Business Combinations | Note 2 — Business Combinations The Company has completed a number of acquisitions in the first nine months 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, customer relationships, workforce 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 nine months of 2024, the Company acquired majority ownership of the following franchisees of the Company: La Rosa Realty Georgia LLC (“Georgia”), La Rosa Realty California (“California”), La Rosa Realty Lakeland LLC (“Lakeland”), and La Rosa Realty Success LLC (“Success”) and 100% ownership of La Rosa Realty Winter Garden LLC (“Winter Garden”), BF Prime LLC (“BF Prime”), and Nona Title Agency LLC (“Nona Title”). The first six franchises engage mostly in 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. Nona Title is a full-service escrow, settlement, and title company whose role is to lead and coordinate the closing between all parties involved in the transaction. 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 seven 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 Lakeland Success BF Prime Nona Title Total Acquired ownership 100 % 51 % 51 % 51 % 51 % 100 % 100 % Acquisition date 2/21/2024 3/7/2024 3/15/2024 4/18/2024 5/25/2024 8/19/2024 8/21/2024 Common stock issued 268,858 276,178 1,387 514,939 56,375 39,739 461,154 1,618,630 Cash consideration $ — $ — $ — $ 50,000 $ 10,000 $ 5,890 $ 174,580 $ 240,470 Equity consideration 352,204 516,453 123,113 823,903 68,778 44,111 484,212 $ 2,412,774 Total purchase price $ 352,204 $ 516,453 $ 123,113 $ 873,903 $ 78,778 $ 50,001 $ 658,792 $ 2,653,244 Noncontrolling interest — 496,200 118,285 839,632 75,689 — — 1,529,806 Acquisition date fair value $ 352,204 $ 1,012,653 $ 241,398 $ 1,713,535 $ 154,467 $ 50,001 $ 658,792 $ 4,183,050 Purchase price allocation $ 352,204 $ 1,012,653 $ 241,398 $ 1,713,535 $ 154,467 $ 50,001 $ 658,792 $ 4,183,050 Less fair value of net assets acquired: Cash 17,623 79,553 1,436 32,935 171 4,542 129,157 $ 265,417 Working capital (less cash) (17,148 ) (54,991 ) (45,027 ) (59,325 ) (21,323 ) (3,817 ) (128,306 ) $ (329,937 ) Intangible assets 171,767 446,657 111,202 815,411 104,798 9,632 102,619 $ 1,762,086 Long-term assets — 91,118 106,542 129,521 22,697 14,545 — $ 364,423 Long-term liabilities — (98,641 ) (69,449 ) (94,591 ) (8,236 ) (7,500 ) — (278,417 ) Net assets acquired 172,242 463,696 104,704 823,951 98,107 17,402 103,470 1,783,572 Goodwill $ 179,962 $ 548,957 $ 136,694 $ 889,584 $ 56,360 $ 32,599 $ 555,322 $ 2,399,478 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 seven acquisitions: Winter Garden Georgia California Lakeland Success BF Prime Nona Title Total Franchise agreement (10 to 11 years) $ 146,990 $ 356,200 $ 92,367 $ 511,453 $ 48,302 $ 7,771 $ — $ 1,163,083 Agent relationships (8 to 11 years) — 43,447 7,657 147,455 — — 102,619 301,178 Real estate listings (1 year) 22,239 37,310 10,417 129,847 55,228 1,526 — 256,567 Non-compete agreements (4 years) 2,538 9,700 761 26,656 1,268 335 — 41,258 Total identifiable intangible assets acquired $ 171,767 $ 446,657 $ 111,202 $ 815,411 $ 104,798 $ 9,632 $ 102,619 $ 1,762,086 The amounts of revenue, cost of revenue, gross profit, and loss from operations before income taxes of the seven acquisitions included in the Company’s condensed consolidated statement of operations from the date of the acquisition for the three- and nine-month periods ended September 30, 2024 is as follows: Three Months Nine Months Ended Ended September 30, September 30, 2024 2024 Revenue $ 3,747,768 $ 7,000,849 Cost of revenue $ 3,413,612 $ 6,395,796 Gross profit $ 334,156 $ 605,053 Loss before provision for income taxes $ 141,839 $ 236,410 The following unaudited pro forma financial information presents the combined operating results of the Company and the 2024 acquisitions 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 nine-month periods ended September 30, 2024 and 2023: Nine Months Ended September 30, 2024 2023 Revenue $ 54,378,721 $ 18,792,646 Cost of revenue 49,592,570 16,576,555 Gross profit $ 4,786,151 $ 2,216,091 Loss before provision for income taxes $ (8,565,144 ) $ (2,933,631 ) Loss per share of common stock attributable to common stockholders, basic and diluted $ (0.61 ) $ (0.28 ) Weighted average shares used in computing net loss per share of common stock attributable to common stockholders 15,852,396 10,372,037 |