Summary Of Significant Accounting Policies | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X and do not include all the information and disclosures required by generally accepted accounting principles in the United States of America (“GAAP”). The Company has made estimates and judgements affecting the amounts reported in the Company’s condensed consolidated financial statements and the accompanying notes. The actual results experienced by the Company may differ materially from the Company’s estimates. The condensed consolidated financial information is unaudited and reflects all normal adjustments that are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented. Results of the three and nine-month periods ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, 2023. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the Company as of and for the year ended December 31, 2022, included in the Company’s Registration Statement on Form S-1. The condensed consolidated balance sheet as of December 31, 2022 was derived from the Company’s audited financial statements referred to above. On March 21, 2022, the Company effected a 1-for-10 reverse stock split and on April 17, 2023, the Company effected a 2-for-1 forward stock split of its common stock issued and outstanding (including adjustments for fractional shares). As a result, all share information in the accompanying condensed consolidated financial statements has been adjusted as if the reverse stock split and the forward stock split happened on the earliest date presented. Use of Estimates The preparation of the Company’s condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant estimates include allowance for doubtful accounts and assumptions used to determine fair value of warrants and other equity instruments, the embedded conversion features of the convertible notes, and the fair value of acquisitions, including intangible assets. Reclassifications Certain reclassifications have been made to data presented in the 2022 financial statements to conform with the 2023 financial statement presentation. Concentrations of Credit Risk The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and trade accounts receivable. Although the Company limits its exposure to credit loss by depositing its cash with established financial institutions that management believes have good credit ratings and represent minimal risk of loss of principal, the Company’s deposits, at times, may exceed federally insured limits. Collateral is not required for accounts receivable, and the Company believes the carrying value approximates fair value. Restricted Cash Restricted cash consists of cash held by the Company for rent collected by the Company due to property owners as well as rent security deposits. The Company recognizes a corresponding deposit liability until the funds are released. Once the cash is transferred from escrow, the Company reduces the respective customer’s deposit liability. Accounts Receivable Accounts receivable consist of balances due from agents, tenants, franchisees, and commissions for closings. In determining collectability, historical trends are evaluated and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances. The allowance for doubtful accounts was $44,721 and $29,039 as of September 30, 2023 (unaudited) and December 31, 2022, respectively. Fair Value Measurements The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. The fair value hierarchy prioritizes the quality and reliability of the information used to determine fair values. The methodology establishes consistency and comparability by providing a fair value hierarchy that prioritizes the inputs to valuation techniques into three broad levels as follows: Level 1 - Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 - Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. ASC 820 requires the use of observable data if such data is available without undue cost and effort. When available, the company uses unadjusted quoted market prices to measure the fair value and classifies such items within Level 1. If quoted market prices are not available, fair value is based upon internally developed models that use current market-based or independently sourced market parameters such as interest rates and currency rates. Items valued using internally generated models are classified according to the lowest level input or value driver that is significant to the valuation. The determination of fair value considers various factors including interest rate yield curves and time value underlying the financial instruments. In the event of an other-than-temporary impairment of a non-public equity method investment, the Company uses the net asset value of its investment in the investee, adjusted using discounted cash flows, for the Company’s estimate of the price that it would consider all factors that would impact the investment’s fair value. The Company’s financial instruments consist primarily of receivables, accounts payable, accrued expenses and short- and long-term debt. The carrying amounts of receivables, accounts payable and accrued expenses approximate fair value because of the short-term maturity of such instruments. In accordance with accounting standards, the Company determined that on September 30, 2023 and on December 31, 2022 certain instruments qualified as derivative liabilities and should be recorded at their fair value on the date of issuance and re-measured at fair value each reporting period with the change reported in earnings. The fair value of these instruments was computed using the Black Scholes model, incorporating transaction details such as the assumed price of the Company’s common stock at an initial public offering, contractual terms, maturity and risk-free rates, as well as assumptions about future financings, volatility, and holder behavior. A summary of the Company’s liabilities measured at fair value on a recurring basis is as follows: As of September 30, 2023 ( u As of December 31, 2022 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Liabilities Derivative liabilities $ — $ — $ 323,750 $ 323,750 $ — $ — $ 1,022,879 $ 1,022,879 The following table provides a summary of changes in fair value associated with the Level 3 liabilities for the three-month periods ended September 30, 2023 and 2022: 2023 ( u 2022 ( u Balance – Ju ne 30 $ 587,006 $ 164,888 Issuance of common stock related to the derivative liability (157,500 — Extinguishment of derivative liability (95,555 ) — Change in fair market value (10,201 ) 1,147 Balance – September 30, $ 323,750 $ 166,035 The following table provides a summary of changes in fair value associated with the Level 3 liabilities for the nine-month periods ended September 30, 2023 and 2022: 2023 u 2022 ( u Balance – December 3 $ 1,022,879 $ 141,672 Issuance of derivative liabilities 7,500 — Issuance of common stock related to the derivative liability (157,500 ) — Extinguishment of derivative liability (410,144 ) — Change in fair market value (138,985 ) 24,363 Balance – September 30, $ 323,750 $ 166,035 Deferred Offering Costs The Company capitalizes certain legal, accounting, and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded in stockholders’ equity ( deficit ) condensed as of September 30, 2023 and December 31, 2022, respectively, and are included in Non-current assets on the condensed consolidated balance sheets. Loan F D D F F The Company accounts for debt discount according to ASC No. 470-20, Debt with Conversion and Other Options. Debt discounts are amortized through periodic charges to interest expense over the term of the related financial instrument using the effective interest method. For the three-month periods ended September 30, 2023 and 2022, the Company recorded amortization of debt discounts of $207,887 (unaudited) and $4,053 (unaudited), respectively. For the nine-month periods ended September 30, 2023 and 2022, the Company recorded amortization of debt discounts of $882,781 (unaudited) and $100,123 (unaudited), respectively. Revenue Recognition The Company applies the provision of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). The Company measures revenue within the scope of ASC 606 by applying the five steps required by the standard . The revenue policies of each of our business segments are Revenues from contracts with customers are summarized by category as follows for the for the three- and nine-month periods ended September 30, 2023 and 2022 Three Months Ended September 30, Nine Months Ended September 30, 2023 ( u 2022 ( u 2023 u 2022 u Real Estate Brokerage Services (Residential) 3,848,991 3,674,149 $ 11,851,678 $ 12,896,795 Franchising Services 217,450 235,607 734,235 822,410 Coaching Services 182,393 164,653 464,603 512,553 Property Management 2,512,810 2,035,126 7,169,786 5,897,105 Real Estate Brokerage Services (Commercial) 30,606 22,357 100,304 77,810 Revenue 6,792,250 6,131,892 $ 20,320,606 $ 20,206,673 The following table disaggregates the Company’s revenue based on the type of sale or service and the timing of satisfaction of performance obligations for the three and Three September 30, Nine September 30, 2023 ( u 2022 ( u 2023 u 2022 u Performance obligations satisfied at a point in time 3,948,963 4,236,131 $ 12,106,595 $ 13,484,424 Performance obligations satisfied over time 2,843,287 1,895,761 8,214,011 6,722,249 Revenue 6,792,250 6,131,892 $ 20,320,606 $ 20,206,673 Cost of Revenue Cost of revenue consists primarily of agent commissions less fees paid to the Company by the real estate agents. Advertising Advertising costs are expensed as incurred. Advertising expense for the three-month periods ended September 30, 2023 and 2022 was $10,718 (unaudited) and $2,780 (unaudited), respectively. condensed Other I N Other income, net for the three-month periods ended September 30, 2023 was from an IRS employee retention refundable credit received for prior tax years, net of legal costs to obtain the credit. Loss Per Common Share Basic loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted loss per common share is computed by giving effect to all potential shares of common stock, including those related to our outstanding warrants and stock equity plans, to the extent dilutive. For all periods presented, these shares were excluded from the calculation of diluted loss per share of common stock because their inclusion would have been anti-dilutive. As a result, diluted loss per common share is the same as basic loss per common share for all periods presented. The following table sets forth common stock equivalents that have been excluded from the computation of dilutive weighted average shares outstanding as their inclusion would have been antidilutive: September 30, 2023 2022 Warrants 140,000 40,000 Options 80,000 80,000 Restricted Stock Award 4,000 — Future equity shares 60,000 — Total 284,000 120,000 Stock Based Compensation The Company follows the requirements of FASB ASC 718-10, Share Based Payments with regards to stock-based compensation issued to employees, directors, and non-employees. The Company has agreements and arrangements that call for stock to be awarded to consultants as compensation. The valuation methodology used to determine the fair value of the warrants issued during the period is the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the warrants or stock options. Risk–free interest rates are calculated based on continuously compounded risk-free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its common stock and does not intend to pay dividends on its common stock in the foreseeable future. The Company recognizes forfeitures as they occur. Recently Adopted Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, that changes the impairment model for most financial assets and certain other instruments. For receivables, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for losses. In addition, an entity will have to disclose significantly more information about allowances and credit quality indicators. The new standard is effective for the Company for fiscal years beginning after December 15, 2022. The Company adopted the standard beginning in fiscal year 2023. The adoption did not have a material impact on the Company’s condensed Recent Accounting Pronouncements Not Yet Adopted In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40) (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. ASU 2020-06 is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company will implement ASU 2020-06 on January 1, 2024. |