Fathom Holdings Inc

Previous wording

Fathom Holdings Inc. (the “Company”, “Corporate”, “Our”, “We”), headquartered in Cary, North Carolina, is a national, technology-driven, end to end real estate services company integrating residential brokerage, mortgage, title, insurance and SaaS offerings for brokers and agents. The Company’s brands include Fathom Realty, Encompass Lending, intelliAgent, LiveBy, Real Results, Verus Title and Cornerstone. Our primary operation, Fathom Realty (as defined below), operates as a real estate brokerage company, working with real estate agents to help individuals purchase and sell residential and commercial properties, primarily in the South, Atlantic, Southwest, and Western parts of the United States, with the intention of expanding into all states.

Current wording

Fathom Holdings Inc. (the “Company”, “Corporate”, “Our”, “We”), headquartered in Cary, North Carolina, is a national, technology-driven, end to end real estate services company integrating residential brokerage, mortgage, title, and SaaS offerings for brokers and agents. The Company’s brands include Fathom Realty, Encompass Lending, intelliAgent, LiveBy, Real Results, Verus Title and Cornerstone. Our primary operation, Fathom Realty (as defined below), operates as a real estate brokerage company, working with real estate agents to help individuals purchase and sell residential and commercial properties, primarily in the South, Atlantic, Southwest, and Western parts of the United States, with the intention of expanding into all states.

Previous wording

Starting in January 2024, we increased the agent’s annual fee which is charged on an agent’s first transaction of each anniversary year from $600 to $700. We also added a fee which affects sales of properties over $600,000 and in addition to the agent’s existing transaction fee of $550. This new ‘High-Value Property Fee’ will consist of an additional $200 on properties priced between $600,000 and $999,999, and an additional fee of $250 charged for each $500,000 tier range in property price. (See our Current Report on Form 8K filed with the SEC on November 28, 2023 for further information).

Current wording

Starting in January 2024, we increased the agent’s annual fee which is charged on an agent’s first transaction of each anniversary year from $600 to $700. We also added a fee which affects sales of properties over $600,000 in addition to the agent’s existing transaction fee of $550. This new ‘High-Value Property Fee’ will consist of an additional $200 on properties priced between $600,000 and $999,999, and an additional fee of $250 charged for each $500,000 tier range in property price. (see our Current Report on Form 8-K filed with the SEC on November 28, 2023 for further information).

Previous wording

In periods of economic growth, demand typically increases resulting in increasing home sales transactions and home sales prices. Similarly, a decline in economic growth, increasing interest rates and declining consumer confidence generally decreases demand. These are the trends we are currently facing. Additionally, industry litigation, and regulations imposed by local, state, and federal government agencies can also negatively impact the housing markets in which we operate. Finally, national and global events, geopolitical instability, that impact economic conditions and financial markets, including interest rates, can adversely impact the housing market.

Current wording

In periods of economic growth, demand typically increases resulting in increasing home sales transactions and home sales prices. Similarly, a decline in economic growth, increasing interest rates and declining consumer confidence generally decreases demand. These are the trends we have been facing, however, mortgage interest rates have recently begun to decline. Additionally, industry litigation, and regulations imposed by local, state, and federal government agencies can also negatively impact the housing markets in which we operate. Finally, national and global events, geopolitical instability, that impact economic conditions and financial markets, including interest rates, can adversely impact the housing market.

Previous wording

In response to these macroeconomic and consumer demand developments, we took action to adjust our operations and manage our business towards longer-term profitability despite these adverse macroeconomic factors. We achieved our goal of reaching total company Adjusted EBITDA breakeven in the second quarter of 2023 although it turned marginally negative again in the third and fourth quarters of 2023. Looking ahead, we remain focused on generating positive operating cash flow even in today’s market environment. We believe that our cost reduction initiatives, combined with the increase in agent transaction fees that became effective in January 2024, have positioned our business for profitable growth in the future.

Current wording

In response to these macroeconomic and consumer demand developments, we took action to adjust our operations and manage our business towards longer-term profitability despite these adverse macroeconomic factors. We achieved our goal of reaching total company Adjusted EBITDA breakeven in the second quarter of 2023 although it turned marginally negative again in the following quarters through the current year first quarter. We achieved total company positive Adjusted EBITDA in the second quarter of 2024. Looking ahead, we remain focused on generating positive operating cash flow even in today’s market environment. We believe that our cost reduction initiatives, a potentially favorable interest rate environment for our mortgage business, the increase in agent transaction fees that became effective in January 2024, and our announced upcoming revenue share program have positioned our business for profitable growth in the future.

Previous wording

There could also be further changes in real estate industry practices. All of this has prompted discussion of changes to rules established by local or state real estate boards or multiple listing services. All of this may require changes to many brokers’ business models, including changes in agent and broker compensation. For example, many of our competitors may need to develop mechanisms and a plan that enable buyers and sellers to negotiate commissions. In contrast, our flat fee per real estate transaction model has always enabled our agents to negotiate their own fees. Our flat fee allows our agents greater ability to negotiate commissions, and we have no direct incentive to interfere with that. Our flat fee per real estate transaction model enables our agents to freely settle their transaction commissions at their own discretion. The Company will continue to monitor ongoing and similar antitrust litigation against our competitors, however, as our agent compensation model fully supports commission negotiation, we do not expect to have to change our compensation model in a manner that would adversely affect our financial condition and results of operations. However, the litigation and its ramifications could cause unforeseen turmoil in our industry, the impacts of which could have a negative effect on us as an industry participant.

Current wording

There could also be further changes in real estate industry practices. All of this has prompted discussion of changes to rules established by local or state real estate boards or multiple listing services. All of this may require changes to many brokers’ business models, including changes in agent and broker compensation. For example, many of our competitors may need to develop mechanisms and a plan that enable buyers and sellers to negotiate commissions. In contrast, our flat fee per real estate transaction model has always enabled our agents to negotiate their own fees. Our flat fee allows our agents greater ability to negotiate commissions, and we have no direct incentive to interfere with that. Our flat fee per real estate transaction model enables our agents to freely settle their transaction commissions at their own discretion. Starting in August of 2024, our new revenue share models will continue to enable our agents to freely settle their transaction commissions at their own discretion. The Company will continue to monitor ongoing and similar antitrust litigation against our competitors, however, as our agent compensation model fully supports commission negotiation, we do not expect to have to change our compensation model in a manner that would adversely affect our financial condition and results of operations. However, the litigation and its ramifications could cause unforeseen turmoil in our industry, the impacts of which could have a negative effect on us as an industry participant.

Previous wording

As of March 31, 2024 and March 31, 2023, we had approximately 11,986 and 10,628 agent licenses, respectively. These figures represent growth of approximately 12.8% year-over-year.

Current wording

As of June 30, 2024 and June 30, 2023, we had approximately 12,224 and 10,930 agent licenses, respectively. These figures represent growth of approximately 12% year-over-year.

Previous wording

Our revenue primarily consists of commissions generated from real estate brokerage services. We also have other service revenue, including mortgage lending, title insurance, home and other insurance, and SaaS revenues.

Current wording

Our revenue primarily consists of commissions generated from real estate brokerage services. We also have other service revenue, including mortgage lending, title insurance, and SaaS revenues.

Previous wording

The revenue streams for the Company’s home and other insurance agency services business are primarily comprised of new and renewal commissions paid by insurance carriers. The transaction price is set as the estimated commissions to be received over the term of the policy based upon an estimate of premiums placed, policy changes and cancellations, net of restraint. The commissions are earned at the point in time upon effective date of the associated policies when control of the policy transfers to the client.

Current wording

The revenue streams for the Company’s home and other insurance agency services business are primarily comprised of new and renewal commissions paid by insurance carriers. The transaction price is set as the estimated commissions to be received over the term of the policy based upon an estimate of premiums placed, policy changes and cancellations, net of restraint. The commissions are earned upon the effective date of the associated policies when control of the policy transfers to the client. This income stopped on May 3, 2024 upon our sale of Dagley Insurance Agency.

Previous wording

Operations and support consist primarily of direct cost to fulfill the services from our mortgage lending, title services, insurance services and other services provided. We expect operations and support to continue to rise over the longer term in proportion to the expected growth in our operations.

Current wording

Operations and support consist primarily of direct cost to fulfill the services from our mortgage lending, title services, insurance (until May 2024), and other services provided. We expect operations and support to continue to rise over the longer term in proportion to the expected growth in our operations.

Previous wording

Depreciation and amortization represent the depreciation charged on our fixed assets and intangible assets other than capitalized software. Depreciation expense is recorded on a straight-line method, based on estimated useful lives of five years for computer hardware, seven years for furniture and equipment and seven years for vehicles. Leasehold improvements are depreciated over the lesser of the life of the lease term or the useful life of the improvements. Amortization expense consists of amortization recorded on acquisition-related intangible assets, excluding purchased software. Customer relationships are amortized on an accelerated basis, which coincides with the period of economic benefit we expect to receive. All other finite-lived intangibles are amortized on a straight-line basis over the term of the expected benefit. Purchased software and capitalized software development costs are amortized on a straight-line basis over the term of the expected benefit and the respective amortization expense is included in technology and development expense. In accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), we do not amortize goodwill.

Current wording

Depreciation and amortization represent the depreciation charged on our fixed assets and intangible assets other than capitalized software. Depreciation expense is recorded on a straight-line method, based on estimated useful lives of three to five years for computer hardware, seven years for furniture and equipment and seven years for vehicles. Leasehold improvements are depreciated over the lesser of the life of the lease term or the useful life of the improvements. Amortization expense consists of amortization recorded on acquisition-related intangible assets, excluding purchased software. Customer relationships are amortized on an accelerated basis, which coincides with the period of economic benefit we expect to receive. All other finite-lived intangibles are amortized on a straight-line basis over the term of the expected benefit. Purchased software and capitalized software development costs are amortized on a straight-line basis over the term of the expected benefit and the respective amortization expense is included in technology and development expense. In accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), we do not amortize goodwill.

Previous wording

For the three months ended March 31, 2024, gross commission income decreased by approximately $7.8 million, or 11%, as compared with the three months ended March 31, 2023. This decrease was primarily attributable to a 9.7% decrease in transaction volume; 7,703 real estate transactions duringthe three months ended March 31, 2024 compared to 8,532 transactions during the three months ended March 31, 2023. Our transaction volume decreased primarily due to higher interest rates. However, the negative impact of rising interest rates on transaction volume was lessened due to the 12.8% expansion in our agent base. During the three months ended March 31, 2024, average revenue per transaction was $8,488, a 1.0% decrease compared to $8,576 during the three months ended March 31, 2023 primarily attributable to a small decrease in commission percentages.

Current wording

For the three months ended June 30, 2024, gross commission income decreased by approximately $11.5 million, or 12%, as compared with the three months ended June 30, 2023. This decrease was primarily attributable to a 8% decrease in transaction volume; there were 10,137 real estate transactions duringthe three months ended June 30, 2024, compared to 11,010 transactions during the three months ended June 30, 2023. Our transaction volume decreased primarily due to the continuation of high mortgage interest rates. During the three months ended June 30, 2024, average revenue per transaction was 8,200, a 5% decrease compared to $8,593 during the three months ended June 30, 2023, primarily attributable to an increase in lease transactions compared to sale transactions, and a small decrease in commission percentages.

Previous wording

For the three months ended March 31, 2024, commission and other agent-related costs decreased by approximately $8.0 million, or 12%, as compared with the three months ended March 31, 2023. Commission and other agent-related costs primarily includes costs related to agent commissions, net of fees paid to us by our agents. These costs generally correlate with recognized revenues. As such, the decrease in commission and other agent-related costs compared to the same period in 2023 was primarily attributable to a decrease in agent commissions paid due to lower transaction volume mainly due to rising interest rates. We also received a lift from our new fee structure that started in 2024, which added a "High-Value Property Fee" to certain properties which augmented the decrease in commission and other agent related costs.

Current wording

For the three months ended June 30, 2024, commission and other agent-related costs decreased by approximately $10.8 million, or 12%, as compared with the three months ended June 30, 2023. Commission and other agent-related costs primarily includes costs related to agent commissions, net of fees paid to us by our agents. These costs generally correlate with recognized revenues. As such, the decrease in commission and other agent-related costs compared to the same period in 2023 was primarily attributable to a decrease in agent commissions paid due to lower transaction volume mainly due to continued high mortgage interest rates. We also received increased fees from our new fee structure that started in 2024, which added a "High-Value Property Fee" to certain properties and partially offset the decrease in commission and other agent related costs.

Previous wording

For the three months ended March 31, 2024, operations and support expenses were $2.1 million, an increase of approximately $0.5 million, or 31%, as compared with the three months ended March 31, 2023. This increase was primarily the result of increased activity in the Company's mortgage business.

Current wording

For the three months ended June 30, 2024, operations and support expenses were $2.7 million, an increase of approximately $0.8 million, or 41%, as compared with the three months ended June 30, 2023. This increase was primarily the result of increased activity in the Company's mortgage business.

Previous wording

For the three months ended March 31, 2024, general and administrative expenses increased by approximately $0.3 million, or 3%, as compared with the three months ended March 31, 2023. The increase was primarily due to increases in costs incurred as we build out our offshore services team and regional leadership partially offset by a reduction in insurance costs.

Current wording

For the three months ended June 30, 2024, general and administrative expenses decreased by approximately $1.0 million, or 10%, as compared with the three months ended June 30, 2023. The decrease was primarily due to the absence of costs attributable to the sale of our insurance business effective May 3, 2024.

Previous wording

For the three months ended March 31, 2024, marketing expenses decreased by approximately $0.1 million, or 16%, as compared with the three months ended March 31, 2023. The decrease in marketing expenses is primarily related to leveraging internal resources and optimizing advertising expenditure.

Current wording

For the three months ended June 30, 2024, marketing expenses decreased by approximately $0.2 million, or 18%, as compared with the three months ended June 30, 2023. The decrease in marketing expenses is primarily related to leveraging internal resources and optimizing advertising expenditure.

Previous wording

Comparison of the Three Months Ended March 31, 2024 and 2023 (dollar amounts in thousands)

Current wording

Comparison of the Six Months Ended June 30, 2024 and 2023 (dollar amounts in thousands)

Previous wording

For the three months ended March 31, 2024, other service revenue increased by approximately $0.7 million or 17%, as compared with the three months ended March 31, 2023. This increase was primarily attributable to an increase in activity of our mortgage business segment during the first quarter of 2024 as interest rates began to dip.

Current wording

For the six months ended June 30, 2024, other service revenue increased by approximately $1.4 million, or 14%, as compared with the six months ended June 30, 2023. This increase was primarily attributable to an increase in activity of our mortgage business segment, partially offset by the absence of revenues attributable to the sale of our insurance business effective May 3, 2024.

Previous wording

For the three months ended March 31, 2024, technology and development expenses increased by approximately $0.4 million, or 23%, as compared with the three months ending March 31, 2023. The increase was attributable to our ongoing investment in the intelliAgent platform and our LiveBy business, and to higher amortization related to capitalized technology development costs.

Current wording

For the six months ended June 30, 2024, technology and development expenses increased by approximately $0.4 million, or 12%, as compared with the six months ending June 30, 2023. The increase was attributable to our ongoing investment in the intelliAgent platform and our LiveBy business, and to higher amortization related to capitalized technology development costs.

Previous wording

For the three months ended March 31, 2024, depreciation and amortization expenses remained relatively constant.

Current wording

For the six months ended June 30, 2024, depreciation and amortization expenses remained relatively constant., compared to the six months ended June 30, 2023.

Previous wording

The Company recorded income tax expense of approximately $0.02 million and $0.01 million for the three months ended March 31, 2024 and 2023, respectively. This tax expense is primarily the result of current state income tax liabilities and deferred tax expense related to deferred tax liabilities that cannot be fully offset by deferred tax assets.

Current wording

The Company recorded income tax expense of approximately $0.01 million and $0.04 million for the six months ended June 30, 2024 and 2023, respectively. This tax expense is primarily the result of current state income tax liabilities and deferred tax expense related to deferred tax liabilities that cannot be fully offset by deferred tax assets.

Previous wording

To date, our principal sources of liquidity have been the net proceeds we received through public offerings and private sales of our common stock, as well as proceeds from loans. As of March 31, 2024, our cash and cash equivalents totaled approximately $5.7 million, which represented a decrease of approximately $1.7 million compared to December 31, 2023. As of March 31, 2024, we had net working capital of approximately $4.4 million, which represented a decrease of $2.4 million compared to December 31, 2023. As noted above, in May 2024 we sold our subsidiary Dagley Insurance for $15.0 million in cash, $8.0 million of which we received at closing, bolstering our current cash position.

Current wording

To date, our principal sources of liquidity have been the net proceeds we received through public offerings and private sales of our common stock, the sale of one of our businesses, as well as proceeds from loans. As of June 30, 2024, our cash and cash equivalents totaled approximately $10.8 million, which represented an increase of approximately $3.2 million compared to December 31, 2023. As of June 30, 2024, we had net working capital of approximately $11.6 million, which represented an increase of $4.8 million compared to December 31, 2023. As noted above, in May 2024 we sold our wholly-owned subsidiary Dagley Insurance Agency business for approximately $15.0 million in cash, $7.8 million of which we received at closing, bolstering our current cash position.

Previous wording

We anticipate that our existing balances of cash and cash equivalents and future expected cash flows generated from our operations will be sufficient to satisfy our operating requirements for at least the next twelve months from the date of the issuance of the unaudited interim consolidated financial statements.

Current wording

We anticipate that our existing balances of cash and cash equivalents and future expected cash flows generated from our operations and from the sale of our insurance business will be sufficient to satisfy our operating requirements for at least the next twelve months from the date of the issuance of the unaudited interim consolidated financial statements.

Previous wording

Comparison of the Three Months Ended March 30, 2024 and 2023 (dollar amounts in thousands)

Current wording

Comparison of the Six Months Ended June 30, 2024 and 2023 (dollar amounts in thousands)

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024 consisted of a net loss of $5.9 million, non-cash charges of $3.4 million, including $2.7 million of stock-based compensation expense and $1.5 million of depreciation and amortization, partially offset by $1.2 million in gains on the sales of mortgages. Changes in assets and liabilities were primarily driven by $49.6 million in mortgage loan originations and $0.9 million in prepaid and other current assets; partially offset by $50.7 million in proceeds from the sales and principal payments on mortgage loans held for sale, as well as, a $1.1 million increase in accrued and other current liabilities.

Current wording

Net cash used in operating activities for the six months ended June 30, 2024 consisted of a net loss of $7.2 million, a gain on sale of a business of $2.9 million, non-cash charges of $5.7 million, including $5.2 million of stock-based compensation expense and $2.8 million of depreciation and amortization, partially offset by $3.2 million in gains on the sales of mortgages. Changes in assets and liabilities were primarily driven by $131.5 million in mortgage loan originations and; partially offset by $132.8 million in proceeds from the sales and principal payments on mortgage loans held for sale, operating lease liabilities decrease of $1.0 million, as well as, a $0.3 million increase in accrued and other current liabilities, and $1.2 million in prepaid and other current assets.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2023 consisted of a net loss of $5.7 million, non-cash charges of $3.7 million, including $2.8 million of stock-based compensation expense and $1.4 million of depreciation and amortization, offset by $0.8 million in gains on the sales of mortgages. Changes in assets and liabilities were primarily driven by a $1.1 million increase in accounts payable and accrued and other current liabilities, partially offset by a $0.3 million increase in accounts receivable and a $0.4 million decrease in operating lease liabilities.

Current wording

Net cash used in operating activities for the six months ended June 30, 2023 consisted of a net loss of $10.0 million, non-cash charges of $9.6 million, including $6.0 million of stock-based compensation expense and $2.9 million of depreciation and amortization, offset by $1.9 million in gains on the sales of mortgages. Changes in assets and liabilities were primarily driven by $85.5 million in mortgage loan originations; partially offset by $83.3 million in proceeds from the sales and principal payments on mortgage loans held for sale, as well as, a $1.7 million increase in accounts payable and accrued and other current liabilities, offset by a $1.3 million increase in accounts receivable and a $0.8 million decrease in operating lease liabilities.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2024 primarily consisted of $0.5 million for purchases of intangible assets related to technology development.

Current wording

Net cash provided by investing activities for the six months ended June 30, 2024 primarily consisted of proceeds from the sale of Dagley Insurance Agency of $7.8 million, partially offset by thepurchases of intangible assets related to technology development of $1.2 million.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2023 primarily consisted of $0.6 million for purchases of intangible assets related to technology development and to $0.09 million for purchases of property and equipment.

Current wording

Net cash used in investing activities for the six months ended June 30, 2023 primarily consisted of $0.9 million for purchases of intangible assets related to technology development, and to $0.01 million for purchases of property and equipment.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2024 consisted primarily of approximately $0.2 million in principal payments on debt and $0.1 million in deferred acquisition payments, partially offset by $0.2 million in net activity on our warehouse lines of credit.

Current wording

Net cash used in financing activities for the six months ended June 30, 2024 consisted primarily of approximately $1.7 million in net activity on our warehouse lines of credit., partially offset by $0.3 million in principal payments on debt and $0.2 million in deferred acquisition payments.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2023 consisted primarily of the change of $0.9 million on our warehouse lines of credit, net of the effect of $0.3 million in principal payments on notes payable.

Current wording

Net cash provided by financing activities for the six months ended June 30, 2023 consisted primarily of the change of $3.9 million on our warehouse lines of credit and the $3.3 million in the Note proceeds, net of $0.5 million in principal payments on other notes payable and $0.3 million in deferred acquisition consideration payments.

Previous wording

We believe that Adjusted EBITDA provides useful information about our financial performance, enhances the overall understanding of our past performance and future prospects, and allows for greater transparency with respect to a key metric used by our management for financial and operational decision-making. We believe that Adjusted EBITDA helps identify underlying trends in our business that otherwise could be masked by the effect of the expenses that we exclude in Adjusted EBITDA. In particular, we believe the exclusion of share-based compensation expense and transaction-related costs associated with our acquisition activity provides a useful supplemental measure in evaluating the performance of our operations and provides better transparency into our results of operations. Adjusted EBITDA also excludes other income and expense, net which primarily includes typically nonrecurring expense items, such as, legal fees associated with the NAR case, minor legal settlement claims, severance costs, professional fees related to investigating potential financing opportunities, if applicable, and other non-cash items representing reserves on certain agent fee collections.

Current wording

We believe that Adjusted EBITDA provides useful information about our financial performance, enhances the overall understanding of our past performance and future prospects, and allows for greater transparency with respect to a key metric used by our management for financial and operational decision-making. We believe that Adjusted EBITDA helps identify underlying trends in our business that otherwise could be masked by the effect of the expenses that we exclude in Adjusted EBITDA. In particular, we believe the exclusion of share-based compensation expense and transaction-related costs associated with our acquisition activity provides a useful supplemental measure in evaluating the performance of our operations and provides better transparency into our results of operations. Adjusted EBITDA also excludes other income and expense, net which primarily includes typically nonrecurring expense items, such as, legal fees associated with the NAR case, minor legal settlement claims, severance costs, professional fees related to investigating potential financing opportunities, if applicable.

Previous wording

The preparation of financial statements and related disclosures in conformity with U.S. GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Our Annual Report on Form 10-K for the year ended December 31, 2023 contains a discussion of our critical accounting estimates in the Management's Discussion and Analysis of Financial Condition and Results of Operations section. There have been no material changes to these estimates during the three months ended March 31, 2024.

Current wording

The preparation of financial statements and related disclosures in conformity with U.S. GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Our Annual Report on Form 10-K for the year ended December 31, 2023 contains a discussion of our critical accounting estimates in the Management's Discussion and

Previous wording

As part of being an emerging growth company, the Company is also considered a small reporting company ("SRC") as of March 31, 2024. Under the terms of the JOBS Act, a SRC has public float of less than $250 million or has less than $100 million in annual revenue and no public float or public float less than $700 million. Being a SRC allows the Company to include less extensive narrative disclosure than required of other reporting companies, particularly concerning executive compensation. It also provides audited financial statements for two fiscal years, in contrast to non-SRCs, which must provide audited financial statements for three fiscal years.

Current wording

The Company is also considered a small reporting company ("SRC") as of June 30, 2024. Under the terms of the JOBS Act, a SRC has public float of less than $250 million or has less than $100 million in annual revenue and no public float or public float less than $700 million. Being a SRC allows the Company to include less extensive narrative disclosure than required of other reporting companies, particularly concerning executive compensation. It also provides audited financial statements for two fiscal years, in contrast to non-SRCs, which must provide audited financial statements for three fiscal years.