Business Combinations | Note 2 — Business Combinations The Company has completed a number of acquisitions in the first quarter of 2024 and will acquire additional businesses in the future. The results of businesses acquired in a business combination are included in the Company’s condensed consolidated financial statements from the date of acquisition. The Company allocates the purchase price, which is the sum of the consideration provided and may consist of cash, equity, or a combination of the two, to the identifiable assets and liabilities of the acquired business at their acquisition date fair values. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates, and selection of comparable companies. To date, the assets acquired and liabilities assumed in the Company’s business combinations have primarily consisted of goodwill and finite-lived intangible assets, consisting primarily of franchise agreements, agent relationships, real estate listings, non-compete agreements, and right-of-use assets. The estimated fair values and useful lives of identifiable intangible assets are based on many factors, including estimates and assumptions of future operating performance and cash flows of the acquired business, the nature of the business acquired, and the specific characteristics of the identified intangible assets. The estimates and assumptions used to determine the fair values and useful lives of identified intangible assets could change due to numerous factors, including market conditions, technological developments, economic conditions and competition. In connection with the determination of fair values, the Company engages independent appraisal firms to assist with the valuation of intangible assets acquired and certain assumed obligations. Transaction costs associated with business combinations are expensed as incurred. During the first quarter of 2024, the Company acquired majority ownership of the following franchisees of the Company: La Rosa Realty Georgia LLC (“Georgia”) and La Rosa Realty California (“California”), and 100% ownership of La Rosa Realty Winter Garden LLC (“Winter Garden”). All three franchises engage mostly in the residential real estate brokerage services to the public primarily through sales agents and also provide coaching and support services to agents on a fee basis. The following table summarizes the purchase consideration and the purchase price allocation to the estimated fair values of the identifiable assets acquired and liabilities assumed for the three acquisitions. The values assigned to certain acquired assets and liabilities are preliminary as the Company is continuing to evaluate the fair value of the assets and liabilities and may be adjusted as further information becomes available during the allocation period of up to 12 months from the acquisition date. Winter Garden Georgia California Total Acquired ownership 100 % 51 % 51 % Acquisition date 2/21/24 3/7/24 3/15/24 Common stock issued 268,858 276,178 1,387 546,423 Equity consideration — purchase price $ 352,204 $ 516,453 $ 123,113 $ 991,770 Noncontrolling interest — 496,200 118,285 614,485 Acquisition date fair value $ 352,204 $ 1,012,653 $ 241,398 $ 1,606,255 Purchase price allocation $ 352,204 $ 1,012,653 $ 241,398 1,606,255 Less fair value of net assets acquired: Cash 17,623 79,553 1,436 98,612 Working capital (less cash) (17,148 ) (54,991 ) (45,027 ) (117,166 ) Intangible identifiable assets 171,767 446,657 111,202 729,626 Long-term assets — 91,118 106,542 197,660 Long-term liabilities — (98,641 ) (69,449 ) (168,090 ) Net assets acquired 172,242 463,696 104,704 740,642 Goodwill $ 179,962 $ 548,957 $ 136,694 $ 865,613 Goodwill generated from the acquisition is primarily attributable to expected synergies from future growth and strategic advantages provided through expansion and is not expected to be deductible for income tax purposes. The classes of intangible identifiable assets acquired and the estimated useful life of each class is presented in the table below for the three acquisitions: Winter Garden Georgia California Total Franchise agreement (10 to 11 years) $ 146,990 $ 356,200 $ 92,367 $ 595,557 Agent relationships (8 to 11 years) — 43,447 7,657 51,104 Real estate listings (1 year) 22,239 37,310 10,417 69,966 Non-compete agreements (4 years) 2,538 9,700 761 12,999 Total identifiable intangible assets acquired $ 171,767 $ 446,657 $ 111,202 $ 729,626 The amounts of revenue, cost of revenue, gross profit, and loss from operations before income taxes of the three acquisitions included in the Company’s condensed consolidated statement of operations from the date of the acquisition for the three month period ended March 31, 2024 is as follows: Three Months Ended March 31, Revenue $ 245,436 Cost of revenue $ 229,712 Gross profit $ 15,725 Loss before provision for income taxes $ (11,983 ) The following unaudited pro forma financial information presents the combined operating results of the Company, Winter Garden, Georgia, and California, as if each acquisition had occurred as of January 1, 2023. The unaudited pro forma financial information includes the accounting effects of the business combinations, including adjustments to the amortization of intangible assets. The unaudited pro forma information does not necessarily reflect the actual results that would have been achieved, nor is it necessarily indicative of the Company’s future consolidated results. The unaudited pro forma financial information is presented in the table below for the three-month periods ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 2023 Revenue $ 14,077,894 $ 7,392,607 Cost of revenue 12,810,962 6,649,529 Gross profit $ 1,266,932 $ 743,078 Loss before provision for income taxes $ (4,783,864 ) $ (1,034,064 ) Loss per share of common stock attributable to common stockholders, basic and diluted $ (0.45 ) $ (0.11 ) Weighted average shares used in computing net loss per share of common stock attributable to common stockholders 14,045,661 9,299,115 |