LRHC 10-K & 10-Q changes, risk factors and insider trading

Our independent auditors have included an explanatory paragraph in their audit report, included in this Annual Report onComprehensive Form 10-K, regarding the Company’s ability to continue as a going concern. This going concern risk may materially limit our ability to raise additional funds through the issuance of new debt or equity or may adversely affect the terms upon which such capital may be available. The inability to obtain sufficient financing on acceptable terms could have a material adverse effect on the Company’s financial condition, results of operations, and business prospects.

We began operations in 2021. As a result of our limited operating history, we have limited financial data that can be used to evaluate our current business, and such data may not be indicative of future performance. We have encountered, and expect to continue to encounter, risks and difficulties frequently experienced by growing companies, including challenges in financial forecasting accuracy, hiring of experienced personnel, hiring of technology employees, determining appropriate investments, developing new products and features, assessing legal and regulatory risks, among others. Any evaluation of our business and prospects should be considered in light of our limited operating history, and the risks and uncertainties inherent in investing in early-stage companies. In addition, recent settlements of litigation based on alleged violations of federal and state antitrust laws may have an adverse impact on our potential growth. See “Risk Factors - Adverse outcomes in litigation and regulatory actions against the NAR, other real estate brokerage companies and agents in our industry could adversely impact our financial results,” below.

Goodwill and indefinite-lived intangible assets, such as trade names, are recorded at fair value at the time of acquisition and are not amortized, but are reviewed for impairment at least annually or more frequently if impairment indicators arise. In evaluating the potential for impairment of goodwill and trade names, we make assumptions regarding future operating performance, business trends and market and economic conditions. Such analyses further require us to make certain assumptions about our sales, operating margins, growth rates and discount rates. There are inherent uncertainties related to these factors and in applying these factors to the assessment of goodwill and trade name recoverability. Goodwill reviews are prepared using estimates of the fair value of reporting units based on the estimated present value of future discounted cash flows. We could be required to evaluate the recoverability of goodwill or trade names prior to the annual assessment if we experience disruptions to the business, unexpected significant declines in operating results, a divestiture of a significant component of our business or market capitalization declines. For the year ended December 31, 2024,2025, we conducted such a review and recorded an impairment of $787,438.$6,911,770 related to goodwill and intangible assets.

If we do not raise sufficient capital to fund our ongoing development activities, it is likely that we will be unable to carry out our business plans. We may not be able to obtain additional financing on terms acceptable, or at all. Even if we obtain financing for near termnear-term operations, we may require additional capital beyond the near term. If we are unable to raise capital when needed, our business, financial condition and results of operations would be materially adversely affected, and we could be forced to reduce or discontinue our operations.

The residential real estate market tends to be cyclical and typically is affected by changes in general economic conditions which are beyond our control. These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets, levels of unemployment, consumer confidence and the general condition of the U.S. and the global economy. The residential real estate market also depends upon the strength of financial institutions, which are sensitive to changes in the general macroeconomic environment. Lack of available credit or lack of confidence in the financial sector could impact the residential real estate market, which in turn could materially and adversely affect our business, financial condition and results of operations. Due to the cyclicality of the real estate market, we cannot predict whether the prior several year period of sustained growth will continue, whether mortgage rates which have climbed over 2022-20242022-2025 will remain at relatively higher levels than in years past and whether home prices will stabilize. The U.S. has experienced housing “bubbles” in the past which have burst, resulting in significant price declines, mortgage defaults and home foreclosures by lenders, the last one occurring in the early 2000’s.2000s.

The U.S. Bureau of Labor Statistics (“BLS”) reported that the Consumer Price Index for All Urban Consumers (CPI-U), a broad-based measure of goods and services costs, rose 0.40.3 percent in February 20242026 seasonally adjusted, and rose 2.82.4 percent over the last 12 months,months ending January 2026, not seasonally adjusted.adjusted.1 This increase was wellabove above the Federal Reserve System’s (the “Fed”) targeted inflation rate of 2.0%, The 20242025 federal funds interest rate in late December decreased to 4.33a range of 3.50 to 3.75 primarily due to moderatingstubborn inflation and signs of a weakening labor market.market.2 TheInflation Federal Open Market Committee decidedcontinues to lower the key overnight borrowing rate by 50 basis points, marking the first rate cut since the early days of the COVID-19 pandemic. Additionally, inflation was coming under controldecline after a period of rising prices, which contributed to the decision. The Fed aimedaims to provide financial relief to borrowers and continue to cool down an overheated economy. Fed funds rates impact interest rates on government bonds that have a correlated effect on mortgage interest rates, which, as of March 20,26, 2025,2026, the average rate for a 30-year fixed rate mortgage was 6.676.38 according to Freddie Mac, the federally chartered home mortgage loan securitizer.securitizer.3 Mortgage interest rates have continued to have a depressingan effect on the sale of existing homes, that include single-family homes, townhomes, condominiums and co-ops, with a year over year decrease of 1.2%1.4% in February 2024 2026 to a seasonally adjusted annual rate of 4.264.09 million.million.4 The slowdown of home sales transactions resulted from many would-be buyers being priced out of homeownership while many homeowners with mortgage rates below 4.0% feeling stuck in place, since selling would mean taking on a mortgage with a significantly higher interest rate. This has had an adverse effect on our agents’ ability to close sales and thus on our results of operations in the year ended December 31, 2024.2025. Thus, we expect these trends to continue to adversely affect our revenues in 2025.2026. Any further increase in the Fed funds rate could push the U.S. economy into a recession which is likely to have a further negative effect on our operations, income and financial condition.

The combination of high mortgage rates, continuing high home prices and limited inventory slowed the housing market substantially in 2024. 2025. Tight inventory was reflected by the risesustained in thehigh national median existing home sale price in February 20252026 of 3.8%$398,000, toa $398,400slight increase of 0.3% from a year earlier ($384,500).earlier. Homes usually go under contract a month or two before they close, so the February data is based on purchase decisions made in December 20242025 and January 2025.2026. The average rate for a 30-year fixed mortgage was 6.67%6.38% as of March 20,26, 2025,2026, down from 7.22%6.65% during the most recent 52 week52-week period, according to Freddie Mac. This combination of higher mortgage rates and higher sales prices has kept many sellers, who would have to relinquish a mortgage at 4.0% or less, from selling, and has pushed many prospective buyers, especially first-time home buyers, out of the market. Total housing inventory at the end of February 20242026 was 1.241.29 million units, up 5.1%3.1% from January and up 17.0%7.9% from one year ago (1.061.24 million). There was an unsold inventory supply of 3.5-months3.8-months at the current sales pace, equal2.4% tohigher than January 20242026 but only up from 3.00.1 monthsmonth infrom February 2024. 2025. Management expects the housing-market slowdown to persist throughout 2025 because home-buying affordability is near its lowest level in decades. Any decline in home sales directly affects the productivity and income of our agents who are paid only upon the closing of their clients’ home purchase or sale. A prolonged depression in home sales will force the least successful agents out of the industry and a decrease in the number of earning agents will have a negative impact on our financial performance and results of operations.

Adverse U.S. and global market, economic and political conditions, including the ongoing conflict between Ukraine and Russia, recent events conflicts in the Middle East and other events or circumstances beyond our control could have a material adverse effect on us.

Another economic or financial crisis or rapid decline of the consumer economy, significant concerns over energy costs, geopolitical issues, including the ongoing conflict armed conflicts between Ukraine and Russia, recentUnited eventsStates and Iran, as well as in Israel and the MiddleGaza East,Strip, the availability and cost of credit, the U.S. mortgage market, or a declining real estate market in the U.S. can contribute to increased volatility, diminished expectations for the economy and the markets, and high levels of structural unemployment by historical standards.

If we re-commence activitiesWe abroad, we will beare subject to risks of operating in foreign countries.

WeIn 2025, have also recentlywe commenced an expansion of our business in Europe, starting with engaging an area developer inand Spain. Previously, we hadestablishing a franchisee locatedsubsidiary in Spain. Peru that closed in 2022, but we may franchise other international locations in the future. When we re-commence activities abroad, ourOur international operations will beare subject to risks that are different from those of our U.S. operations that could result in losses against which we are not insured and therefore negatively affect our profitability. Those international risks include:

We depend substantially on our Founder ,Founder, Joseph La Rosa, and our Chief Operating Officer, Deana La Rosa, and the loss of any our senior management or other key employees or the inability to hire additional qualified personnel could adversely affect our operations, our brand and our financial performance.

Our future success is largely dependent on the efforts and abilities of our Founder, Chief Executive Officer, Interim Chief Financial Officer, President Officer and Chairman, President, Joseph La Rosa, our Chief Operating Officer, Deana La Rosa, our senior management and other key employees. The loss of the services of Mr. La Rosa, Mrs. La Rosa and other senior management would have a significant detrimental effect on the Company as its brand is tied to their name, image and personality. We do not maintain key employee life insurance policies on Mr. La Rosa or our other senior management and therefore their loss could make it more difficult to successfully operate our business and achieve our business goals. As a result, we may not be able to cover the financial loss we may incur in losing the services of any of these individuals.

Based on our Common Stock outstanding as of DecemberJune 31,3, 2024,2026, Mr. La Rosa beneficially owned approximately 28%0.19% of our outstanding Common Stock and all 2,0001,800 shares of our Series X Preferred Stock that provides for 10,000 votes per share when voting with the Common Stock, representing 62%91.81% of the total voting power of our capital stock. Thus, Mr. La Rosa, our President andPresident, Chief Executive Officer, and Interim Chief Financial Officer, Chairman of the Board of Directors of the Company (“Board” or “Board of Directors”), and majority stockholder, controls all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions. transactions. The interests of Mr. La Rosa may not coincide with the interests of other stockholders.

Mr. Joseph La Rosa has voting control with respect to director elections and all other matters. Subject to any fiduciary duties owed to other stockholders under Nevada law, Mr. La Rosa controls all matters requiring approval by our stockholders, including the election and removal of directors and any proposed merger, acquisition, consolidation or sale of all or substantially all of our assets. In addition, due to his significant ownership stake and his service as our Chairman of the Board of Directors and Chief Executive Officer, Director and Interim Chief Financial Officer, Mr. La Rosa controls the management of our business and affairs. Mr. La Rosa may have interests that are different than yours and may support proposals and actions with which you may disagree. This concentration of ownership could have the effect of delaying, deferring or preventing a change in control, or impeding a merger or consolidation, takeover or other business combination that could be favorable to our other stockholders and adversely affecting the market price of our Common Stock.

Because Mr. La Rosa controls, as of AprilJune 15,3, 2025,2026, 50.5%91.81% of the total voting power of our capital stock, we are considered a “controlled company” for the purposes of the listing requirements of the Nasdaq Capital Market. A controlled company is not required to have a majority of independent directors or form an independent compensation or nominating and corporate governance committee. Nevertheless, we have a majority of independent directors who will serve on our Audit, Compensation and Nominating and Corporate Governance Committees. However, although we have no current plans to do so, for as long as we remain a controlled company, we could take advantage of such exemptions in the future.

We regard our “LR La Rosa Realty” service mark and the “LR” logo that we own, as having significant value and as being important factors in the marketing of our brand. We believe that this and other intellectual property are valuable assets that are critical to our success. We rely on a combination of protections provided by contracts, as well as copyright, trademark, trade secret and other laws, to protect our intellectual property from infringement, misappropriation, or dilution. We have registered certain trademarks and service marks and have other trademark and service mark registration applications pending in the U.S. and foreign jurisdictions. However, not all trademarks or service marks that we currently use have been registered in all of the countries in which we may do business in the future, and they may never be registered in all of those countries. Although we monitor trademark portfolios internally and impose an obligation on franchisees to notify us upon learning of potential infringement, there can be no assurance that we will be able to adequately maintain, enforce and protect our trademarks or other intellectual property rights.

As an example, in the matter of Burnett v. National Association of Realtors (U.S. District Court for the Western District of Missouri), a federal jury found thatthe the NAR and certain other remaining brokerage defendants liable for $1.8 billion in damages on claims that these companies conspired to artificially inflate brokerage commissions, which is in violation of federal antitrust law (the “Burnett Ruling”). The verdict was appealed on October 31, 2023. Additionally, certain other brokerage defendants settled with the plaintiffs, including both monetary and non-monetary settlement terms. That same day, the NAR, EXP World Holdings, Inc., Compass, Inc., Redfin Corporation, Weichert Realtors, United Real Estate, Howard Hann Real Estate Services, and Douglas Elliman, Inc.Inc., The Keyes Company, Illustrated Properties, LLC, Baird & Warner, Inc., Real Estate One, Inc., and others were named as defendants in Gibson v. National Association of Realtors (U.S. District Court for the Western District of Missouri), alleging a similar fact pattern and antitrust violations. On or about March 15, 2024, NAR agreed to settle the Burnett Ruling, along with a sister litigation, by agreeing to pay $418 million over approximately four years, and changing certain of its rules surrounding agent commissions (the “Burnett Settlement”).commissions. On November 26, 2024, the BurnettNAR Settlement receivedwas itsgranted over objections, The final approval.approval Onorder Marchis 22,currently 2024,being realappealed. estateIf brokeragethe companyNAR CompassSettlement Inc.is announcedsustained thaton appeal, it will payis $57.5 million as part of a proposed settlementexpected to resolve claims lawsuitsagainst overthe real estate commissionsNAR and agreedcertain companies related to changethis its business practices to ensure clients can more easily understand how brokers and agents are compensated for their services.matter.

If, for example, the market for real estate relatedestate-related stocks or the stock market in general experiences loss of investor confidence, the trading price of our Common Stock could decline for reasons unrelated to our business, financial condition or operating results. The trading price of our shares might also decline in reaction to events that affect other companies in our industry, even if these events do not directly affect us. Each of these factors, among others, could harm the value of our Common Stock.

Prospective investors should read the following discussion and analysis of our financial condition and results of operations together with our financial statements statements and the related notes and other financial information included elsewhere in this annual report. Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy for for our business, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.Statements and Industry Data.” This discussion should be read in conjunction with our audited consolidated financial statements and the notes thereto included elsewhere in this report.

On October 12, 2023, we consummated our IPO.initial Followingpublic ouroffering IPO, during (the fiscal“IPO”). yearSince ended December 31, 2023,then, we acquired majority ownership of the following franchisees of the Company: Nona Legacy Powered By La Rosa Realty, Inc. (formerly, La Rosa Realty Lake Nona Inc.), Horeb Kissimmee Kissimmee Realty, LLC, La Rosa Realty Premier, LLC, La Rosa Realty Orlando, LLC, and 100% ownership of the following franchisees of the Company: La Rosa CW Properties, LLC and La Rosa Realty North Florida LLC. In December 2023, we also formed our majority owned subsidiary La Rosa Realty Texas LLC. During the fiscal year ended December 31, 2024, we acquired majority ownership of the following franchisees and affiliates of the Company: La Rosa Realty Georgia LLC, La Rosa Realty California, La Rosa Realty Lakeland LLC DBA La Rosa Realty Prestige, and La Rosa Realty Success LLC,LLC and 100% ownership of the following franchisees of the Company: La Rosa Realty Orlando, LLC, La Rosa Realty Premier, LLC, La Rosa CW Properties, LLC, La Rosa Realty North Florida LLC, La Rosa Realty Winter Garden LLC, BF Prime LLC, FPG Title Group, LLC (formerly, Nona Title Agency LLC,LLC), La Rosa Realty Lakeland LLC (DBA La Rosa Realty Prestige), La Rosa Realty Beaches LLC, and Baxpi Holdings.Holdings Additionally,LLC. In December 2023, we acquiredalso theformed remainingour non-controllingmajority interestowned portions of Nona Legacy Powered By La Rosa Realty, Inc. (formerly,subsidiary La Rosa Realty LakeTexas NonaLLC. Inc.)In December 2024, we opened our first office and wholly owned subsidiary in North Carolina, La Rosa Realty NC LLC. In January 2025, we formed LR Luxury, LLC, engaged mostly in the residential real estate brokerage business. In April 2025, we formed LR Agent Advance, LLC, offering a commission advancement program exclusively for La Rosa agents. In 2025, we also formed LR Realty Premier, LLC,Spain, makingS.L., themour both 100%wholly owned entities.subsidiary in Spain.

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 grew our agent count by six18 percent from 2,4342,581 atas of December 31, 20232024 to 2,5813,050 atas of December 31, 2024.2025.

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 generated from title services revenue and insurance and (viii) fees from our events and forums.

The majority of our revenue is derived from fees and dues based on the number of agents working under the La Rosa Realty brand. Due to the low fixed cost structure of both our Company and franchise models, the addition of new sales agents generally requires little incremental investment in capital or infrastructure. Accordingly, the number of commission producing sales agents in our Company and our franchisees is the most important factor affecting our results of operations and the addition of new agents can favorably impact our revenue and our earnings before interest, taxes, depreciation and amortization (“EBITDA”). Historically, the number of agents in the residential real estate industry has been highly correlated with overall home sale transaction activity. We believe that the number of agents and those that produce commissions in our network is the primary statistic that drives our revenue. Another major factor is the cyclicality of the real estate industry that has peaks and valleys depending on macroeconomic conditions that we cannot control. And finally, our revenues fluctuate based on the changes in the aggregate fee revenue per sales agent as a significant portion of our revenue is tied to various fees that are ultimately tied to the number of agents, including annual dues, continuing franchise fees, and certain transaction or service-based fees. Our revenue per agent also increases in other ways including when transaction sides and transaction sizes increase since a portion of our revenue comes from fees tied to the number and size of real estate transactions closed by our agents. While the Company was not named as a defendant in any of the recent class action lawsuits alleging antitrust violations, it is possible that it could be a litigant at some point in the future. Several of these lawsuits have been settled (see “Risk Factors - Adverse outcomes in litigation and regulatory actions against the NAR, other real estate brokerage companies and agents in our industry could adversely impact our financial results). These settlements will result in changes in the way real estate brokers are compensated for their services. Most notably, home sellers will no longer be required to pay buyer agent commissions which will result in lower buyer agent compensation. We cannot predict the full breadth of the outcome of these lawsuits but believe that they will result in a significant adverse effect on our financial condition and results of operations for the foreseeable future.

The benchmark 30-year fixed conforming mortgage rate rose to a peak of about 8% during the second half of 2023, according to Freddie Mac data. That interest rate then retreated to between 6.08% and 7.22% during 2024 and between 6.15% to 7.04% during 2025. Consequently, housing demand remained soft, prices are rising, consumer sentiment has weakened, and home sales are declining. The U.S. Federal Reserve continues continues to take action intended to address 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 reduced to 483 basis points. In February 2025,2026, the federal funds rate was 433 364 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 6.62% and 6.85% during 2024. Consequently, housing demand remained soft, prices are rising, consumer sentiment has weakened, and home sales are declining. In February 2025,2026, the the existing home sales market decreased 1.2% compared to February 20242025 according to the NAR. 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.

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 and may adversely affect our business model and revenues. On October 31, 2023, a federal jury in Missouri found that 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. We have not, as of the date hereof, been named as a defendant in any antitrust litigation. 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, there will be rule changes for the NAR. In the settlement, effective mid-July 2024, NAR has agreed to put in place a new rule prohibiting offers of compensation on the MLS, as well as adopt new rules requiring written agreements between buyers and buyers’ agents. However, the direct and indirect effects, if any, of the judgment upon the real estate industry are not yet entirely clear.

There could also be furtherThe 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, we will likely have to develop mechanisms and a plan that enable buyers and sellers to negotiate commissions. The Company will continue to monitor ongoing and similar antitrust litigation against our competitors. 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.

See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” of the Notes to the consolidated financial statements in Part II, Item 8 of this Comprehensive Form 10-K.

Residential real estate services revenue increased $36.574$9.5 million, or 179%,17%, in the year ended December 31, 20242025 against the comparable prior year period. The increase was drivenprimarily byrelated $9.789to $9.8 million of revenue fromdue the seven acquisitions completed during fiscal year 2024, in addition the increase was due to a full year of income from the sixseven acquiredacquisitions companiescompleted in 2023 of $27.166 million. Also, we received a full fiscal year of revenue from the increased transaction fee, monthly agent fee, and annual fee effective September 1, 2023.2024.

Franchising services services revenue decreased $554$199 thousand, or 63%,61%, in the year ended December 31, 20242025 against the comparable prior year period. The decrease is primarily attributable to the six franchise acquisitions completed in the fourth quarter of fiscal year 2023 and the six franchise acquisitions during fiscal year 2024, which no longer contribute to franchising royalty fees. These fees would have totaled $658 thousand for the year ended December 31, 2024. Our remaining franchisees saw a slight increase in revenue due to market conditions in our residential services stabilizing in 2024, which partially offset the decline in franchising royalty fee revenue. Franchising royalties would be expected to decline as the acquisition of additional franchises continues.

Coaching services revenue declined slightly by $60$125 thousandthousand, duringor 22%, in the year ended December 31, 20242025 against the comparable prior year period. This is attributable to structural changes to increasea recruitmentshift andin NARfocus relatedby matters.management in the agent plans to focus on agent count growth that does not require coaching. This was done in anticipation of boosting transaction volume.

Property management revenue increased $1.435$47 million,thousand, or 15%,13%, in the year ended December 31, 20242025 against the comparable prior year period primarily due to increases in theapplication numberfees ofdespite a reduction in total properties under management from 600 in 2023 to 650 in 2024 along with the full year benefit in 2024 of a management fee price increase effective September 1, 2023 from $44 to $55 in 2024 per agent property.managed.

CostsThe percentage of gross margin remained the same year over year. Gross margin related to residential real estate brokerage services increased $924 $3.654 million,thousand, or 217%,17%, in the year ended December 31, 20242025 against the comparable prior year period. The increase was driven in part by $8,945an increase in revenue of $9.5 million ofand a related cost of revenue increase of $8.6 million primarily from the seven acquisitions completed during fiscal year 2024. In addition we saw a full year impact from the six acquisitions from the 4th Quarter of 2023. The gross profit increased $3.654 million, or 216.7%, from 2023 to 2024 primarily attributable to the fee increases enacted in September of 2023 and gross profit from acquisitions. Due to these factors ourTherefore, gross margin increasedremained torelatively 9.4%constant compared to our 2023 gross margin of 8.2%.year-over-year.

CostsThe percentage of gross margin declined by 77.5%. Gross margin related to property management services increaseddeclined $1.424by million,$23 or 15.2%, inthousand the year ended December 31, 20242025 against the comparable prior year period. The increase in property management costs were primarilyis related to fixed costs of sales that did not change while the increasenumber inof properties under management.management The gross margin is consistent from 2023 to 2024.declined.

Payroll and benefits increased $1.9 $1.7 million or 78%,40%, in the year ended December 31, 20242025 against the comparable prior year period primarily due to benefits offered and headcount increases and certain one-time bonuses paid to changesour in the executive management team, bonus, payroll taxes and acquisitions from the 4th quarter of 2023 and during 2024. In addition, headcount increases to facilitate growth and replace 3rd party costs.executives.

Professional fees increased $1.334 $1.6 million, or 513%,103%, in the year ended December 31, 20242025 against the comparable prior year period. Primarily thisThis increase iswas primarily relateddue to $666,390 ofprofessional and legal costfees incurred related to acquisitions,financing litigationtransactions andentered SECinto reporting. Secondarily, an increase of $523,191 in fees related to the company and other professional accounting services related to audits and acquisitions.2025.

Insurance, training and other costs increaseddecreased $54 thousand, or 9%, in 2024the primarilyyear ended December 31, 2025 against the comparable prior year period. This is due to our new directorsfavorable contracts and officersusing (D&O)alternative policiesless thatcostly provideproviders liabilityfor coverage.trainings.

We incurred stock-based compensation of $4.7 million in 2024 based upon restricted stock units granted to agents and employees,employees ($1.0$0.8 million), consultants who provided various services to the company ($1.4 million), and an option grant to our CEO pursuant to the terms of his employment agreement ($2.3$2.1 million). During 2023, we incurred stock-based compensation of $5.1 million in 2023 based upon restricted stock units granted to agents and employees, most of which was part of the IPO ($1.998 million), consultants who provided various services to the company ($1.286 million), option awards to non-management directors ($421 thousand), and an option grant to our CEOCOO pursuant to the terms of hisher employment agreement ($1.395 million$400,000).

InDuring the Novemberyear 2024,ended weDecember entered into31, an2025, ATMthe AgreementCompany withreceived A.G.P./Allianceproceeds Global Partners, as sales agent, relating tofrom the sale of Common Stock. During the year ended December 31, 2024, we issued an aggregate of 222,0003,871 shares of Common Stock pursuant to suchits sales agreement with AGP (“ATM Agreement for net proceeds”) of $169,236. We$7,496,361. The Company paid the sales agent compensation with respect to sale of such shares in the amount of $5,728.$105,885.

On JulyAugust 13,20, 2026, the closing price of our Common Stock was $1.01.$0.5636 . Pursuant to Nasdaq Rule 5810(c)(3)(A)(iii), if the closing price of our Common Stock is $0.10 or less for 10 consecutive trading days, we will be issued a Staff Delisting Determination by Nasdaq. If we receive a Staff Delisting Determination Letter resulting from our Common Stock trading at or below $0.10 for 10 consecutive trading days, we will have 7 calendar days to request a hearing before a Nasdaq hearings panel to review the Staff Delisting Determination, which will determine the delisting of our Common Stock by Nasdaq. A hearing would then take place within 45 days of the hearing request to determine whether or not our Common Stock would be delisted. If, in the future, we receive a Staff Delisting Determination there can be no assurance that we would be successful in preventing a determination by the Nasdaq hearing panel that our stock will be delisted.

On June 10, 2026, the Companywe received a letter from the Staff indicating that, because the Company’sour stockholders’ equity as reported in its Form 10-K for the fiscal year ended December 31, 2025 was $(1,848,252), thewe Company isare no longer in compliance with Nasdaq Listing Rule 5550(b)(1), which requires companies listed on The Nasdaq Capital Market to maintain a minimum of $2,500,000 in stockholders’ equity for continued listing. Nasdaq’s letter provides the Company with 45 calendar days, or untilOn July 27, 2026, we submitted to submitNasdaq a plan to regainof compliance (“SEaddressing Plan,”how andwe together with the Filing Plan, the “Plans”). The Company is currently evaluating its available optionsintend to resolve the deficiency and regain compliance with the Nasdaq minimumListing stockholders’Rule equity5550(b)(1). requirement.If the plan is accepted, we can be granted up to 180 calendar days from the date of the letter (or until December 7, 2026) to evidence compliance.

There can be no assurance that the Companywe will be able to regain or maintain compliance with all applicable continued listing requirements or that its PlansNasdaq will be acceptedaccept byour theplan Nasdaq.of compliance.

Except as disclosed above in this Section “Item 1A. Risk Factors,” there have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on June 4, 2026 and our Quarterly Report on Form 10-Q for the period ended March 31, 2026 filed with the SEC on July 31, 2026.

Our real estate brokerage offices, both corporate and franchised, are staffed with 2,9792,807 licensed real estate brokers and sales associates as of MarchJune 31,30, 2026.

On April 16, 2026, the Company received a notice (the “10-K Notice”) from the Nasdaq Listing Qualifications Department (the “Staff”) that the Company is not in compliance with Nasdaq Listing Rule 5250(c)(1) as a result of its failure to timely file its Annual Report on Form 10-K (“Comprehensive Form 10-K”) for the fiscal year ended December 31, 2025 (the “Initial Delinquent Filing”) with the SEC. The Staff informed the Company that, under Nasdaq rules, the Company has 60 calendar days, or until June 15, 2026, to submit a plan to regain compliance, and if the Staff accepts such plan, they can grant an exception of up to 180 calendar days from the Initial Delinquent Filing’s due date (or until October 12, 2026) to regain compliance.

On June 4, 2026, the Company filed Comprehensiveits Annual Report on Form 10-K for the fiscal year ended December 31, 2025 with the SEC. On June 10, 2026, the Company received a letter from the Staff indicating that based on the June 4, 2026 filing of the Form 10-K, the Staff has determined that the Company complies with Nasdaq Listing Rule 5250(c)(1) with regard to the Form 10-K filing. However,On sinceJuly it31, has2026, notthe Company filed its Quarterly Report on Form 10-Q for the period ended March 31, 2026 with the SEC. On August 4, 2026, the Company received a letter from the Company’sStaff indicating that based on the July 31, 2026 filing of the Quarterly Report on Form 10-Q, the Staff has determined that the Company remainscomplies noncompliantwith Nasdaq Listing Rule 5250(c)(1). On June 11, 2026, the Company submitted to Nasdaq a plan of compliance (the “Plan”) addressing how the Company intends to regain compliance with Nasdaq’s listing rules with respect to the delinquent reports, and Nasdaqthis hasmatter theis discretionnow to grant the Company up to 180 calendar days from the due date of the Form 10-K, or October 12, 2026, to regain compliance.closed.

Series E Preferred Stock FinancingFinancings

On July 10, 2026, the Company and the Investor entered into a securities purchase agreement pursuant to which the Company issued the Investor 250 shares of the Company’s Series E Convertible Preferred Stock, par value $0.0001 per share (“Series E Preferred Stock”), for a purchase price of $1,000 per share. On July 9, 2026, the Company filed respective Certificate of Designation of Rights and Preferences of the Series E Preferred Stock with the Secretary of State of the State of Nevada.

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 ourOur agent count bydecreased 7.66.5 %, from 2,7693,001 at MarchJune 31,30, 2025 to 2,9792,807 at MarchJune 31,30, 2026.

The majority of our revenue is derived from fees and dues based on the number of agents working under the La Rosa Realty brand. Due to the low fixed cost structure of both our Company and franchise models, the addition of new sales agents generally requires little incremental investment in capital or infrastructure. Accordingly, the number of commission producing sales agents in our Company and our franchisees is the most important factor affecting our results of operations and the addition of new agents can favorably impact our revenue and our earnings before interest, taxes, depreciation and amortization (“EBITDA”). Historically, the number of agents in the residential real estate industry has been highly correlated with overall home sale transaction activity. We believe that the number of agents and those that produce commissions in our network is the primary statistic that drives our revenue. Another major factor is the cyclicality of the real estate industry that has peaks and valleys depending on macroeconomic conditions that we cannot control. And finally, our revenues fluctuate based on the changes in the aggregate fee revenue per sales agent as a significant portion of our revenue is tied to various fees that are ultimately tied to the number of agents, including annual dues, continuing franchise fees, and certain transaction or service-based fees. Our revenue per agent also increases in other ways including when transaction sides and transaction sizes increase since a portion of our revenue comes from fees tied to the number and size of real estate transactions closed by our agents. While the Company was not named as a defendant in any of the recent class action lawsuits alleging antitrust violations, it is possible that it could be a litigant at some point in the future. Several of these lawsuits have been settled (see our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on June 4, 2026) “Risk Factors – Adverse outcomes in litigation and regulatory actions against the NAR, other real estate brokerage companies and agents in our industry could adversely impact our financial results). These settlements will result in changes in the way real estate brokers are compensated for their services. Most notably, home sellers will no longer be required to pay buyer agent commissions which will result in lower buyer agent compensation. We cannot predict the full breadth of the outcome of these lawsuits but believe that they will result in a significant adverse effect on our financial condition and results of operations for the foreseeable future.

The benchmark 30-year fixed conforming mortgage rate rose to a peak of about 8% during the second half of 2023, according to Freddie Mac data. That interest rate then retreated to between 6.08% and 7.22% during 2024 and between 6.15% to 7.04% during 2025. Consequently, housing demand remained soft, prices are rising, consumer sentiment has weakened, and home sales are declining. The U.S. Federal Reserve continues to take action intended to address 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 reduced to 483 basis points. In MayJune 2026, the federal funds rate was 363 basis points. The fluctuations impact interest rates, which significantly contribute to mortgage rate adjustments. In May 2026, the existing home sales market rose 3.2% compared to both April 2026 and May 2025, reaching a seasonally adjusted annual rate (SAAR) of 4.17 million units, according to the NAR. This increase had a positive impact on consumer demand for our services, as consumers weighed the financial implications of selling or purchasing a home. Continuing improved housing market conditions would positively affect our operating performance and results of operations.

The recently adopted SEC cybersecurity disclosure rules for public companies require disclosure regarding cybersecurity risk management (including the corporate board’s role in overseeing cybersecurity risks, management’s role and expertise in assessing and managing cybersecurity risks, and processes for assessing, identifying and managing cybersecurity risks) in annual reports. These new cybersecurity disclosure rules also require the disclosure of material cybersecurity incidents in a Form 8-K, generally within four days of determining an incident is material. We have included respective disclosures in our Annual Report on Form 10-K for fiscal year ended December 31, 2025 filed with the Commission on June 4 ,4, 2026.

Residential real estate services sales revenue decreased by approximately $1.2$5.1 million, or 9%,26%, in the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025. The decrease was driven primarily by the sale of its interest in LR Kissimmee.

Franchising services revenue decreased by approximately $4$9.6 thousand, or 9%,31%, in the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025. The decrease is attributable tothe reductionending inof franchisingcertain activities.franchise agreements.

Coaching services revenue decreased by approximately $73$122.4 thousand, or 77%,100%, in the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, primarily due to a strategic shift from Coaching services to aid in onboarding of new Agents.

Property management revenue increaseddecreased by approximately $3$6.8 thousand, or 3%,7%, in the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, overallas thisa isresult consistentof witha decrease in the priornumber yearof revenues.properties under management.

Real estate brokerage services (commercial) revenue increased by approximately $216$17.3 thousand, or 379%,9%, in the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, as a result of new leadership in the department and the condensing lead time it generally takes to generate a commercial real estate transaction.

Title settlement and insurance revenue increaseddecreased by approximately $22$4.9 thousand, or 28%,6%, in the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, primarily due to company advertisingloss of thiskey servicemanagement toduring itsthe agents.second quarter of 2026.