generated through the AiChat’s conversational platform solutions, the reAlpha platform and our real estate offerings, including mortgage brokerage and title services, as a result of the integration of our recently acquired businesses. The integration of these services into reAlpha has provided additional sources of potential revenue to this segment.
Current report
Cost of revenue. Cost of revenue was $113,361 during the three months ended September 30, 2024, an increase of $83,001, or 273%, from the comparable 2023 period. Cost of revenue primarily consists of the direct expenses associated with the delivery of our loan brokerage services and technology solutions. This includes compensation-related expenses for roles directly supporting loan origination and customer interactions, along with other direct costs necessary for fulfilling service transactions.
Current report
Operating Loss. Operating loss was $546,488 during the three months ended September 30, 2024, an increase of $515,437, or 1,660%, from the comparable 2023 period. This increase was primarily due to higher salaries for employees from acquired companies and an increase in marketing and advertising expenses associated with the marketing campaign for reAlpha platform.
Current report
Revenue. Revenue was $0 during the three months ended September 30, 2024, compared to $11,548 for the comparable 2023 period. Because we sold our properties as a result of putting our short-term rental operations on hold, we do not expect to generate revenue within this segment until, and if, we resume operations in this segment.
Current report
Operating Loss. Operating loss was $64,430 during the three months ended September 30, 2024, compared to $27,447 for the comparable 2023 period. This increase in operating loss is primarily due to amortization expenses associated with acquired intangible within this segment. Although we are no longer generating revenue in this segment as a result of putting these operations on hold, we are still incurring costs related to the amortization and related expenses resulting from the sale of our previously held properties.
Current report
Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023
Current report
Technology Services
Current report
Revenue. Revenue was $422,006 for the nine months ended September 30, 2024, an increase of $279,468, or 196%, from the comparable 2023 period. This increase was driven by revenue from AiChat’s conversational platform solutions, reAlpha platform and real estate offerings, including mortgage brokerage and title services, following the integration of our recently acquired businesses. This increase in revenue was slightly offset by a decrease in revenue from the myAlphie platform following its sale during the nine months ended September 30, 2023.
Current report
Cost of revenue. Cost of revenue was $139,687 for the nine months ended September 30, 2024, an increase of $2,214 or 2%, from the comparable 2023 period. Cost of revenue primarily consists of the direct expenses associated with the delivery of our loan brokerage services and technology solutions, including compensation-related expenses for roles supporting loan origination and customer interactions, and other direct costs necessary for fulfilling service transactions. This increase was partially offset by significant reductions in expenses related to the sale of the myAlphie platform, which lowered costs related to such platform.
Current report
Operating Loss. Operating loss was $661,046, during the nine months ended September 30, 2024, an increase of $620,442, or 1,528%, from the comparable 2023 period. This increase was primarily due to higher salaries for employees from acquired companies, an increase in marketing and advertising expenses associated with the marketing campaign for reAlpha platform and professional fees related to our recent acquisitions, which reflect the necessary investments to support and integrate these new operations.
Current report
Revenue. Revenue was $0 during the nine months ended September 30, 2024, compared to $82,762 for the comparable 2023 period. Because we sold our properties as a result of putting our short-term rental operations on hold, we do not expect to generate revenue within this segment until, and if, we resume operations in this segment.
Current report
Operating Loss. Operating loss was $193,324 during the nine months ended September 30, 2024, compared to $226,079 for the comparable 2023 period. Although we are no longer generating revenue in this segment as a result of putting these operations on hold, we are still incurring costs related to the amortization and related expenses resulting from the sale of our previously held properties. Additionally, expenses related to property management and maintenance, which were present in the previous reporting period, also contributed to the overall decline.
Current report
Contractual Commitments and Obligations
Current report
On August 14, 2024, we entered into the Purchase Agreement with the Lender (each as defined above) to issue and sell a secured promissory note worth $5,455,000 (see “Recent Developments – Streeterville Capital, LLC Note Purchase Agreement and Secured Promissory Note” for further information). As of September 30, 2024, we have incurred $435,000 original issue discount expenses related to the Note. Further, in accordance with the Note and related Purchase Agreement, beginning seven months after issuance, the Lender may redeem up to $545,000 of the Note per month, which amount will be due and payable in cash within three trading days of our receipt of a redemption notice from the Lender.
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Removed paragraphs (40)
Previous 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.
Previous report
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 report
See “Part II – Item 5. Other Information” of this report for more information on the Note, Purchase Agreement and related agreements.
Previous report
Three months ended June 30, 2024 compared to three months ended June 30, 2023
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous report
Analysis of Segment Results:
Previous report
Technology (formerly “Platform”) Services
Previous 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.
Previous report
*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 report
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 report
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 report
Six months ended June 30, 2024, compared to six months ended June 30, 2023
Previous report
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 report
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 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.
Previous 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.
Previous report
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 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.
Previous 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.
Previous 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.
Previous 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.
Previous report
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 report
Analysis of Segment Results:
Previous report
Technology (formerly “Platform”) Services
Previous report
**Revenues.**For the six months ended June 30, 2024, revenues for the technology services segment were $82,779 compared to $95,064 for the same period in 2023. This decrease in revenue is attributable to sale of myAlphie which was generating technology services income during the six months ended June 30, 2023.
Previous report
**Cost of revenues.**For the six months ended June 30, 2024, cost of revenues for the technology services segment was $36,499 compared to $107,114 for the same period in 2023. The cost of revenues consists of costs incurred in connection with the technical support services provided to Turnit. The decrease was attributable to the limited technical support provided to Turnit during the six months ended June 30, 2024.
Previous report
Revenues. For the six months ended June 30, 2024, revenues for the rental business segment was $0 compared to $71,214 for the same period in 2023. This 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 report
Cost of revenues. For the six months ended June 30, 2024, cost of revenues for the rental business segment was $0 compared to $12,045 for the same period in 2023. This decrease is mainly attributed to the elimination of property management fees and maintenance costs associated with properties we no longer own.
Previous report
As of June 30, 2024, pursuant to the Share Purchase Agreement entered into on December 1, 2022, between us and GEM (the “GEM Agreement”), we can issue and sell to GEM up to an aggregate value of $100 million in shares of our common stock pursuant to draw down notices in accordance with the GEM Agreement. At this time, we do not intend to draw down on the GEM Agreement, but we will continuously evaluate our cash-on-hand position and business operations needs going forward. We, in our sole discretion, may draw down from the GEM Agreement in the future as our business operations evolve and more working capital to fund operations is needed.
Previous report
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.
Previous report
Net cash used in financing activities was $143,885 for the six months ended June 30, 2024, compared to $33,353 for the six months ended June 30, 2023. The variation in cash flows from financing activities is mainly attributed to reduction in debt payments compared to the previous six months ending June 30, 2023. Additionally, there were proceeds from common stock issuances during the period ending June 30, 2023, in connection with our Regulation A offering, which were not present as of June 30, 2024.
Reworded paragraphs (20)
Previous wording
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 wording
We are a real estate technology company developing an end-to-end commission-free homebuying platform, which we have named reAlpha, previously called “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. reAlpha 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.
Previous wording
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 wording
reAlpha 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. reAlpha also provides market insights, detailed property data, and uses large language models to answer queries and facilitate the homebuying process via a user-friendly, 24/7 web platform and IOS application. reAlpha’s capabilities are complemented and supported by reAlpha Realty, LLC, our in-house brokerage firm, on a no-obligation and commission free basis. Although reAlpha 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.
Previous wording
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 wording
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 is being directed towards the continuous enhancement and refinement of reAlpha 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 are 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. To advance such strategy, during the second and third quarters of 2024 we announced the acquisitions of Naamche, Inc. and its Nepal counterpart entity Naamche, Inc. Pvt. Ltd. (collectively, “Naamche”), AiChat Pte. Ltd (“AiChat”), Hyperfast Title LLC (“Hyperfast”) and Debt Does Deals, LLC (d/b/a Be My Neighbor) (“Be My Neighbor”). These acquisitions have added revenue, additional potential sources of revenue, technology services, and additional capabilities to the reAlpha platform. For instance, following the acquisition of Be My Neighbor, we now have an in-house mortgage brokerage, which mortgage brokerage services are also directly offered through reAlpha. Be My Neighbor is licensed to operate in 27 U.S. states. Additionally, because of our acquisition of Hyperfast, we now can offer title, closing, and settlement services in 3 U.S. states. Following the integration of these companies into our business, consumers using reAlpha have access to these services directly in the platform, both through the web platform and IOS application.
Previous wording
We may resume the complementary asset-heavy model from our rental business segment if the prevailing interest rates and other macroeconomic factors align more favorably with such business model. In the meantime, our growth strategy will encompass both organic and inorganic methods through commercialization of our AI technologies that are in varying stages of development and acquisitions of complementary businesses and technologies. In particular, we intend to acquire companies that we believe will complement our business model and accelerate our proposition to expand our technology offerings to customers by offering IT services, staffing and accounting services and others.
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. We may resume the complementary asset-heavy model from our rental business segment if the prevailing interest rates and other macroeconomic factors align more favorably with such business model. In the meantime, our growth strategy will encompass both organic and inorganic methods through commercialization of our AI technologies that are in varying stages of development and acquisitions of complementary businesses and technologies. In particular, we intend to acquire companies that we believe will complement our business model and accelerate our proposition to expand our technology offerings to customers by offering IT services, staffing and accounting services and others.
Previous 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.
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, reAlpha. 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
Our current technology services segment technologies include: (i) reAlpha BRAIN, (ii) reAlpha HUMINT, (iii) GENA, (iv) Claire and (v) reAlpha App.
Current wording
Our current technology services segment technologies include: (i) reAlpha, (ii) reAlpha BRAIN; (iii) reAlpha HUMINT, (iv) GENA, (v) reAlpha App and (vi) AiChat’s conversational platform.
Previous 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).
Current wording
Our revenue model revolves around our mortgage services, title services and services offered by our subsidiaries, such as AiChat. As we begin to acquire more companies in the homebuying transactions vertical, including, but not limited to, insurance and others that are complementary to our business, we expect to generate revenues by offering such services. We also expect that our reAlpha platform will drive additional customers to these acquired companies through users interacting and buying homes on reAlpha, which will expand their overall potential customer base. 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
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 wording
On July 12, 2024, we entered into a Business Acquisition and Financing Agreement (the “Acquisition Agreement”) with AiChat (as defined above), a company incorporated in the Republic of Singapore, AiChat10X Pte. Ltd., a Singaporean company (the “Seller”), and Kester Poh Kah Yong (the “Founder”). Under the Acquisition Agreement, we acquired 85% of the outstanding ordinary shares of AiChat, an AI-driven company specializing in conversational customer experience solutions, from the Seller. The remaining 15% of AiChat’s shares will be acquired on June 30, 2025 (the “Acquisition”).
Previous wording
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 wording
In exchange for all of the ordinary shares of AiChat outstanding immediately prior to the execution of the Acquisition Agreement, and pursuant to the terms and subject to the conditions of the Acquisition Agreement, we agreed to pay the Seller an aggregate purchase price of $1,140,000, consisting of: (i) $312,000 in restricted shares of our common stock, based on a 10% discount to the 10 day volume weighted average price (the “VWAP Share Price”) of our common stock as reported on the Nasdaq Capital Market (“Nasdaq”) and issuable to the Seller no later than January 1, 2025 (the “First Tranche Shares”); (ii) $588,000 in restricted shares of our common stock, based on a 10% discount to the VWAP Share Price, subject to any Base Case Adjustment (as defined in the Acquisition Agreement), issuable to the Seller no later than April 1, 2025 (the “Second Tranche Shares”); and (iii) $240,000 in restricted shares of our common stock, calculated at a 5% discount to the VWAP Share Price, issuable to the Seller no later than December 1, 2025 (the “Third Tranche Shares,” and together with the First Tranche Shares and the Second Tranche Shares, the “Tranche Shares”). In addition, we agreed to subscribe for and purchase from AiChat: (i) 55,710 ordinary shares of AiChat as of the Acquisition’s closing date, for a subscription price of $60,000; and (ii) 222,841 ordinary shares of AiChat in accordance with a disbursement scheduled to be determined and agreed to by us, AiChat and the Founder, for a total subscription price of $240,000.
Previous wording
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 wording
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 equated 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.
Previous wording
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 wording
On July 24, 2024, we entered into a Membership Interest Purchase Agreement (the “Hyperfast Purchase Agreement”) with David R. Breschi and Kristen Britton (the “Sellers”). Under this agreement, we acquired 85% of the outstanding membership interests in Hyperfast (as defined above), a Florida-based company specializing in real estate closings and title insurance (the “Hyperfast Acquisition”). The Hyperfast Purchase Agreement includes standard representations, warranties, and covenants typical for transactions of this nature.
Previous wording
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 wording
In conjunction with the Hyperfast Acquisition, we, the 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 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 Sellers’ membership interests, and for the Sellers to sell their respective interests in Hyperfast, all in accordance with the terms specified in the Operating Agreement.
Previous wording
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 wording
On August 14, 2024, we entered into a note purchase agreement (the “Purchase Agreement”) with Streeterville Capital, LLC (“Lender”) pursuant to which we issued and sold to the Lender a secured promissory note in the original principal amount of $5,455,000 (the “Note”). The Note carries an original issue discount of $435,000 and we agreed to pay $20,000 to the Lender to cover its legal fees, accounting costs, due diligence, monitoring and other transaction costs, each of which were deducted from the proceeds of the Note received by us resulting in a purchase price received by us of $5,000,000. Interest under the Note accrues at a rate of 8% per annum, and the unpaid amount of the Note, and any interest, fees, charges and late fees are due 18 months following the date of issuance. The Note and Purchase Agreement include certain material terms, including the Lender’s ability to redeem a portion of the Note from time to time beginning seven months after issuance, events of default and penalties associated therewith, restrictive covenants on our ability to issue securities, subject to exceptions set forth therein, a “most favored nation” provision, among others. In connection with the Note and Purchase Agreement, we, Rhove, and subsequently Be My Neighbor, also entered into security agreements and intellectual security agreements in favor of the Lender, and our U.S. subsidiaries entered into a guaranty in favor of the Lender.
Previous wording
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 wording
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 receive proceeds from, any of the investors that were introduced to us by Maxim in connection with the Placement, then we will pay Maxim a cash fee of 3.75% of the proceeds received from such financing.
Previous 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.
Current wording
Other (Expenses) Income. Other expenses were $408,954 during the three months ended September 30, 2024, an increase of $360,186, or 739%, from the comparable 2023 period. This increase was primarily attributable to the amortization of the commitment fee of $125,000 incurred in connection with the equity facility we have in place with GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, “GEM”), pursuant to a Share Purchase Agreement between us and GEM, dated December 1, 2022 (the “GEM Agreement”), interest expense of $83,861, and original issue discount of $36,250 which was related to the Note (see “Recent Developments – Streeterville Capital, LLC Note Purchase Agreement and Secured Promissory Note” above for further information).
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.
Current wording
We reconcile our non-GAAP financial measure of Adjusted EBITDA to our net income, adjusted to exclude interest expense, depreciation and amortization and certain charges or gains resulting from non-recurring events.
Previous 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.
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. The cost of capital and historically high-interest rates can also have a direct impact on our ability to raise capital through debt or equity offerings or to pursue acquisitions. Economic environments yielding higher interest rates with more stringent debt terms such as today’s market environment require larger equity commitments. This means that, as larger equity commitments are required, we will have less leverage and may have fewer acquisitions overall. We cannot provide any assurance that we will be able to raise additional funds on acceptable terms, if at all. Our ability to raise additional capital will depend on various factors, including market conditions, investor demand, and our financial performance.
Previous 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).
Current wording
We had cash and cash equivalents of approximately $7.0 million as of September 30, 2024 and approximately $6.4 million as of December 31, 2023. Based on our estimates, we believe we do not have sufficient working capital to meet our financial needs for the 12-month period following September 30, 2024. 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. Additionally, we are contemplating to raise capital through an offering of our securities, and we expect that, to the extent such offering is consummated, we will not need additional capital for a period beyond the 12-month period following the offering consummation.
Previous 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.
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. We believe that if 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, it is unlikely that the holders of the Warrants will 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. Due to an ongoing dispute with GYBL regarding the GEM Warrants, pursuant to which we have claimed that the GEM Warrants are void and subject to rescission under Section 29(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), there is uncertainty about the enforceability of the GEM Warrants and its terms (see “Note 16 – Subsequent Events” for further information). If the dispute is not resolved through negotiations and the lawsuit is adversely determined against us, we may be required to adjust the GEM Warrants’ exercise price downward significantly, and we may incur penalties under the GEM Agreement and/or other litigation expenses related to the dispute, which could materially adversely impact our financial statements, cash flows and results of operations. See “Note 16 – Subsequent Events” for further information. 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 November 11, 2024, which was $1.00 per share.
Previous wording
For the six months ending June 30, 2024, net cash used in investing activities was $79,423, whereas for the same period in 2023, net cash provided by investing activities was $228,254. This change in cash flows from investing activities is mainly attributable to increased capitalization of software development costs during the six months ended June 30, 2024.
Current wording
For the nine months ended September 30, 2024, net cash used in investing activities was $368,269, whereas for the same period in 2023, net cash provided by investing activities was $400,330. This change in cash flows from investing activities is mainly attributable to increased capitalization of software development costs during the nine months ended September 30, 2024.
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
Acquisition of Naamche, Inc. and Naamche, Inc. Pvt. Ltd.
Previous report — wording carried 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.
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
Further, the cost of capital and historically high-interest rates can have a direct impact on our ability to raise capital through debt or equity offerings or to pursue acquisitions. Economic environments yielding higher interest rates with more stringent debt terms such as today’s market environment require larger equity commitments. This means that, as larger equity commitments are required, we will have less leverage and may have fewer acquisitions overall.