La Rosa Holdings Corp

Previous wording

In addition to providing person-to-person residential and commercial real estate brokerage services to the public, we cross sell ancillary technology-based products and services primarily to our sales agents and the sales agents associated with our franchisees. Our business is organized based on the services we provide internally to our agents and to the public, which are residential and commercial real estate brokerage, franchising, real estate brokerage education and coaching, and property management. Our real estate brokerage business operates primarily under the trade name La Rosa Realty, which we own, and, to a lesser extent, under the trade name Better Homes Realty which we license. We have 22 La Rosa Realty corporate real estate brokerage offices and branches located in Florida, California, Texas, and Georgia. We have 15 La Rosa Realty franchised real estate brokerage offices and branches and two affiliated real estate brokerage offices that pay us fees in two states in the United States and Puerto Rico. Our real estate brokerage offices, both corporate and franchised, are staffed with 2,581 licensed real estate brokers and sales associates as of July 31, 2024, and increase of 6% since December 31, 2023.

Current wording

In addition to providing person-to-person residential and commercial real estate brokerage services to the public, we cross sell ancillary technology-based products and services primarily to our sales agents and the sales agents associated with our franchisees. Our business is organized based on the services we provide internally to our agents and to the public, which are residential and commercial real estate brokerage, franchising, real estate brokerage education and coaching, and property management. Our real estate brokerage business operates primarily under the trade name La Rosa Realty, which we own, and, to a lesser extent, under the trade name Better Homes Realty which we license. We have 24 La Rosa Realty corporate real estate brokerage offices and branches located in Florida, California, Texas, Georgia, and Puerto Rico. We have 8 La Rosa Realty franchised real estate brokerage offices and branches and 3 affiliated real estate brokerage offices that pay us fees in three states in the United States and Puerto Rico. Our real estate brokerage offices, both corporate and franchised, are staffed with 2,647 licensed real estate brokers and sales associates as of September 30, 2024, an increase of 9% since December 31, 2023. In addition to our real estate brokerage offices, we also have a wholly owned title services company that was acquired during the quarter.

Previous wording

In the first half of 2024, we acquired majority ownership of the following franchisees of the Company: La Rosa Realty Georgia, LLC, La Rosa Realty California, La Rosa Realty Lakeland LLC, La Rosa Realty Success LLC and 100% ownership of La Rosa Realty Winter Garden LLC.

Current wording

In the first nine months of 2024, we acquired majority ownership of the following franchisees of the Company: La Rosa Realty Georgia, LLC, La Rosa Realty California, La Rosa Realty Lakeland LLC, La Rosa Realty Success LLC and 100% ownership of La Rosa Realty Winter Garden LLC, BF Prime LLC, and Nona Title Agency LLC. In November 2024, we acquired 49% membership interests of our subsidiary, La Rosa Realty Premier, LLC, which became our wholly owned subsidiary.

Previous wording

It is management’s intention to acquire additional franchisees in 2024. We continuously look to search for potential acquisition targets. Management is in discussions with several franchisees; however, any future agreements may have terms that are materially different than the terms of completed acquisitions. We cannot guarantee that the Company will actually enter into any binding acquisition agreements with any of those companies. If we do, we cannot assure you that the terms of such acquisitions will be substantially the same or better for the Company than those of completed acquisitions.

Current wording

It is management’s intention to acquire additional franchisees and other entities through the remainder of 2024 and in 2025. We continuously look to search for potential acquisition targets. Management is in discussions with several franchisees; however, any future agreements may have terms that are materially different than the terms of completed acquisitions. We cannot guarantee that the Company will actually enter into any binding acquisition agreements with any of those companies. If we do, we cannot assure you that the terms of such acquisitions will be substantially the same or better for the Company than those of completed acquisitions.

Previous wording

Our financial results are primarily driven by the total number of sales agents in our Company, the number of sales agents closing residential real estate transactions, the number of sales agents utilizing our coaching services, the number of agents who work with our franchisees, and the number of properties under management. We increased our agent count by just under four 4%, from 2,436 at June 30, 2023 to 2,535 at June 30, 2024.

Current wording

Our financial results are primarily driven by the total number of sales agents in our Company, the number of sales agents closing residential real estate transactions, the number of sales agents utilizing our coaching services, the number of agents who work with our franchisees, and the number of properties under management. We increased our agent count by just over 6%, from 2,493 at September 30, 2023 to 2,647 at September 30, 2024.

Previous wording

The majority of our revenue is derived from a stable set of fees paid by our brokers, franchisees, and consumers. We have multiple revenue streams, with the majority of our revenue derived from commissions paid by consumers who transact business with our and our franchisees’ agents, royalties paid by our franchisees, dues and technology fees paid by our sales agents, our franchisees, and our franchisees’ agents. Our major revenue streams come from such sources as: (i) residential real estate brokerage revenue, (ii) revenue from our property management services, (iii) franchise royalty fees, (iv) fees from the sale or renewal of franchises and other franchise revenue, (v) coaching, training and assistance fees, (vi) brokerage revenue generated transactionally on commercial real estate, and (vii) fees from our events and forums.

Current wording

The majority of our revenue is derived from a stable set of fees paid by our brokers, franchisees, and consumers. We have multiple revenue streams, with the majority of our revenue derived from commissions paid by consumers who transact business with our and our franchisees’ agents, royalties paid by our franchisees, dues and technology fees paid by our sales agents, our franchisees, and our franchisees’ agents. Our major revenue streams come from such sources as: (i) residential real estate brokerage revenue, (ii) revenue from our property management services, (iii) franchise royalty fees, (iv) fees from the sale or renewal of franchises and other franchise revenue, (v) coaching, training and assistance fees, (vi) brokerage revenue generated transactionally on commercial real estate, (vii) fees from our events and forums, and (viii) revenue from title services.

Previous wording

The U.S. Federal Reserve continues to take action intended to address the increases in inflation. The Federal Reserve Board has maintained the federal funds rate at 533 basis points since August of 2023 from a range of 0 to 25 basis points as of the first quarter of 2022. The increase has impacted interest rates, which have significantly contributed to rising mortgage rates. During the second half of 2022, the benchmark 30 year fixed conforming mortgage rate rose above 6% for the first time since 2008, according to Freddie Mac data, and has reached a recent peak of about 8% during the second half of 2023. That interest rate sat in between 6.6% and 6.8% during Q2 of 2024. Consequently, housing demand is softening, prices are rising, consumer sentiment has weakened, and home sales are declining. In June of 2024, the existing home sales market declined 5.4% compared to June of 2023 according to the National Association of Realtors. This decline had an adverse impact on consumer demand for our services, as consumers weighed the financial implications of selling or purchasing a home. Continuing poor housing market conditions would adversely affect our operating performance and results of operations.

Current wording

The U.S. Federal Reserve continues to take action intended to address the increases in inflation. The Federal Reserve Board maintained the federal funds rate at 533 basis points from August of 2023 through mid-September 2024, when it was then reduced to 483 basis points. The fluctuations impact interest rates, which significantly contribute to mortgage rate adjustments. During the second half of 2022, the benchmark 30 year fixed conforming mortgage rate rose above 6% for the first time since 2008, according to Freddie Mac data, and reached a peak of about 8% during the second half of 2023. That interest rate sat in between 6.1% and 6.9% during Q3 of 2024. Consequently, housing demand has softened, prices are rising, consumer sentiment has weakened, and home sales are declining. In September of 2024, the existing home sales market declined 3.5% compared to September of 2023 according to the National Association of Realtors. This decline had an adverse impact on consumer demand for our services, as consumers weighed the financial implications of selling or purchasing a home. Continuing poor housing market conditions would adversely affect our operating performance and results of operations.

Previous wording

Residential real estate services sales revenue increased by approximately $18.1 million, or 226%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increase was driven by approximately $19.7 million of revenue from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the five acquisitions completed in the first half of fiscal year 2024, offset by a 27% decrease in total transaction volume. We increased our transaction fee, monthly agent fee, and annual fee effective September 1, 2023, which, if volume returns to 2023 levels, real estate brokerage services revenue, excluding incremental acquisition revenue, will increase in 2024.

Current wording

Residential real estate services sales revenue increased by approximately $12.6 million, or 328%, in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase was driven by approximately $12.2 million of revenue from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the seven acquisitions completed in the first nine months of fiscal year 2024. We increased our transaction fee, monthly agent fee, and annual fee effective September 1, 2023, which, if volume returns to 2023 levels, real estate brokerage services revenue, excluding incremental acquisition revenue, will increase in 2024.

Previous wording

Costs related to residential real estate brokerage services increased by approximately $10.1 million, or 231%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was driven by approximately $11.1 million of cost of revenue from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the five acquisitions completed in the first half of fiscal year 2024. The gross profit increased by approximately $1.0 million, or 304%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 primarily attributable to the gross profit from acquisitions.

Current wording

Costs related to residential real estate brokerage services increased by approximately $11.4 million, or 325%, in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase was driven by approximately $11.2 million of cost of revenue from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the seven acquisitions completed in the first nine months of fiscal year 2024. The gross profit increased by approximately $1.2 million, or 368%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 primarily attributable to the gross profit from acquisitions.

Previous wording

Residential real estate services sales revenue increased by approximately $11.1 million, or 237%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was driven by approximately $12.2 million of revenue from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the five acquisitions completed in the first half of fiscal year 2024, offset by a 17% decrease in total transaction volume. We increased our transaction fee, monthly agent fee, and annual fee effective September 1, 2023, which, if volume returns to 2023 levels, real estate brokerage services revenue, excluding incremental acquisition revenue, will increase in 2024.

Current wording

Residential real estate services sales revenue increased by approximately $30.7 million, or 259%, in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. The increase was driven by approximately $32 million of revenue from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the seven acquisitions completed in the first nine months of fiscal year 2024, offset by a 19% decrease in total transaction volume. We increased our transaction fee, monthly agent fee, and annual fee effective September 1, 2023, which, if volume returns to 2023 levels, real estate brokerage services revenue, excluding incremental acquisition revenue, will increase in 2024.

Previous wording

Costs related to residential real estate brokerage services increased by approximately $16.3 million, or 222%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increase was driven by approximately $18.0 million of cost of revenue from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the five acquisitions completed in the first half of fiscal year 2024. The gross profit increased by approximately $1.8 million, or 277%, for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 primarily attributable to the gross profit from acquisitions.

Current wording

Costs related to residential real estate brokerage services increased by approximately $27.8 million, or 255%, in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. The increase was driven by approximately $29.2 million of cost of revenue from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the seven acquisitions completed in the first nine months of fiscal year 2024. The gross profit increased by approximately $3.0 million, or 308%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 primarily attributable to the gross profit from acquisitions.

Previous wording

Franchising services revenue decreased by approximately $143 thousand, or 68%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The decrease was attributable from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the five acquisitions completed in the first half of fiscal year 2024, which no longer contribute to franchising royalties fees, which would have totaled approximately $167 thousand in the second quarter of 2024. Our remaining franchisees saw a similar decrease in volume related to the same market conditions in our residential services, which negatively impacted our franchising royalty fee revenue.

Current wording

Franchising services revenue decreased by approximately $152 thousand, or 70%, in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The decrease was attributable from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the seven acquisitions completed in the first nine months of fiscal year 2024, which no longer contribute to franchising royalties fees, which would have totaled approximately $163 thousand in the third quarter of 2024. Our remaining franchisees saw a similar decrease in volume related to the same market conditions in our residential services, which negatively impacted our franchising royalty fee revenue.

Previous wording

Costs of revenue for franchising services increased by approximately $14 thousand, or 13%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, related to the increase costs of the external software that supports the Company’s franchises. The gross profit (loss) of franchising services has moved to a loss position for the three-month period ending June 30, 2024 over the comparable prior year period, which is attributable to the reduction in the cost of revenue due to the acquisitions of the eleven franchises in the fourth quarter of 2023 and the first quarter of 2024.

Current wording

Costs of revenue for franchising services increased by approximately $4 thousand, or 3%, in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, related to the increase costs of the external software that supports the Company’s franchises. The gross profit (loss) of franchising services has moved to a loss position for the three-month period ending September 30, 2024 over the comparable prior year period, which is attributable to the reduction in the cost of revenue due to the acquisitions of the thirteen franchises in the fourth quarter of 2023 and the first three quarters of 2024.

Previous wording

Franchising services revenue decreased by approximately $304 thousand, or 59%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The decrease was attributable from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the five acquisitions completed in the first half of fiscal year 2024, which no longer contribute to franchising royalties fees, which would have totaled approximately $342 thousand in the second quarter of 2024. Our remaining franchisees saw a similar decrease in volume related to the same market conditions in our residential services, which negatively impacted our franchising royalty fee revenue.

Current wording

Franchising services revenue decreased by approximately $455 thousand, or 62%, in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. The decrease was attributable from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the seven acquisitions completed in the first nine months of fiscal year 2024, which no longer contribute to franchising royalties fees, which would have totaled approximately $505 thousand in the third quarter of 2024. Our remaining franchisees saw a similar decrease in volume related to the same market conditions in our residential services, which negatively impacted our franchising royalty fee revenue.

Previous wording

Costs of revenue for franchising services increased by approximately $35 thousand, or 16%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, related to the increase costs of the external software that supports the Company’s franchises. The gross profit (loss) of franchising services has moved to a loss position for the six-month period ending June 30, 2024 over the comparable prior year period, which is attributable to the reduction in the cost of revenue due to the acquisitions of the eleven franchises in the fourth quarter of 2023 and the first quarter of 2024.

Current wording

Costs of revenue for franchising services increased by approximately $39 thousand, or 11%, in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, related to the increase costs of the external software that supports the Company’s franchises. The gross profit (loss) of franchising services has moved to a loss position for the nine-month period ending September 30, 2024 over the comparable prior year period, which is attributable to the reduction in the cost of revenue due to the acquisitions of the thirteen franchises in the fourth quarter of 2023 and the first three quarters of 2024.

Previous wording

Coaching services revenue increased by $62 thousand, or 22%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to an increase in an emphasis of our coaching program, partially offset due to the reduction in our residential transaction volume.

Current wording

Coaching services revenue decreased by $57 thousand, or 31%, in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to an reduction in activity in our coaching program due to the reduction in our residential transaction volume.

Previous wording

Costs of revenue related to coaching services increased by approximately $35 thousand, or 45%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Costs related to coaching services is related to the augmentation of the coaching program. The gross margin is relatively consistent in the three-month periods ended June 30, 2024 and 2023.

Current wording

Costs of revenue related to coaching services decreased by approximately $27 thousand, or 27%, in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. Costs related to coaching services is related to the augmentation of the coaching program. The gross margin has remained relatively stable with an decrease of 3.1% in the three-month period ended September 30, 2024 compared to September 30, 2023.

Previous wording

Coaching services revenue increased by $60 thousand, or 40%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to an increase in an emphasis of our coaching program, partially offset due to the reduction in our residential transaction volume.

Current wording

Coaching services revenue increased by $5 thousand, or 1%, in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to an increase in an emphasis of our coaching program earlier in 2024, partially offset due to the reduction in our residential transaction volume.

Previous wording

Costs of revenue related to coaching services increased by approximately $41 thousand, or 28%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. Costs related to coaching services is related to the augmentation of the coaching program. The gross margin is relatively consistent in the six-month periods ended June 30, 2024 and 2023.

Current wording

Costs of revenue related to coaching services increased by approximately $14 thousand, or 6%, in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. Costs related to coaching services is related to the augmentation of the coaching program. The gross margin has remained relatively stable with an decrease of 2.5% in the three-month period ended September 30, 2024 compared to September 30, 2023.

Previous wording

Property management revenue increased by approximately $375 thousand, or 16%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to an increase in the number of properties under management along with a management fee price increase effective September 1, 2023.

Current wording

Property management revenue increased by approximately $341 thousand, or 14%, in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to an increase in the number of properties under management along with a management fee price increase effective September 1, 2023.

Previous wording

Costs of revenue related to property management services increased by approximately $367 thousand, or 16%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase in property management costs was primarily related to the timing of distributions to property owners as well as the increase in properties under management. The gross margin is consistent in the three-month periods ended June 30, 2024 and 2023.

Current wording

Costs of revenue related to property management services increased by approximately $283 thousand, or 11%, in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase in property management costs was primarily related to the timing of distributions to property owners as well as the increase in properties under management. The gross margin increased 1.8% remaining relatively consistent in the three-month periods ended September 30, 2024 and 2023.

Previous wording

Property management revenue increased by approximately $645 thousand, or 16%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to an increase in the number of properties under management along with a management fee price increase effective September 1, 2023.

Current wording

Property management revenue increased by approximately $986 thousand, or 14%, in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to an increase in the number of properties under management along with a management fee price increase effective September 1, 2023.

Previous wording

Costs of revenue related to property management services increased by approximately $636 thousand, or 14%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increase in property management costs was primarily related to the timing of distributions to property owners as well as the increase in properties under management. The gross margin is consistent in the six-month periods ended June 30, 2024 and 2023.

Current wording

Costs of revenue related to property management services increased by approximately $920 thousand, or 13%, in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. The increase in property management costs was primarily related to the timing of distributions to property owners as well as the increase in properties under management. The gross margin is consistent in the nine-month periods ended September 30, 2024 and 2023.

Previous wording

Commercial real estate services sales revenue increased by approximately $127 thousand, or 440%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. During 2024, the Company invested in additional training and personnel to grow the commercial business, which increased the cost of revenue, which increased by approximately $129 thousand in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Current wording

Commercial real estate services sales revenue increased by approximately $34 thousand, or 110%, in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. During 2024, the Company invested in additional training and personnel to grow the commercial business, which increased the cost of revenue, which increased by approximately $40 thousand in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Previous wording

Commercial real estate services sales revenue increased by approximately $115 thousand, or 165%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. During 2024, the Company invested in additional training and personnel to grow the commercial business, which increased the cost of revenue, which increased by approximately $134 thousand in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Current wording

Commercial real estate services sales revenue increased by approximately $149 thousand, or 110%, in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. During 2024, the Company invested in additional training and personnel to grow the commercial business, which increased the cost of revenue, which increased by approximately $173 thousand in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Previous wording

Selling, general and administrative costs, excluding stock-based compensation, increased by approximately $2.0 million, or 210%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. A portion of the increase was driven by $666 thousand of additional costs from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the five acquisitions completed in the first half of fiscal year 2024. The remaining increase is primarily attributable to approximately $863 thousand in public company costs, including listing costs, printer costs, transfer agent fees, and investor relation costs and related professional fees, since our initial public offering in October 2023 as well as approximately $254 thousand of amortization of the intangible assets incurred through the acquisitions in the fourth quarter of 2023 and the first half of 2024 and an increase in personnel costs of $163 thousand.

Current wording

Selling, general and administrative costs, excluding stock-based compensation, increased by approximately $2.0 million, or 203%, in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. A portion of the increase was driven by $1.1 million of additional costs from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the seven acquisitions completed in the first three quarters of fiscal year 2024. The remaining increase is primarily attributable to approximately $441 thousand in public company costs, including listing costs, printer costs, transfer agent fees, and investor relation costs and related professional fees, since our initial public offering in October 2023 as well as approximately $286 thousand of amortization of the intangible assets incurred through the acquisitions in the fourth quarter of 2023 and the first three quarters of 2024 and an increase in personnel costs of $680 thousand.

Previous wording

Selling, general and administrative costs, excluding stock-based compensation, increased by approximately $3.6 million, or 186%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. A portion of the increase was driven by $1.3 million of additional costs from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the five acquisitions completed in the first half of fiscal year 2024. The remaining increase is primarily attributable to approximately $1.3 million in public company costs, including listing costs, printer costs, transfer agent fees, D&O insurance and investor relation costs and related professional fees as well as approximately $438 thousand of amortization of the intangible assets incurred through the acquisitions in the fourth quarter of 2023 and the first half of 2024, an increase in personnel costs of $284 thousand, and additional marketing events of $155 thousand.

Current wording

Selling, general and administrative costs, excluding stock-based compensation, increased by approximately $5.6 million, or 192%, in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. A portion of the increase was driven by $2.4 million of additional costs from the six acquisitions completed in the fourth quarter of fiscal year 2023 and the seven acquisitions completed in the first three quarters of fiscal year 2024. The remaining increase is primarily attributable to approximately $1.9 million in public company costs, including listing costs, printer costs, transfer agent fees, D&O insurance and investor relation costs and related professional fees as well as approximately $726 thousand of amortization of the intangible assets incurred through the acquisitions in the fourth quarter of 2023 and the first three quarters of 2024, an increase in personnel costs of $1.6 million, and additional events and technology costs of $341 thousand.

Previous wording

We incurred stock-based compensation of approximately $474 thousand and $3.7 million in the three and six months ended June 30, 2024, respectively, primarily due to option grants to our CEO pursuant to the terms of his employment agreement ($2.1 million), other employees ($0.9 million), and consultants who provided various services to the company ($0.7 million). We incurred stock-based compensation of approximately $5 thousand and $74 thousand in the three and six months ended June 30, 2023, respectively, primarily due to option grants given to the non-management directors of our board of directors in February 2022.

Current wording

We incurred stock-based compensation of approximately $390 thousand and $4.1 million in the three and nine months ended September 30, 2024, respectively, primarily due to option grants to our CEO pursuant to the terms of his employment agreement ($2.1 million), other employees ($1.0 million), and investors and consultants who provided various services to the company ($1.0 million). We incurred stock-based compensation of approximately $5 thousand and $79 thousand in the three and nine months ended September 30, 2023, respectively, primarily due to option grants given to the non-management directors of our board of directors in February 2022.

Previous wording

Other expense, net for the six months ended June 30, 2024 was approximately $507 thousand compared to other expense, net, of approximately $686 thousand for the six months ended June 30, 2023. The expense in 2024 was due to interest expense and the amortization of financing fees related to the debt raise in February 2024 and April 2024 and the Advances on Future Receipts in May 2024 as well as an increase in the value of the derivative liabilities associated with the convertible debt. The expense in 2023 was primarily due to costs related to the amortization of financing fees related to convertible debt instruments with embedded equity elements issued in the fourth quarter of fiscal year 2022 along with an increase in interest expense associated with new debt issuances during the fourth quarter of fiscal year 2022, partially offset by a decrease in the revaluation of the derivative liabilities.

Current wording

Other expense, net for the three months ended September 30, 2024 was approximately $645 thousand compared to other income, net, of approximately $74 thousand for the three months ended September 30, 2023. The expense in 2024 was due to interest expense and the amortization of financing fees related to the debt raise in February, April and July 2024, the loss on extinguishment related to the same three notes in September 2024 and the Advances on Future Receipts in May 2024, partially offset by a $219 thousand decrease in the revaluation of the derivative liabilities associated with the convertible debt. The income in 2023 was due to an IRS employee retention credit received for prior tax years, net of legal costs to obtain the credit, partially offset by amortization of financing fees.

Previous wording

Other expense, net for the three months ended June 30, 2024 was approximately $426 thousand compared to other expense, net, of approximately $113 thousand for the three months ended June 30, 2023. The expense in 2024 was due to interest expense and the amortization of financing fees related to the debt raise in February 2024 and April 2024 and the Advances on Future Receipts in May 2024 as well as an increase in the value of the derivative liabilities associated with the convertible debt. The expense in 2023 was primarily due to costs related to the amortization of financing fees related to convertible debt instruments with embedded equity elements issued in the fourth quarter of fiscal year 2022 along with an increase in interest expense associated with new debt issuances during the fourth quarter of fiscal year 2022, partially offset by a decrease in the revaluation of the derivative liabilities.

Current wording

Other expense, net for the nine months ended September 30, 2024 was approximately $1.152 million compared to other expense, net, of approximately $612 thousand for the nine months ended September 30, 2023. The expense in 2024 was due to interest expense and the amortization of financing fees related to the debt raise in February, April and July 2024, the loss on extinguishment related to the same three notes in September 2024 and the Advances on Future Receipts in May 2024, partially offset by an decrease in the value of the derivative liabilities associated with the convertible debt. The 2023 expense was due to costs related to the amortization of financing fees related to convertible debt instruments with embedded equity elements issued in the fourth quarter of fiscal year 2022 along with an increase in interest expense associated with new debt issuances during the fourth quarter of fiscal year 2022, partially offset by a decrease in the revaluation of the derivative liabilities and the IRS employee retention credit received for prior tax years, net of legal costs to obtain the credit.

Previous wording

On June 30, 2024 and December 31, 2023, we had cash of approximately $1.6 million and $1.0 million, respectively, on hand.

Current wording

On September 30, 2024 and December 31, 2023, we had cash of approximately $1.8 million and $1.0 million, respectively, on hand.

Previous wording

In May 2024, the Company entered into a standard merchant cash advance agreement which the Company sold in the aggregate $761,250 in future receipts of the Company for $500,000. Until the purchase price has been repaid, the Company agreed to pay Cedar $23,000 per week.

Current wording

In May 2024, we entered into a standard merchant cash advance agreement where we sold in the aggregate $761,250 in future receipts of the Company for $500,000. Until the purchase price has been repaid, the Company agreed to pay Cedar $23,000 per week.

Previous wording

During the six months ended June 30, 2024, operating activities consumed $1.3 million of our cash on hand, which was primarily attributable to the net loss of $2.0 million, excluding stock-based compensation, amortization and depreciation, non-cash interest expense and amortization of debt discounts, and provision for credit losses, partially offset by changes in working capital of $0.7 million, mostly due to an increase in accounts payable, security deposit payables, and an increase in contract liabilities, partially offset by an increase in accounts receivable and payments on lease liabilities.

Current wording

During the nine months ended September 30, 2024, operating activities consumed $1.9 million of our cash on hand, which was primarily attributable to the net loss of $9.3 million, excluding stock-based compensation, amortization and depreciation, non-cash interest expense and amortization of debt discounts and provision for credit losses, partially offset by changes in working capital of $1.2 million, mostly due to an increase in accounts payable, accrued expenses, security deposit payables, partially offset by an increase in payments on lease liabilities.

Previous wording

During the six months ended June 30, 2024, we purchased five acquisitions with capital stock and two of the five with additional cash payments totaling $60 thousand. Each of the five acquisitions had an aggregate amount of $132 thousand of cash. See Note 2, “Business Combinations” of the Notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q for additional information regarding the acquisitions.

Current wording

During the nine months ended September 30, 2024, we completed seven acquisitions with capital stock and three of the seven with additional cash payments totaling $240 thousand. Each of the seven acquisitions had an aggregate amount of $265 thousand of cash. See Note 2, “Business Combinations” of the Notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q for additional information regarding the acquisitions.

Previous wording

During the six months ended June 30, 2024, we received net cash provided by financing activities of $2.1 million, which included the proceeds of our debt issuance in February 2024 and April 1 of $2.2 million and the receipt of the advances on future receipts of $0.5 million, offset by deferred debt issuance costs of $0.3 million, payments on notes payable, and payments to advances on future receipts and post-acquisition consideration totaling $0.3 million.

Current wording

During the nine months ended September 30, 2024, we received net cash provided by financing activities of $3.4 million, which included the proceeds of our debt issuances in February, April and July 2024, a draw on the line of credit and the receipt of the advances on future receipts all totaling $3.6 million, proceeds from issuance of common stock of $1.9 million offset by deferred debt issuance costs, payments on notes payable, and payments to advances on future receipts and post-acquisition consideration all totaling $2.1 million.