8-K
La Rosa Holdings Corp. (LRHC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 13, 2023
| La Rosa Holdings Corp. | ||
|---|---|---|
| (Exact name of registrant as specified in its charter) | ||
| Nevada | 001-41588 | 87-1641189 |
| --- | --- | --- |
| (State or other jurisdiction<br><br> <br>of incorporation) | (Commission<br><br> <br>File Number) | (I.R.S. Employer<br><br> <br>Identification No.) |
| 1420 Celebration Blvd.,<br><br>2<br><br>nd<br><br>Floor<br><br> <br>Celebration, Florida | 34747 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
(321) 250-1799
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.0001 par value | LRHC | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Item 2.01 Completion of Acquisition or Disposition of Assets
La Rosa Realty Lake Nona, Inc
.
On October 13, 2023,
La Rosa Holdings Corp., a Nevada corporation (the “Company”), closed the acquisition of 51% of issued and outstanding common stock (the “Majority Shares”) of La Rosa Realty Lake Nona, Inc., a Florida corporation (“Lake Nona”), a franchisee of the Company, pursuant to the previously announced stock purchase agreement, dated January 6, 2022 and amended on September 15, 2022 (the “Lake Nona Purchase Agreement”), by and among the Company, Lake Nona and the sole stockholder of Lake Nona (the “Selling Stockholder”).
As the consideration for the Majority Shares, the Company paid the Selling Stockholder $50,000 in cash and issued the Selling Stockholder an aggregate of 324,998
unregistered
shares of the Company’s common stock (the “Lake Nona Purchase Shares”).
The Selling Stockholder also entered into a lock-up/leak out agreement with the Company pursuant to which the Selling Stockholder may not sell more than one-twelfth of the Lake Nona Purchase Shares per calendar month during the one year period commencing after the six-month holding period under Rule 144 promulgated under the Securities Act of 1933, as amended, subject to applicable securities laws.
The foregoing summary of the Lake Nona Purchase Agreement, as amended, is qualified in its entirety by reference to such agreement and amendment thereto, copies of which are filed as
Exhibits 10.1 and 10.2 to this Current Report on Form 8-K and is incorporated herein by reference.
Horeb Kissimmee Realty, LLC
.
On October 16, 2023,
the Company closed its acquisition of a majority of the membership interests (the “Majority Interests”) of Horeb Kissimmee Realty LLC, a Florida limited liability company (“Kissimmee Realty”), a franchisee of the Company, pursuant to the previously announced membership interest purchase agreement, dated December 21, 2021, as amended on September 15, 2022 (the “Kissimmee Purchase Agreement”), by and among the Company, Kissimmee and the owner of 100% of the membership interest in Kissimmee (the “Selling Member”).
As the consideration for the Company acquisition of the Majority Interests of Kissimmee Realty, the Company paid the Selling Member $500,000 in cash and issued the Selling Member an aggregate of
513,626
unregistered
shares of the Company’s common stock (the “Kissimmee Purchase Shares”).
On October 16, 2023, the Selling Member also entered into a lock-up/leak out agreement with the Company pursuant to which the Selling Member may not sell more than one-twelfth of the Kissimmee Purchase Shares per calendar month during the one year period commencing after the six-month holding period under Rule 144 promulgated under the Securities Act of 1933, as amended, subject to applicable securities laws.
The foregoing summary of the Kissimmee Purchase Agreement, as amended, is qualified in its entirety by reference to such agreement and amendment thereto, copies of which are filed as
Exhibits 10.6 and 10.7 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 3.02. Unregistered Sales of Equity Securities.
As disclosed under Item 2.01 of this Form 8-K, on October 13, 2023, the Company issued an aggregate 324,998
unregistered
shares of the Company’s common stock to the Selling Stockholder of Lake Nona pursuant to the Lake Nona Purchase Agreement. The Company issued the shares pursuant to the exemption from the registration requirements of the Securities Act available to the Company under Section 4(a)(2) promulgated under the Securities Act due to the fact that the issuance did not involve a public offering of securities.
As disclosed under Item 2.01 of this Form 8-K, on October 16, 2023, the Company issued an aggregate of 513,626
unregistered
shares of the Company’s common stock to the Selling Member of Kissimmee Realty pursuant to the Kissimmee Realty Purchase Agreement. The Company issued the shares pursuant to the exemption from the registration requirements of the Securities Act available to the Company under Section 4(a)(2) promulgated under the Securities Act due to the fact that the issuance did not involve a public offering of securities.
Item 7.01 Regulation FD Disclosure.
On October 16, 2023, the Company issued a press release announcing the closing of the Company’s acquisition of the Majority Shares of common stock of Lake Nona described in Item 2.01 of this Current Report on Form 8-K. The press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
On October 18, 2023, the Company issued a press release announcing that it had closed an acquisition of 51% membership interest of Kissimmee described in Item 2.01 of this Current Report on Form 8-K. The press release is filed as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.
The information furnished pursuant to this Item 7.01, including Exhibit 99.1 and Exhibit 99.2 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), or otherwise subject to the liabilities under that section, nor shall it be deemed to be incorporated by reference in any filing made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
| (a) | Financial Statements of Business Acquired. |
|---|
The required financial statements of Lake Nona as of and for the fiscal year ended December 31, 2022 are attached hereto as Exhibit 99.3 and are incorporated in their entirety herein by reference.
The required financial statements of Lake Nona as of and for six months ended June 30, 2023 are attached hereto as Exhibit 99.4 and are incorporated in their entirety herein by reference.
The required financial statements of Kissimmee Realty as of and for the fiscal year ended December 31, 2022 are attached hereto as Exhibit 99.5 and are incorporated in their entirety herein by reference.
The required financial statements of Kissimmee Realty as of and for six months ended June 30, 2023 are attached hereto as Exhibit 99.6 and are incorporated in their entirety herein by reference.
| (b) | Pro forma financial information. |
|---|
The Company will file the pro forma financial information required by Item 9.01(b) of Form 8-K by an amendment to this Current Report on Form 8-K no later than 71 calendar days from the date this Current Report on Form 8-K is required to be filed.
The following exhibits are being filed herewith, unless otherwise indicated:
* Incorporated by reference to the Company’s Registration Statement on Form S-1 (No. 333-264372), filed with the SEC on September 12, 2023.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: October 19, 2023 | LA ROSA HOLDINGS CORP. | |
|---|---|---|
| By: | /s/ Joseph La Rosa | |
| Name: | Joseph La Rosa | |
| Title: | Chief Executive Officer |
Exhibit 99.1
La Rosa Acquires Real Estate BrokerageFranchisee with Audited
Revenue in Excess of $9.8 Millionand Positive Net Income in 2022
Company Begins to Execute on itsPlanned Roll-Up Strategy
Celebration, FL / October 16, 2023 / – La Rosa Holdings Corp. (NASDAQ: LRHC) (“La Rosa” or the “Company”), a holding company for five agent-centric, technology-integrated, cloud-based, multi-service real estate companies, today announced that it has acquired a controlling interest in the Company’s franchisee - La Rosa Realty Lake Nona, Inc. (“Lake Nona”) located in Orlando, Florida.
Lake Nona generated revenue in excess of $9.8 million and positive net income in 2022. The franchisee provides residential and commercial real estate brokerage services. It also provides coaching and support services to agents on a fee basis.
“We are excited to welcome the franchisee into the corporate organization,” said Joe La Rosa, CEO of La Rosa Holdings Corp. “We believe that not only does this acquisition expand our footprint in Florida, but it will also increase our top line revenue. With future planned franchisee acquisitions, we expect both our top line and bottom line to improve considerably as our current infrastructure is set up to support five times our current agent count. We have a brokerage model which is agent centric with 100% commission. In our view, our agent-centric commission model enables our sales agents to obtain higher net commissions than they would otherwise receive from many of our competitors in our local markets. We provide our real estate brokers and sales agents who are seeking financial independence with a turnkey solution and support them in growing their brokerages while they fund their own businesses. This enables us to maintain a low fixed-cost business model with several recurring revenue streams, yielding relatively high margins and cash flow. Moreover, we believe that our proprietary technology, training, and the support that we provide to our agents at a minimal cost to them is one of the best offered in the industry. Our strategy is to drive exponential growth to capitalize on the changing agency model trends occurring in the industry.”
About La Rosa HoldingsCorp.
La Rosa is a holding company for five agent-centric, technology-integrated, cloud-based, multi-service real estate companies. In addition to providing person-to-person residential and commercial real estate brokerage services to the public, the Company cross-sells ancillary technology-based products and services primarily to its sales agents and the sales agents associated with their franchisees. La Rosa’s business is organized based on the services they provide internally to their agents and to the public, which are residential and commercial real estate brokerage, franchising, real estate brokerage education and coaching, and property management. La Rosa has six La Rosa Realty corporate real estate brokerage offices located in Florida, 27 La Rosa Realty franchised real estate brokerage offices in six states in the United States and Puerto Rico. The Company’s real estate brokerage offices, both corporate and franchised, are staffed with more than 2,380 licensed real estate brokers and sales associates.
For more information, please visit: https://www.larosaholdings.com
Forward-Looking Statements
This press release contains forward-looking statements regarding the Company’s current expectations that are subject to various risks and uncertainties. Such statements include statements regarding the Company’s ability to grow its business and other statements that are not historical facts, including statements which may be accompanied by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential” or similar words. . These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Actual results could differ materially from those described in these forward-looking statements due to certain factors, including without limitation, the Company's ability to achieve profitable operations, customer acceptance of new services, the demand for the Company’s services and the Company’s customers' economic condition, the impact of competitive services and pricing, general economic conditions and other risk factors detailed in the Company's filings with the United States Securities and Exchange Commission (the "SEC”).. You are urged to carefully review and consider any cautionary statements and other disclosures, including the statements made under the headings “Risk Factors” and elsewhere in documents that we file from time to time with the SEC. Forward-looking statements contained in this press release are made only as of the date of the this press release, and La Rosa does not undertake any responsibility to update any forward-looking statements in this release, except as may be required by applicable law. References and links to websites have been provided as a convenience, and the information contained on such websites is not incorporated by reference into this press release.
For more information, contact: info@larosaholdings.com
Investor Relations Contact:
Crescendo Communications, LLC
David Waldman/Natalya Rudman
Tel: (212) 671-1020
Email: LRHC@crescendo-ir.com
Exhibit 99.2
La Rosa Acquires Second Real EstateBrokerage Franchisee with Audited
Revenue of $10.8 Million and PositiveNet Income in 2022
Company Continues to Execute onits Planned Roll-Up Strategy
Celebration, FL / October 18, 2023 / – La Rosa Holdings Corp. (NASDAQ: LRHC) (“La Rosa” or the “Company”), a holding company for five agent-centric, technology-integrated, cloud-based, multi-service real estate companies, today announced that it has acquired a controlling interest in the Company’s franchisee - Horeb Kissimmee Realty, LLC (“Kissimmee) located in Kissimmee, Florida.
Kissimmee generated revenue of $10.8 million and had positive net income in 2022. The franchisee provides residential and commercial real estate brokerage services. It also provides coaching and support services to agents on a fee basis.
Joe La Rosa, CEO of the Company, commented, “We are executing on our planned roll-up strategy of acquiring profitable franchisees. We believe that this acquisition when combined with the previous acquisition of La Rosa Realty Lake Nona, Inc., will double our top-line revenue. We have several other acquisitions in the pipeline, and we expect both our top-line and bottom-line revenue to improve considerably as our current infrastructure is set up to support five times our current agent count. We believe our brokerage model is unique when compared to many of our competitors in our local market. It is agent centric with 100% commission and it also provides real estate brokers and sales agents who are seeking financial independence with a turnkey solution and support in growing their brokerages while they fund their own businesses. This enables us to maintain a low fixed-cost business model with several recurring revenue streams, yielding relatively high margins and cash flow. We also offer proprietary technology, training, and support to our agents at a minimal cost to them which we believe is one of the best packages offered in the industry.”
About La Rosa HoldingsCorp.
La Rosa is a holding company for five agent-centric, technology-integrated, cloud-based, multi-service real estate companies. In addition to providing person-to-person residential and commercial real estate brokerage services to the public, the Company cross-sells ancillary technology-based products and services primarily to its sales agents and the sales agents associated with their franchisees. La Rosa’s business is organized based on the services they provide internally to their agents and to the public, which are residential and commercial real estate brokerage, franchising, real estate brokerage education and coaching, and property management. La Rosa has seven La Rosa Realty corporate real estate brokerage offices located in Florida, 26 La Rosa Realty franchised real estate brokerage offices in six states in the United States and Puerto Rico. The Company’s real estate brokerage offices, both corporate and franchised, are staffed with more than 2,380 licensed real estate brokers and sales associates.
For more information, please visit: https://www.larosaholdings.com
Forward-Looking Statements
This press release contains forward-looking statements regarding the Company’s current expectations that are subject to various risks and uncertainties. Such statements include statements regarding the Company’s ability to grow its business and other statements that are not historical facts, including statements which may be accompanied by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential” or similar words. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Actual results could differ materially from those described in these forward-looking statements due to certain factors, including without limitation, the Company's ability to achieve profitable operations, customer acceptance of new services, the demand for the Company’s services and the Company’s customers' economic condition, the impact of competitive services and pricing, general economic conditions and other risk factors detailed in the Company's filings with the United States Securities and Exchange Commission (the "SEC”). You are urged to carefully review and consider any cautionary statements and other disclosures, including the statements made under the headings “Risk Factors” and elsewhere in documents that we file from time to time with the SEC. Forward-looking statements contained in this press release are made only as of the date of the this press release, and La Rosa does not undertake any responsibility to update any forward-looking statements in this release, except as may be required by applicable law. References and links to websites have been provided as a convenience, and the information contained on such websites is not incorporated by reference into this press release.
For more information, contact: info@larosaholdings.com
Investor Relations Contact:
Crescendo Communications, LLC
David Waldman/Natalya Rudman
Tel: (212) 671-1020
Email: LRHC@crescendo-ir.com
Exhibit 99.3
INDEPENDENT AUDITOR’SREPORT
To the Stockholder of La Rosa Realty Lake Nona, Inc.
Opinion
We have audited the accompanying financial statements of La Rosa Realty Lake Nona, Inc. (a Florida Limited Liability Company), which comprise the balance sheets as of December 31, 2022 and 2021, and the related statements of income, changes in stockholder’s deficit, and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of La Rosa Realty Lake Nona, Inc. as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of La Rosa Realty Lake Nona, Inc. and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the FinancialStatements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about La Rosa Realty Lake Nona, Inc.’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued.
Auditor’s Responsibilities for the Auditof the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
| F-1 |
| --- |
To the Stockholder of La Rosa Realty Lake Nona, Inc.
In performing an audit in accordance with generally accepted auditing standards, we:
| · | Exercise<br> professional judgment and maintain professional skepticism throughout the audit. |
|---|---|
| · | Identify<br> and assess the risks of material misstatement of the financial statements, whether due to<br> fraud or error, and design and perform audit procedures responsive to those risks. Such procedures<br> include examining, on a test basis, evidence regarding the amounts and disclosures in the<br> financial statements. |
| --- | --- |
| · | Obtain<br> an understanding of internal control relevant to the audit in order to design audit procedures<br> that are appropriate in the circumstances, but not for the purpose of expressing an opinion<br> on the effectiveness of La Rosa Realty Lake Nona, Inc.’s internal control. Accordingly,<br> no such opinion is expressed. |
| --- | --- |
| · | Evaluate<br> the appropriateness of accounting policies used and the reasonableness of significant accounting<br> estimates made by management, as well as evaluate the overall presentation of the financial<br> statements. |
| --- | --- |
| · | Conclude<br> whether, in our judgment, there are conditions or events, considered in the aggregate, that<br> raise substantial doubt about La Rosa Realty Lake Nona, Inc.’s ability to continue<br> as a going concern for a reasonable period of time. |
| --- | --- |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
/s/ Rosenberg Rich Baker Berman, P.A.
Somerset, New Jersey
April 24, 2023
| F-2 |
| --- |
La Rosa Realty Lake Nona, Inc.
Balance Sheets
| December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Assets | ||||||
| Current Assets | ||||||
| Cash | $ | 144,559 | $ | 138,814 | ||
| Accounts receivable | 166,583 | 340,557 | ||||
| Other current assets | 10,611 | 12,399 | ||||
| Total Current Assets | 321,753 | 491,770 | ||||
| Right of use asset | 445,533 | - | ||||
| Total Assets | $ | 767,286 | $ | 491,770 | ||
| Liabilities and Stockholder's Deficit | ||||||
| Current Liabilities | ||||||
| Accounts payable | $ | 329,582 | $ | 408,108 | ||
| Operating lease liability | 74,607 | - | ||||
| Due to related party | - | 83,762 | ||||
| Notes payable, current | 5,559 | 11,919 | ||||
| Total Current Liabilities | 409,748 | 503,789 | ||||
| Operating lease liability, net of current | 370,926 | - | ||||
| Notes payable, net of current | 107,441 | 121,150 | ||||
| Security deposits payable | 2,500 | 2,500 | ||||
| Total Liabilities | 890,615 | 627,439 | ||||
| Commitments and contingencies (Note 5) | ||||||
| Stockholder's Deficit | (123,329 | ) | (135,669 | ) | ||
| Total Liabilities and Stockholder's Deficit | $ | 767,286 | $ | 491,770 |
See notes to the financial statements.
| F-3 |
| --- |
La Rosa Realty Lake Nona, Inc.
Statements of Income
| Years Ended December<br> 31, | |||||
|---|---|---|---|---|---|
| 2022 | 2021 | ||||
| Revenue | $ | 9,888,547 | $ | 10,478,475 | |
| Cost of revenue | 8,976,222 | 9,480,249 | |||
| Gross Profit | 912,325 | 998,226 | |||
| Operating Expenses | |||||
| General and administrative expenses | 657,763 | 582,576 | |||
| Sales and marketing expenses | 54,229 | 47,547 | |||
| Total Operating Expenses | 711,992 | 630,123 | |||
| Income From Operations | 200,333 | 368,103 | |||
| Other Income (Expense) | |||||
| Forgiveness of debt | 20,069 | 11,700 | |||
| Other income (expense) | 3,977 | (785 | ) | ||
| Other Income | 24,046 | 10,915 | |||
| Net Income | $ | 224,379 | $ | 379,018 |
See notes to the financial statements.
| F-4 |
| --- |
La Rosa Realty Lake Nona, Inc.
Statement of Changes in Stockholder’sDeficit
| Amount | |||
|---|---|---|---|
| Balance, January 1, 2021 | $ | (33,758 | ) |
| Stockholder distributions | (480,929 | ) | |
| Net income | 379,018 | ||
| Balance, December 31, 2021 | (135,669 | ) | |
| Stockholder distributions | (212,039 | ) | |
| Net income | 224,379 | ||
| Balance, December 31, 2022 | $ | (123,329 | ) |
See notes to the financial statements.
| F-5 |
| --- |
La Rosa Realty Lake Nona, Inc.
Statements of Cash Flows
| Years Ended December<br> 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Cash Flows from Operating Activities | ||||||
| Net Income | $ | 224,379 | $ | 379,018 | ||
| Adjustments to Reconcile Net Income to Net Cash | ||||||
| Provided by Operating Activities: | ||||||
| Forgiveness of debt | (20,069 | ) | (11,700 | ) | ||
| (Increase) Decrease in Operating Assets: | ||||||
| Accounts receivable | 173,974 | (211,352 | ) | |||
| Other current assets | 1,788 | (12,399 | ) | |||
| Increase (Decrease) in Operating Liabilities: | ||||||
| Accounts payable and accrued expenses | (78,526 | ) | 200,431 | |||
| Security deposit | - | (50 | ) | |||
| Deferred revenue | ||||||
| Due to related party | (83,762 | ) | 83,762 | |||
| Net Cash Provided by Operating Activities | 217,784 | 427,710 | ||||
| Cash Flows from Financing Activities | ||||||
| Proceeds from notes payable | - | 20,169 | ||||
| Distributions paid | (212,039 | ) | (480,929 | ) | ||
| Net Cash Used in Financing Activities | (212,039 | ) | (460,760 | ) | ||
| Net Increase (Decrease) in Cash | 5,745 | (33,050 | ) | |||
| Cash at Beginning of Year | 138,814 | 171,864 | ||||
| Cash at End of Year | $ | 144,559 | $ | 138,814 | ||
| Supplemental Disclosures of Cash Flow Information: | ||||||
| Cash Paid During the Year for: | ||||||
| Interest | $ | - | $ | - | ||
| Income taxes | $ | - | $ | - |
See notes to the financial statements.
| F-6 |
| --- |
La Rosa Realty Lake Nona, Inc.
Notes to the Financial Statements
NOTE 1 - DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
Nature of Operations
La Rosa Reality Lake Nona, Inc. (the "Company") provides residential and commercial real estate brokerage services to the public primarily through sales agents. The Company also provides coaching and support services to agents on a fee basis.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the Company's combined 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.
Accounts Receivable
Accounts receivable consist of balances due from agents and commissions from closings. The Company has not recorded allowances due to the Company's historical ability to collect substantially all receivables. In determining collectability, historical trends are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances.
| F-7 |
| --- |
La Rosa Realty Lake Nona, Inc.
Notes to the Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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<br> that are unadjusted and accessible at the measurement date for identical, unrestricted assets<br> or liabilities; |
|---|---|
| - | Level 2 - Quoted prices for identical assets<br> and liabilities in markets that are not active, quoted prices for similar assets and liabilities<br> in active markets or financial instruments for which significant inputs are observable, either<br> directly or indirectly; and |
| --- | --- |
| - | Level 3 - Prices or valuations that require<br> 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. As of December 31, 2022 and 2021 the Company did not have any assets or liabilities measured at fair value.
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 following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. At contract inception, the Company assesses the goods or services promised within each contract that falls under the scope of ASC 606, determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied. The application of these five steps necessitates the development of assumptions that require judgment.
The Company records revenue based upon the consideration specified in the client arrangement, and revenue is recognized when the performance obligations in the client arrangement are satisfied. A performance obligation is a contractual promise to transfer a distinct good or service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Under ASC 606, performance obligations are recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.
| F-8 |
| --- |
La Rosa Reality Lake Nona, Inc.
Notes to the Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
Real Estate Brokerage Services (Residential)
The Company serves as a licensed broker in the areas in which it operates for the purpose of processing residential real estate transactions. This portion of revenue consists of commissions generated from real estate brokerage services. The Company is contractually obligated to provide for the fulfillment of transfers of real estate between buyers and sellers. The Company provides these services itself and controls the services of its agents necessary to legally transfer the real estate. Consequently, the Company is defined as the principal in the transaction. The Company, as principal, satisfies its obligation upon the closing of a real estate transaction. The Company has concluded that agents are not employees of the Company, rather deemed to be independent contractors. Upon satisfaction of its obligation, the Company recognizes revenue in the gross amount of consideration it is entitled to receive. The transaction price is calculated by applying the Company's portion of the agreed-upon commission rate to the property's selling price. The Company may provide services to the buyer, seller, or both parties to a transaction. When the Company provides services to the seller in a transaction, it recognizes revenue for its portion of the commission, which is calculated as the sales prices multiplied by the commission rate for the "buy" side of the transaction. In instances in which the Company represents both the buyer and the seller in a transaction, it recognizes the full commission on the transaction. Commissions revenue contains a single performance obligation that is satisfied upon the closing of a real estate transaction, at which point the entire transaction price is earned. The Company's customers remit payment for the Company's services to the title company or attorney closing the sale of property at the time of closing. The Company receives payment upon close of property within days of the closing of a transaction. The Company is not entitled to any commission until the performance obligation is satisfied and is not owed any commission for unsuccessful transactions, even if services have been provided. In addition to commission, revenue from real estate brokerage services (residential) consists of annual and monthly dues charged to our agents for providing systems, accounting, marketing tools, and compliance services. The annual and monthly dues are recognized each month as the services are provided.
Coaching Services
The Company provides mandatory training and guidance to newly licensed agents for their first three sales transactions. Revenue is recognized based on 10% of the commission earned on these transactions payable upon closing of the transaction. Coaches also provide optional special education services throughout the year to agents.
Real Estate Brokerage Services (Commercial)
The Company serves as a licensed broker in the areas in which it operates for the purpose of processing commercial real estate transactions. This portion of revenue consists of commissions generated from real estate brokerage services. The Company is contractually obligated to provide for the fulfillment of transfers of real estate between buyers and sellers. The Company provides these services itself and controls the services of its agents necessary to legally transfer the real estate. Correspondingly, the Company is defined as the principal. The Company, as principal, satisfies its obligation upon the closing of a real estate transaction. The Company has concluded that agents are not employees of the Company, rather deemed to be independent contractors. Upon satisfaction of its obligation, the Company recognizes revenue in the gross amount of consideration it is entitled to receive. The transaction price is calculated by applying the Company's portion of the agreed-upon commission rate to the property's selling price. The Company may provide services to the buyer, seller, or both parties to a transaction.
| F-9 |
| --- |
La Rosa Reality Lake Nona, Inc.
Notes to the Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
Real Estate Brokerage Services (Commercial),continued
When the Company provides services to the seller in a transaction, it recognizes revenue for its portion of the commission, which is calculated as the sales prices multiplied by the commission rate for the "buy" side of the transaction. In instances in which the Company represents both the buyer and the seller in a transaction, it recognizes the full commission on the transaction. Commissions revenue contains a single performance obligation that is satisfied upon the closing of a real estate transaction, at which point the entire transaction price is earned. The Company's customers remit payment for the Company's services to the title company or attorney closing the sale of property at the time of closing. The Company receives payment upon close of property within days of the closing of a transaction at a rate of 10% of the gross commission income. The Company is not entitled to any commission until the performance obligation is satisfied and is not owed any commission for unsuccessful transactions, even if services have been provided.
Revenues from contracts with customers are summarized by category as follows for the years ended December 31:
| 2022 | 2021 | |||
|---|---|---|---|---|
| Real Estate Brokerage Services (Residential) | $ | 9,840,335 | $ | 10,401,187 |
| Coaching Services | 47,752 | 68,217 | ||
| Real Estate Brokerage Services (Commercial) | 460 | 9,071 | ||
| Revenue | $ | 9,888,547 | $ | 10,478,475 |
Cost of Revenue
Cost of revenue consists primarily of agent commissions less fees.
| Advertising |
|---|
Advertising costs are expensed as incurred. Advertising expense for the years ended December 31, 2022 and 2021 was $20,064 and $2,000, respectively.
Income Taxes
The Company is taxed as an "S" Corporation under the Internal Revenue Code. The Company’s income is included in the stockholder’s income tax returns. Accordingly, the Company generally is not subject to federal or certain state income taxes.
The Company accounts for income taxes under FASB ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
| F-10 |
| --- |
La Rosa Reality Lake Nona, Inc.
Notes to the Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes (continued)
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2022 and 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction.
Leases
In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02 (“ASU 2016-02”), which requires lessees to recognize leases on balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The Company adopted ASC 842 as of January 1, 2022 using the modified retrospective basis with a cumulative effect adjustment as of that date. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to carry forward the historical determination of contracts as leases, lease classification and not reassess initial direct costs for historical lease arrangements. Accordingly, previously reported financial statements, including footnote disclosures, have not been recast to reflect the application of the new standard to all comparative periods presented.
Operating lease assets are included within operating lease right-of-use assets, and the corresponding operating lease liabilities are recorded as current portion of long-term operating lease, and within long-term liabilities as long-term operating lease, net of current portion on our consolidated balance sheet as of December 31, 2022.
Adoption of the new lease standard on January 1, 2022 had a material impact on our consolidated balance sheet. The most significant impacts related to the recognition of right-of-use ("ROU") asset of $439,682 and lease liability of $439,682 for our operating lease on the consolidated balance sheet. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. The standard did not materially impact our consolidated statement of operations and consolidated statement of cash flows.
| F-11 |
| --- |
La Rosa Reality Lake Nona, Inc.
Notes to the Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently Issued Accounting Standards
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 is currently evaluating the impact of the pending adoption of the new standard on its financial statements and intends to adopt the standard on January 1, 2023.
Subsequent Events Evaluation Date
The Company evaluated the events and transactions subsequent to its December 31, 2022 balance sheet date, in accordance with FASB ASC 855-10-50, “SubsequentEvents,” determined there were no significant events to report through April 24, 2023, which is the date the financial statements were available to be issued.
NOTE 3 - CONCENTRATIONS OF BUSINESS AND CREDIT RISK
At times throughout the year, the Company may maintain certain bank accounts in excess of FDIC insured limits of $250,000.
NOTE 4 - RELATED PARTY TRANSACTIONS
At December 31, 2021 the Company owed its sole stockholder $83,762 in unpaid commissions.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Company is obligated under a noncancellable operating lease terms for office space, which expires in September 2027 with monthly payments of $8,223, plus certain occupancy expenses as prescribed in the lease, including without limitation certain utility costs. The Company is also obligated under a noncancellable operating lease terms for office equipment, which expires in November 2026 with monthly payments of $429. Rent expense under all leases for the years ended December 31, 2022 and 2021 was $143,799 and $125,764, respectively.
| F-12 |
| --- |
La Rosa Reality Lake Nona, Inc.
Notes to the Financial Statements
NOTE 5 - COMMITMENTS AND CONTINGENCIES (continued)
The balances for operating leases where the Company is the lessee are presented as follows within the balance sheet:
| Operating leases: | December 31, <br>2022 | |
|---|---|---|
| Assets: | ||
| Operating lease right-of-use asset | $ | 445,533 |
| Liabilities: | ||
| Current portion of long-term operating lease | 74,607 | |
| Long-term operating lease, net of current portion | 370,926 | |
| $ | 445,533 |
The components of lease expense are as follows within our statement of income:
| December 31, <br>2022 | ||
|---|---|---|
| Operating lease right-of-use asset | $ | 90,742 |
Other information related to leases where we are the lessee is as follows:
| December<br> 31,<br> <br>2022 | |||
|---|---|---|---|
| Weighted-average remaining lease term: | |||
| Operating leases | 4.71 years | ||
| Discount rate: | |||
| Operating leases | 4.14 | % |
Supplemental cash flow information related to leases where we are the lessee is as follows:
| December<br> 31,<br> <br>2022 | ||
|---|---|---|
| Cash paid for amounts included in the measurements of lease liabilities: | $ | 91,944 |
As of December 31, 2022, the maturities of our operating lease liability are as follows:
| Year<br> Ended: | December<br> 31,<br> <br>2022 | ||
|---|---|---|---|
| December<br> 31, 2023 | $ | 104,574 | |
| December 31,<br> 2024 | 104,574 | ||
| December 31,<br> 2025 | 104,574 | ||
| December 31,<br> 2026 | 103,451 | ||
| December 31,<br> 2027 | 74,002 | ||
| Total minimum<br> lease payments | 491,175 | ||
| Less:<br> Interest | (45,642 | ) | |
| Present value of lease obligations | 445,533 | ||
| Less:<br> Current portion | (74,607 | ) | |
| Long-term<br> portion of lease obligations | $ | 370,926 |
| F-13 |
| --- |
La Rosa Reality Lake Nona, Inc.
Notes to the Financial Statements
NOTE 6 - DEBT
Notes Payable
The Company's notes payable balance consists of the following at December 31:
| 2022 | 2021 | |||||
|---|---|---|---|---|---|---|
| Paycheck Protection Program Loans | $ | - | $ | 20,069 | ||
| Economic Injury Disaster Loans | 113,000 | 113,000 | ||||
| Total Notes Payable | 113,000 | 133,069 | ||||
| Less: Current Portion | (5,559 | ) | (11,919 | ) | ||
| Notes Payable - Long Term | $ | 107,441 | $ | 121,150 |
Paycheck Protection Program Loan
On May 4, 2020, the Company received loan proceeds under the Paycheck Protection Program pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) as administered by the U.S. Small Business Administration (the “SBA”) in the principal amount of $11,700 (the “PPP Loan”). On March 29, 2021, the Company and the SBA amended the loan and the Company received additional proceeds in the amount of $20,069. The Loan, as amended matures on January 4, 2025 and bears interest at a rate of 1.00% per annum. The Lender will have 90 days to review borrower’s forgiveness application and the United States Small Business Administration ("SBA") will have an additional 60 days to review the Lender’s decision as to whether the borrower’s loan may be forgiven. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered utilities, and certain covered mortgage interest payments during the twenty-four week period beginning on the date of first disbursement of the PPP Loan.
For purposes of the CARES Act, payroll costs exclude compensation of an individual employee earning more than $100,000, prorated annually. Not more than 40% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. The original loan of $11,700 was forgiven in 2021 and the additional amount of $20,069 was forgiven in 2022.
Economic Injury Disaster Loan
On June 22, 2020, the Company received proceeds from an Economic Injury Disaster Loan ("EIDL" or "the "Loan") from the Small Business Administration ("SBA"), in the amount of $113,000. The Loan, which is in the form of a promissory note dated June 22, 2020, matures on June 22, 2050 and bears interest at a rate of 3.75% per annum. Payments are to be made monthly beginning as of June 22, 2022. Each payment is to be applied first to the interest accrued to the date of receipt of each payment, and the remaining balance, if any, will be applied to the principal. The loan terms provide for a collateral interest for the SBA, and limits the use of proceeds to working capital to alleviate the effects of COVID-19 on the Company's economic condition. Unlike the Paycheck Protection Program ("PPP"), established as part of the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") enacted March 27, 2020, the EIDL program does not currently provide a mechanism for loan forgiveness.
Future maturities of the loan payable, if not forgiven, are as follows:
| Year ending December 31, | ||
|---|---|---|
| 2023 | $ | 5,559 |
| 2024 | 2,312 | |
| 2025 | 2,408 | |
| 2026 | 2,507 | |
| 2027 | 2,610 | |
| Thereafter | 97,604 | |
| $ | 113,000 |
| F-14 |
| --- |
LaRosa Reality Lake Nona, Inc.
Notes to the FinancialStatements
NOTE 7 - SUBSEQUENT EVENTS
On January 6, 2022, and later amended September 15, 2022, the Company and its stockholder's entered into an agreement with La Rosa Holdings Corp. pursuant to which La Rosa Holdings Corp. will acquire 51% of the equity interest in La Rosa Realty Lake Nona, Inc. La Rosa Franchising LLC, with whom, the Company entered into a franchise agreement with in 2019 is a wholly owned subsidiary of La Rosa Holdings Corp. The agreement will close within five days an underwritten initial public offering of La Rosa Holdings Corp.
| F-15 |
| --- |
Exhibit 99.4
LaRosa Realty Lake Nona, Inc.
BalanceSheets
| June 30, 2023 | December 31, 2022 | |||||
|---|---|---|---|---|---|---|
| (Unaudited) | (Audited) | |||||
| Assets | ||||||
| Current Assets | ||||||
| Cash | $ | 44,365 | $ | 144,559 | ||
| Accounts receivable, net | 84,723 | 166,583 | ||||
| Other current assets | - | 10,611 | ||||
| Total current Assets | 129,088 | 321,753 | ||||
| Right of use asset | 400,479 | 445,533 | ||||
| Total Assets | $ | 529,567 | $ | 767,286 | ||
| Liabilities and Stockholders' Deficit | ||||||
| Current Liabilities | ||||||
| Accounts payable | $ | 112,834 | $ | 318,878 | ||
| Accrued expenses | 10,016 | 10,704 | ||||
| Note payable, current | - | 5,559 | ||||
| Operating lease liability | 89,175 | 74,607 | ||||
| Total Current Liabilities | 212,025 | 409,748 | ||||
| Note payable, net of current | 113,000 | 107,441 | ||||
| Security deposits payable | 2,500 | 2,500 | ||||
| Operating lease liability, net of current | 312,015 | 370,926 | ||||
| Total Liabilities | 639,540 | 890,615 | ||||
| Commitments and contingencies (Note 4) | ||||||
| Stockholders' Deficit | (109,973 | ) | (123,329 | ) | ||
| Total Liabilities and Stockholders' Deficit | $ | 529,567 | $ | 767,286 |
Seenotes to the unaudited interim financial statements
| F-1 |
| --- |
LaRosa Realty Lake Nona, Inc.
Statementsof Income
| Six Months ended June 30, | ||||||
|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||
| (Unaudited) | (Unaudited) | |||||
| Revenue | $ | 4,354,460 | $ | 5,024,829 | ||
| Cost of revenue | 3,861,913 | 4,532,587 | ||||
| Gross Profit | 492,547 | 492,242 | ||||
| Operating Expenses | ||||||
| General and administrative expenses | 353,831 | 342,471 | ||||
| Sales and marketing expenses | 17,164 | 45,883 | ||||
| Total Operating Expenses | 370,995 | 388,354 | ||||
| Income From Operations | 121,552 | 103,888 | ||||
| Other Income (Expense) | ||||||
| Forgiveness of debt | - | 20,069 | ||||
| Interest expense | (2,490 | ) | (2,118 | ) | ||
| Other Income (Expense) | (2,490 | ) | 17,951 | |||
| Net Income | $ | 119,062 | $ | 121,839 |
See notes to the unaudited interim financial statements.
| F-2 |
| --- |
LaRosa Realty Lake Nona, Inc.
Statementsof Stockholder’s Deficit
| Amount | |||
|---|---|---|---|
| (Unaudited) | |||
| Balance as of January 1, 2023 | $ | (123,329 | ) |
| Net income | 119,062 | ||
| Stockholder distributions | (105,706 | ) | |
| Balance as of June 30, 2023 | $ | (109,973 | ) |
| Amount | |||
| --- | --- | --- | --- |
| Balance as of January 1, 2022 | (135,668 | ) | |
| Net income | 121,839 | ||
| Stockholder distributions | (73,432 | ) | |
| Balance as of June 30, 2022 | (87,261 | ) |
See notes to the unaudited interim financial statements.
| F-3 |
| --- |
LaRosa Realty Lake Nona, Inc.
Statementsof Cash Flows
| Six Months Ended June 30, | ||||||
|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||
| (Unaudited) | (Unaudited) | |||||
| Cash Flows from Operating Activities: | ||||||
| Net Income | $ | 119,062 | $ | 121,839 | ||
| Adjustments to Reconcile Net Income to Net Cash | ||||||
| Provided by Operating Activities: | ||||||
| Amortization of Financing Lease | 2,640 | - | ||||
| Forgiveness of debt | - | (20,069 | ) | |||
| Provision for bad debts | 19,685 | - | ||||
| Changes in Operating Assets and Liabilities: | ||||||
| Accounts receivable | 62,176 | 285,246 | ||||
| Prepaid expenses | 10,611 | 12,399 | ||||
| Accounts payable and accrued expenses | (206,733 | ) | (167,319 | ) | ||
| Operating lease liabilities | 1,023 | - | ||||
| Net Cash Provided by Operating Activities | 8,464 | 232,096 | ||||
| Cash Flows Used in Investing Activities: | ||||||
| Cash paid for financing lease | (2,952 | ) | - | |||
| Net Cash Used in Investing Activities | (2,952 | ) | - | |||
| Cash Flows from Financing Activities: | ||||||
| Payments to related party | - | (83,762 | ) | |||
| Distributions paid | (105,706 | ) | (73,432 | ) | ||
| Net Cash Used in Financing Activities | (105,706 | ) | (157,194 | ) | ||
| Net Change in Cash | (100,194 | ) | 74,902 | |||
| Cash at Beginning of Year | 144,559 | 138,814 | ||||
| Cash at End of Period | $ | 44,365 | $ | 213,716 | ||
| Supplemental Disclosures of Cash Flow Information: | ||||||
| Cash Paid During the Period for: | ||||||
| Interest | $ | 3,178 | $ | 528 | ||
| Income taxes | $ | - | $ | - |
See notes to the unaudited interim financial statements.
| F-4 |
| --- |
LaRosa Realty Lake Nona, Inc.
Notes to the Interim Unaudited Condensed Consolidated Financial Statements
NOTE 1 - DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
Nature of Operations
La Rosa Realty Lake Nona, Inc. (the “Company”) provides residential and commercial real estate brokerage services to the public primarily through sales agents. The business also provides coaching and support services to agents on a fee basis.
Liquidity
The Company is subject to the risks and challenges associated with companies at a similar stage of development. These include dependence on key individuals, successful development and marketing of its offerings, and competition with larger companies with greater financial, technical, and marketing resources. Furthermore, during the period required to achieve substantially higher revenue in order to become consistently profitable, the Company may require additional funds that might not be readily available or might not be on terms that are acceptable to the Company. Based on the Company’s current cash position and resources, management believes the Company has adequate resources to fund its operations for the next twelve months from the date these financial statements are made available.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the Company’s combined 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.
Accounts Receivable
Accounts receivable consist of balances due from agents and commissions from closings. The Company records no allowances due to the Company’s ability to collect substantially all receivables. In determining collectability, historical trends are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances.
| F-5 |
| --- |
LaRosa Realty Lake Nona, Inc.
Notes to the Interim Unaudited Condensed Consolidated Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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<br> prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities; |
|---|---|
| - | Level 2 - Quoted prices<br> for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets<br> or financial instruments for which significant inputs are observable, either directly or indirectly; and |
| - | Level 3 - Prices or valuations<br> 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 nonpublic 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. As of June 30, 2023 and December 31, 2022 the Company did not have any assets or liabilities measured at fair value.
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 following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. At contract inception, the Company assesses the goods or services promised within each contract that falls under the scope of ASC 606, determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied. The application of these five steps necessitates the development of assumptions that require judgment.
The Company records revenue based upon the consideration specified in the client arrangement, and revenue is recognized when the performance obligations in the client arrangement are satisfied. A performance obligation is a contractual promise to transfer a distinct good or service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.
| F-6 |
| --- |
LaRosa Realty Lake Nona, Inc.
Notes to the Interim Unaudited Condensed Consolidated Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
RealEstate Brokerage Services (Residential)
The Company serves as a licensed broker in the areas in which it operates for the purpose of processing residential real estate transactions. This portion of revenue consists of commissions generated from real estate brokerage services. The Company is contractually obligated to provide for the fulfillment of transfers of real estate between buyers and sellers. The Company provides these services itself and controls the services of its agents necessary to legally transfer the real estate. Consequently, the Company is defined as the principal in the transaction. The Company, as principal, satisfies its obligation upon the closing of a real estate transaction. The Company has concluded that agents are not employees of the Company, rather deemed to be independent contractors. Upon satisfaction of its obligation, the Company recognizes revenue in the gross amount of consideration it is entitled to receive. The transaction price is calculated by applying the Company’s portion of the agreed-upon commission rate to the property’s selling price. The Company may provide services to the buyer, seller, or both parties to a transaction. When the Company provides services to the seller in a transaction, it recognizes revenue for its portion of the commission, which is calculated as the sales prices multiplied by the commission rate for the “buy” side of the transaction. In instances in which the Company represents both the buyer and the seller in a transaction, it recognizes the full commission on the transaction. Commissions revenue contains a single performance obligation that is satisfied upon the closing of a real estate transaction, at which point the entire transaction price is earned. The Company’s customers remit payment for the Company’s services to the title company or attorney closing the sale of property at the time of closing. The Company receives payment upon close of property within days of the closing of a transaction. The Company is not entitled to any commission until the performance obligation is satisfied and is not owed any commission for unsuccessful transactions, even if services have been provided. In addition to commission, revenue from real estate brokerage services (residential) consists of annual and monthly dues charged to our agents for providing systems, accounting, marketing tools, and compliance services. The annual and monthly dues are recognized each month as the services are provided.
CoachingServices
The Company provides mandatory training and guidance to newly licensed agents for their first three sales transactions. Revenue is recognized based on 10% of the commission earned on these transactions payable upon closing of the transaction. Coaches also provide optional special education services throughout the year to agents.
RealEstate Brokerage Services (Commercial)
The Company serves as a licensed broker in the areas in which it operates for the purpose of processing commercial real estate transactions. This portion of revenue consists of commissions generated from real estate brokerage services. The Company is contractually obligated to provide for the fulfillment of transfers of real estate between buyers and sellers. The Company provides these services itself and controls the services of its agents necessary to legally transfer the real estate. Correspondingly, the Company is defined as the principal. The Company, as principal, satisfies its obligation upon the closing of a real estate transaction. The Company has concluded that agents are not employees of the Company, rather deemed to be independent contractors. Upon satisfaction of its obligation, the Company recognizes revenue in the gross amount of consideration it is entitled to receive. The transaction price is calculated by applying the Company’s portion of the agreed-upon commission rate to the property’s selling price. The Company may provide services to the buyer, seller, or both parties to a transaction.
| F-7 |
| --- |
LaRosa Realty Lake Nona, Inc.
Notes to the Interim Unaudited Condensed Consolidated Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
RealEstate Brokerage Services (Commercial), continued
When the Company provides services to the seller in a transaction, it recognizes revenue for its portion of the commission, which is calculated as the sales prices multiplied by the commission rate for the “buy” side of the transaction. In instances in which the Company represents both the buyer and the seller in a transaction, it recognizes the full commission on the transaction. Commissions revenue contains a single performance obligation that is satisfied upon the closing of a real estate transaction, at which point the entire transaction price is earned. The Company’s customers remit payment for the Company’s services to the title company or attorney closing the sale of property at the time of closing. The Company receives payment upon close of property within days of the closing of a transaction at a rate of 10% of the gross commission income. The Company is not entitled to any commission until the performance obligation is satisfied and is not owed any commission for unsuccessful transactions, even if services have been provided.
Revenues from contracts with customers are summarized by category as follows for the six months ended June 30:
| 2023 | 2022 | |||
|---|---|---|---|---|
| Real Estate Brokerage Services (Residential) | $ | 4,334,874 | $ | 4,984,257 |
| Coaching Services | 19,586 | 40,572 | ||
| Revenue | $ | 4,354,460 | $ | 5,024,829 |
Cost of Revenue
Cost of revenue consists primarily of agent commissions less fees.
Advertising
Advertising costs are expensed as incurred. Advertising expenses for the six months ended June 30, 2023 and 2022 was $6,984 and $7,780, respectively.
Income Taxes
The Company is taxed as an “S” Corporation under the Internal Revenue Code. The Company’s income is included in the stockholder’s income tax returns. Accordingly, the Company generally is not subject to federal or certain state income taxes.
| F-8 |
| --- |
LaRosa Realty Lake Nona, Inc.
Notes to the Interim Unaudited Condensed Consolidated Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Leases
In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02 (“ASU 2016-02”), which requires lessees to recognize leases on balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to recognize an ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The Company adopted ASC 842 as of January 1, 2022 using the modified retrospective basis with a cumulative effect adjustment as of that date. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company to carry forward the historical determination of contracts as leases, lease classification and not reassess initial direct costs for historical lease arrangements. Accordingly, previously reported financial statements, including footnote disclosures, have not been recast to reflect the application of the new standard to all comparative periods presented.
Lease assets are included within lease right-of-use assets, and the corresponding lease liabilities are recorded as current portion of long-term leases, and within long-term liabilities as long-term leases, net of the current portion on the consolidated balance sheet as of June 30, 2023.
Adoption of the new lease standard on January 1, 2022 had a material impact on the Company’s consolidated balance sheet. As of June 30, 2023, the Company recognized a right-of-use (“ROU”) asset of $400,479 and offset with lease liability of $401,190. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The standard did not materially impact the consolidated statement of operations and consolidated statement of cash flows.
| F-9 |
| --- |
LaRosa Realty Lake Nona, Inc.
Notes to the Interim Unaudited Condensed Consolidated Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently Issued Accounting Standards
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 consolidated financial statements.
NOTE 3 - CONCENTRATIONS OF BUSINESS AND CREDIT RISK
At times throughout the year, the Company may maintain certain bank accounts in excess of FDIC insured limits of $250,000.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
The Company is obligated under a noncancellable operating lease for office space, which expires in September 2027 with monthly payments of $8,223, plus certain occupancy expenses as prescribed in the lease. The Company is also obligated under a noncancellable financing lease for office equipment, which expires in November 2026 with monthly payments of $492. Lease expense for six months ended June 30, 2023 and 2022 was $52,397 and $80,135, respectively.
| F-10 |
| --- |
LaRosa Realty Lake Nona, Inc.
Notes to the Interim Unaudited Condensed Consolidated Financial Statements
NOTE 6 - DEBT
NotesPayable
The Company’s notes payable balance consists of the following at June 30:
| 2023 | 2022 | |||
|---|---|---|---|---|
| Economic Injury Disaster Loans | 113,000 | 113,000 | ||
| Total Notes Payable | 113,000 | 133,000 | ||
| Less: Current Portion | - | - | ||
| Notes Payable - Long Term | $ | 113,000 | $ | 133,000 |
EconomicInjury Disaster Loan
On June 22, 2020 the Company received proceeds from an Economic Injury Disaster Loan (“EIDL” or “the “Loan”) from the Small Business Administration (“SBA”), in the amount of $113,000. The Loan, which is in the form of a promissory note dated June 22, 2020, matures on June 22, 2050 and bears interest at a rate of 3.75% per annum. Payments are to be made monthly beginning as of June 22, 2022. Each payment is to be applied first to the interest accrued to the date of receipt of each payment, and the remaining balance, if any, will be applied to the principal. The loan terms provide for a collateral interest for the SBA and limits the use of proceeds to working capital to alleviate the effects of COVID-19 on the Company’s economic condition. The EIDL program does not currently provide a mechanism for loan forgiveness.
NOTE 7 - SUBSEQUENT EVENTS
On January 6, 2022, the Company and its stockholder's entered into an agreement with La Rosa Holdings Corp. pursuant to which La Rosa Holdings Corp. will acquire 51% of the equity interest in La Rosa Realty Lake Nona, Inc. La Rosa Franchising LLC, with whom, the Company entered into a franchise agreement with in 2019 is a wholly owned subsidiary of La Rosa Holdings Corp. The agreement will close within five days an underwritten initial public offering of La Rosa Holdings Corp.
| F-11 |
| --- |
Exhibit 99.5
INDEPENDENTAUDITOR’S REPORT
To the Members of Horeb Kissimmee Realty, LLC
d/b/a La Rosa Realty Kissimmee
Opinion
We have audited the accompanying financial statements of Horeb Kissimmee Realty, LLC d/b/a La Rosa Realty Kissimmee (a Florida Limited Liability Company), which comprise the balance sheets as of December 31, 2022 and 2021, and the related statements of income, changes in members’ equity (deficit), and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Horeb Kissimmee Realty, LLC d/b/a La Rosa Realty Kissimmee as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Horeb Kissimmee Realty, LLC d/b/a La Rosa Realty Kissimmee and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the FinancialStatements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Horeb Kissimmee Realty, LLC d/b/a La Rosa Realty Kissimmee’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued.
Auditor’s Responsibilities for the Auditof the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
| F-1 |
| --- |
To the Member of Horeb Kissimmee Realty, LLC
d/b/a La Rosa Realty Kissimmee
In performing an audit in accordance with generally accepted auditing standards, we:
| · | Exercise<br> professional judgment and maintain professional skepticism throughout the audit. |
|---|---|
| · | Identify<br> and assess the risks of material misstatement of the financial statements, whether due to<br> fraud or error, and design and perform audit procedures responsive to those risks. Such procedures<br> include examining, on a test basis, evidence regarding the amounts and disclosures in the<br> financial statements. |
| --- | --- |
| · | Obtain<br> an understanding of internal control relevant to the audit in order to design audit procedures<br> that are appropriate in the circumstances, but not for the purpose of expressing an opinion<br> on the effectiveness of Horeb Kissimmee Realty, LLC d/b/a La Rosa Realty Kissimmee’s<br> internal control. Accordingly, no such opinion is expressed. |
| --- | --- |
| · | Evaluate<br> the appropriateness of accounting policies used and the reasonableness of significant accounting<br> estimates made by management, as well as evaluate the overall presentation of the financial<br> statements. |
| --- | --- |
| · | Conclude<br> whether, in our judgment, there are conditions or events, considered in the aggregate, that<br> raise substantial doubt about Horeb Kissimmee Realty, LLC d/b/a La Rosa Realty Kissimmee’s<br> ability to continue as a going concern for a reasonable period of time. |
| --- | --- |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
/s/ Rosenberg Rich Baker Berman, P.A.
Somerset, New Jersey
April 24, 2023
| F-2 |
| --- |
HorebKissimmee Realty, LLC
d/b/a
LaRosa Realty Kissimmee
BalanceSheets
| December 31, | |||||
|---|---|---|---|---|---|
| 2022 | 2021 | ||||
| Assets | |||||
| Current Assets | |||||
| Cash | $ | 124,296 | $ | 535,240 | |
| Accounts receivable | 104,151 | 309,552 | |||
| Total Current Assets | 228,447 | 844,792 | |||
| Fixed Assets, net | 12,291 | 19,068 | |||
| Right of use asset | 134,387 | - | |||
| Total Assets | $ | 375,125 | $ | 863,860 | |
| Liabilities and Members' Equity (Deficit) | |||||
| Current Liabilities | |||||
| Accounts payable | $ | 196,662 | $ | 396,343 | |
| Operating lease liability | 59,001 | - | |||
| Notes payable, current | 7,765 | 4,670 | |||
| Total Current Liabilities | 263,428 | 401,013 | |||
| Operating lease liability, net of current | 75,386 | - | |||
| Notes payable, net of current | 142,235 | 145,330 | |||
| Total Liabilities | 481,049 | 546,343 | |||
| Commitments and contingencies (Note 5) | |||||
| Members' Equity (Deficit) | (105,924 | ) | 317,517 | ||
| Total Liabilities and Members' Equity (Deficit) | $ | 375,125 | $ | 863,860 |
See notes to the financial statements.
| F-3 |
| --- |
HorebKissimmee Realty, LLC
d/b/a
LaRosa Realty Kissimmee
Statementsof Income
| Years Ended December 31, | |||||
|---|---|---|---|---|---|
| 2022 | 2021 | ||||
| Revenue | $ | 10,845,224 | $ | 11,767,738 | |
| Cost of revenue | 9,973,938 | 10,693,293 | |||
| Gross Profit | 871,286 | 1,074,445 | |||
| Operating Expenses | |||||
| General and administrative expenses | 597,529 | 546,128 | |||
| Sales and marketing expenses | 59,333 | 34,614 | |||
| Total Operating Expenses | 656,862 | 580,742 | |||
| Income From Operations | 214,424 | 493,703 | |||
| Other Income | |||||
| Forgiveness of debt | - | 25,692 | |||
| Other income | (15,894 | ) | 1,428 | ||
| Other Income | (15,894 | ) | 27,120 | ||
| Net Income | $ | 198,530 | $ | 520,823 |
See notes to the financial statements.
| F-4 |
| --- |
HorebKissimmee Realty, LLC
d/b/a
LaRosa Realty Kissimmee
Statementsof Changes in Members’ Equity
| Amount | |||
|---|---|---|---|
| Balance, January 1, 2021 | $ | 335,524 | |
| Member distributions | (538,830 | ) | |
| Net income | 520,823 | ||
| Balance, December 31, 2021 | 317,517 | ||
| Member distributions | (621,971 | ) | |
| Net income | 198,530 | ||
| Balance, December 31, 2022 | $ | (105,924 | ) |
See notes to the financial statements.
| F-5 |
| --- |
Horeb Kissimmee Realty, LLC
d/b/a
La Rosa Realty Kissimmee
Statements of Cash Flows
| Years Ended December<br> 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Cash Flows from Operating Activities | ||||||
| Net Income | $ | 198,530 | $ | 520,823 | ||
| Adjustments to Reconcile Net Income to Net Cash | ||||||
| Provided by Operating Activities: | ||||||
| Forgiveness of debt | - | (25,692 | ) | |||
| Depreciation | 6,777 | 4,803 | ||||
| (Increase) Decrease in Operating Assets: | ||||||
| Accounts receivable | 205,400 | (29,697 | ) | |||
| Increase (Decrease) in Operating Liabilities: | ||||||
| Accounts payable and accrued expenses | (199,680 | ) | 23,109 | |||
| Net Cash Provided by Operating Activities | 211,027 | 493,346 | ||||
| Cash Flows from Financing Activities | ||||||
| Distributions paid | (621,971 | ) | (538,830 | ) | ||
| Net Cash Used in Financing Activities | (621,971 | ) | (538,830 | ) | ||
| Net Decrease in Cash | (410,944 | ) | (45,484 | ) | ||
| Cash at Beginning of Year | 535,240 | 580,724 | ||||
| Cash at End of Year | $ | 124,296 | $ | 535,240 | ||
| Supplemental Disclosures of Cash Flow Information: | ||||||
| Cash Paid During the Year for: | ||||||
| Interest | $ | - | $ | - | ||
| Income taxes | $ | - | $ | - |
See notes to the financial statements.
| F-6 |
| --- |
Horeb Kissimmee Realty, LLC
d/b/a
La Rosa Realty Kissimmee
Notes to the Financial Statements
NOTE 1 - DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
Nature of Organization
Horeb Kissimmee Realty, LLC d/b/a La Rosa Realty Kissimmee (the "Company") provides residential and commercial real estate brokerage services to the public primarily through sales agents. The business also provides coaching and support services to agents on a fee basis.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the Company's 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.
Accounts Receivable
Accounts receivable consist of balances due from agents and commissions from closings. For the years ended December 31, 2022 and 2021, the Company did not record any allowance for doubtful accounts, based on the Company's historical ability to collect substantially all receivables. In determining collectability, historical trends are evaluated, and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances.
Fixed Assets
The cost of property and equipment is depreciated using the straight-line method based on the estimated useful lives of the assets: five years for computers; seven years for office furniture and other equipment.
| F-7 |
| --- |
Horeb Kissimmee Realty, LLC
d/b/a
La Rosa Realty Kissimmee
Notes to the Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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<br> that are unadjusted and accessible at the measurement date for identical, unrestricted assets<br> or liabilities; |
|---|---|
| - | Level 2 - Quoted prices for identical assets<br> and liabilities in markets that are not active, quoted prices for similar assets and liabilities<br> in active markets or financial instruments for which significant inputs are observable, either<br> directly or indirectly; and |
| --- | --- |
| - | Level 3 - Prices or valuations that require<br> 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.
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 following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. At contract inception, the Company assesses the goods or services promised within each contract that falls under the scope of ASC 606, determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied. The application of these five steps necessitates the development of assumptions that require judgment.
The Company records revenue based upon the consideration specified in the client arrangement, and revenue is recognized when the performance obligations in the client arrangement are satisfied. A performance obligation is a contractual promise to transfer a distinct good or service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Under ASC 606, performance obligations are satisfied when a customer obtains control of promised goods or services in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.
| F-8 |
| --- |
Horeb Kissimmee Realty, LLC
d/b/a
La Rosa Realty Kissimmee
Notes to the Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
Real Estate Brokerage Services (Residential)
The Company serves as a licensed broker in the areas in which it operates for the purpose of processing residential real estate transactions. This portion of revenue consists of commissions generated from real estate brokerage services. The Company is contractually obligated to provide for the fulfillment of transfers of real estate between buyers and sellers. The Company provides these services itself and controls the services of its agents necessary to legally transfer the real estate. Consequently, the Company is defined as the principal in the transaction. The Company, as principal, satisfies its obligation upon the closing of a real estate transaction. The Company has concluded that agents are not employees of the Company, rather deemed to be independent contractors. Upon satisfaction of its obligation, the Company recognizes revenue in the gross amount of consideration it is entitled to receive. The transaction price is calculated by applying the Company's portion of the agreed-upon commission rate to the property's selling price. The Company may provide services to the buyer, seller, or both parties to a transaction. When the Company provides services to the seller in a transaction, it recognizes revenue for its portion of the commission, which is calculated as the sales prices multiplied by the commission rate for the "buy" side of the transaction. In instances in which the Company represents both the buyer and the seller in a transaction, it recognizes the full commission on the transaction. Commissions revenue contains a single performance obligation that is satisfied upon the closing of a real estate transaction, at which point the entire transaction price is earned. The Company's customers remit payment for the Company's services to the title company or attorney closing the sale of property at the time of closing. The Company receives payment upon close of property within days of the closing of a transaction. The Company is not entitled to any commission until the performance obligation is satisfied and is not owed any commission for unsuccessful transactions, even if services have been provided. In addition to commission, revenue from real estate brokerage services (residential) consists of annual and monthly dues charged to our agents for providing systems, accounting, marketing tools, and compliance services. The annual and monthly dues is recognized each month as services are provided.
Coaching Services
The Company provides mandatory training and guidance to newly licensed agents for their first three sales transactions. Revenue is recognized based on 10% of the commission earned by the agent on these transactions and is recognized upon closing of each real estate transaction. Coaches also provide optional special education services throughout the year to agents. Revenue is recognized over time as the services are provided.
Real Estate Brokerage Services (Commercial)
The Company serves as a licensed broker in the areas in which it operates for the purpose of processing commercial real estate transactions. This portion of revenue consists of commissions generated from real estate brokerage services. The Company is contractually obligated to provide for the fulfillment of transfers of real estate between buyers and sellers. The Company provides these services itself and controls the services of its agents necessary to legally transfer the real estate. Correspondingly, the Company is defined as the principal. The Company, as principal, satisfies its obligation upon the closing of a real estate transaction. The Company has concluded that agents are not employees of the Company, rather deemed to be independent contractors. Upon satisfaction of its obligation, the Company recognizes revenue in the gross amount of consideration it is entitled to receive. The transaction price is calculated by applying the Company's portion of the agreed-upon commission rate to the property's selling price. The Company may provide services to the buyer, seller, or both parties to a transaction.
| F-9 |
| --- |
Horeb Kissimmee Realty, LLC
d/b/a
La Rosa Realty Kissimmee
Notes to the Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
Real Estate Brokerage Services (Commercial),continued
When the Company provides services to the seller in a transaction, it recognizes revenue for its portion of the commission, which is calculated as the sales prices multiplied by the commission rate for the "buy" side of the transaction. In instances in which the Company represents both the buyer and the seller in a transaction, it recognizes the full commission on the transaction. Commissions revenue contains a single performance obligation that is satisfied upon the closing of a real estate transaction, at which point the entire transaction price is earned. The Company's customers remit payment for the Company's services to the title company or attorney closing the sale of property at the time of closing. The Company receives payment upon close of property within days of the closing of a transaction at a rate of 10% of the gross commission income. The Company is not entitled to any commission until the performance obligation is satisfied and is not owed any commission for unsuccessful transactions, even if services have been provided.
Revenues from contracts with customers are summarized by category as follows for the years ended December 31:
| 2022 | 2021 | |||
|---|---|---|---|---|
| Real Estate Brokerage Services (Residential) | $ | 10,768,245 | $ | 11,670,008 |
| Coaching Services | 46,987 | 62,633 | ||
| Real Estate Brokerage Services (Commercial) | 29,992 | 35,097 | ||
| Revenue | $ | 10,845,224 | $ | 11,767,738 |
Cost of Revenue
Cost of revenue consists primarily of agent commissions.
| Advertising |
|---|
Advertising costs are expensed as incurred. Advertising expense for the years ended December 31, 2022 and 2021 was $34,363 and $14,547, respectively.
Income Taxes
The Company accounts for income taxes under FASB ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
| F-10 |
| --- |
Horeb Kissimmee Realty, LLC
d/b/a
La Rosa Realty Kissimmee
Notes to the Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes (continued)
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2022 and 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only tax jurisdiction.
Leases
In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02 (“ASU 2016-02”), which requires lessees to recognize leases on balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The Company adopted ASC 842 as of January 1, 2022 using the modified retrospective basis with a cumulative effect adjustment as of that date. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to carry forward the historical determination of contracts as leases, lease classification and not reassess initial direct costs for historical lease arrangements. Accordingly, previously reported financial statements, including footnote disclosures, have not been recast to reflect the application of the new standard to all comparative periods presented.
Operating lease assets are included within operating lease right-of-use assets, and the corresponding operating lease liabilities are recorded as current portion of long-term operating lease, and within long-term liabilities as long-term operating lease, net of current portion on our consolidated balance sheet as of December 31, 2022.
Adoption of the new lease standard on January 1, 2022 had a material impact on our consolidated balance sheet. The most significant impacts related to the recognition of right-of-use ("ROU") asset of $197,607 and lease liability of $197,607 for our operating lease on the consolidated balance sheet. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. The standard did not materially impact our consolidated statement of operations and consolidated statement of cash flows.
| F-11 |
| --- |
Horeb Kissimmee Realty, LLC
d/b/a
La Rosa Realty Kissimmee
Notes to the Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently Issued Accounting Standards
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 is currently evaluating the impact of the pending adoption of the new standard on its financial statements and intends to adopt the standard on January 1, 2023.
Subsequent Events Evaluation Date
The Company evaluated the events and transactions subsequent to its December 31, 2022 balance sheet date, in accordance with FASB ASC 855-10-50, “SubsequentEvents,” determined there were no significant events to report through April 24, 2023, which is the date the financial statements were available to be issued.
NOTE 3 - CONCENTRATIONS OF BUSINESS AND CREDIT RISK
At times throughout the year, the Company may maintain certain bank accounts in excess of FDIC insured limits of $250,000.
NOTE 4 - FIXED ASSETS
Fixed assets consist of the following as of December 31:
| 2022 | 2021 | |||||
|---|---|---|---|---|---|---|
| Equipment | $ | 13,300 | $ | 13,300 | ||
| Furniture | 15,000 | 15,000 | ||||
| Less: accumulated depreciation | (9,232 | ) | (4,429 | ) | ||
| $ | 19,068 | $ | 23,871 |
Depreciation expense for the years ended December 31, 2022 and 2021 was approximately $6,777 and $4,803, respectively.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Company is obligated under a noncancellable operating lease terms for office space through December 2024 with monthly payments of $5,410, including annual escalation at 3% plus certain occupancy expenses as prescribed in the lease, including without limitation certain utility costs. Rent expense plus certain occupancy expenses as prescribed in the lease for the years ended December 31, 2022 and 2021 was $91,048 and $83,769, respectively.
| F-12 |
| --- |
Horeb Kissimmee Realty, LLC
d/b/a
La Rosa Realty Kissimmee
Notes to the Financial Statements
NOTE 5 - COMMITMENTS AND CONTINGENCIES (continued)
The balances for operating leases where the Company is the lessee are presented as follows within the balance sheet:
| December 31, | ||
|---|---|---|
| Operating leases: | 2022 | |
| Assets: | ||
| Operating lease right-of-use asset | $ | 134,387 |
| Liabilities: | ||
| Current portion of long-term operating lease | 59,001 | |
| Long-term operating lease, net of current portion | 75,386 | |
| $ | 134,387 |
The components of lease expense are as follows within our statement of income:
| December<br> 31,<br> <br>2022 | ||
|---|---|---|
| Operating lease right-of-use asset | $ | 66,886 |
Other information related to leases where we are the lessee is as follows:
| December<br> 31,<br><br> <br><br> <br>2022 | |||
|---|---|---|---|
| Weighted-average remaining lease term: | |||
| Operating leases | 2.00 years | ||
| Discount rate: | |||
| Operating leases | 1.04 | % |
Supplemental cash flow information related to leases where we are the lessee is as follows:
| December<br> 31,<br> <br>2022 | ||
|---|---|---|
| Cash paid for amounts included in the measurements of lease liabilities: | $ | 64,919 |
As of December 31, 2022, the maturities of our operating lease liability are as follows:
| Year Ended: | December<br> 31,<br> <br>2022 | ||
|---|---|---|---|
| December 31, 2023 | $ | 66,779 | |
| December 31, 2024 | 59,555 | ||
| Total minimum lease payments | 126,334 | ||
| Less: Interest | (1,354 | ) | |
| Present value of lease obligations | 124,980 | ||
| Less: Current portion | (59,001 | ) | |
| Long-term portion of lease obligations | $ | 65,979 |
| F-13 |
| --- |
Horeb Kissimmee Realty, LLC
d/b/a
La Rosa Realty Kissimmee
Notes to the Financial Statements
NOTE 6 - DEBT
Notes Payable
The Company's notes payable balance consists of the following at December 31:
| 2022 | 2021 | |||||
|---|---|---|---|---|---|---|
| Economic Injury Disaster Loans | $ | 150,000 | $ | 150,000 | ||
| Less: Current Portion | (7,765 | ) | (4,670 | ) | ||
| Notes Payable - Long Term | $ | 142,235 | $ | 145,330 |
Paycheck Protection Program Loan
On May 1, 2020, the Company received loan proceeds under the Paycheck Protection Program pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) as administered by the U.S. Small Business Administration (the “SBA”) in the principal amount of $25,692 (the “PPP Loan”). The Lender will have 90 days to review borrower’s forgiveness application and the United States Small Business Administration ("SBA") will have an additional 60 days to review the Lender’s decision as to whether the borrower’s loan may be forgiven. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered utilities, and certain covered mortgage interest payments during the twenty-four week period beginning on the date of first disbursement of the PPP Loan.
For purposes of the CARES Act, payroll costs exclude compensation of an individual employee earning more than $100,000, prorated annually. Not more than 40% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. The loan was forgiven in 2021.
Economic Injury Disaster Loan
On June 10, 2020, the Company received proceeds from an Economic Injury Disaster Loan ("EIDL" or "the "Loan") from the Small Business Administration ("SBA"), in the amount of $150,000. The Loan, which is in the form of a promissory note dated June 10, 2020, matures on June 10, 2050 and bears interest at a rate of 3.75% per annum. Payments are to be made monthly beginning as of June 1, 2021 in the amount of $731. Each payment is to be applied first to the interest accrued to the date of receipt of each payment, and the remaining balance, if any, will be applied to the principal. The loan terms provide for a collateral interest for the SBA, and limits the use of proceeds to working capital to alleviate the effects of COVID-19 on the Company's economic condition. Unlike the Paycheck Protection Program ("PPP"), established as part of the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") enacted March 27, 2020, the EIDL program does not currently provide a mechanism for loan forgiveness.
Future maturities of the loan payable, if not forgiven, are as follows:
| Year ending December 31, | ||
|---|---|---|
| 2023 | $ | 7,765 |
| 2024 | 3,213 | |
| 2025 | 3,336 | |
| 2026 | 3,463 | |
| 2027 | 3,567 | |
| Thereafter | 128,656 | |
| $ | 150,000 |
| F-14 |
| --- |
Horeb Kissimmee Realty, LLC
d/b/a
La Rosa Realty Kissimmee
Notes to the Financial Statements
NOTE 7 - SUBSEQUENT EVENTS
On January 31, 2022, and later amended September 15, 2022, the Company and its sole member entered into an agreement with La Rosa Holdings Corp. pursuant to which La Rosa Holdings Corp. will acquire 51% of the membership interest in Horeb Kissimmee Realty, LLC. La Rosa Franchising LLC, with whom, the Company entered into a franchise agreement with in 2019 is a wholly owned subsidiary of La Rosa Holdings Corp. The agreement will close within five days an underwritten initial public offering of La Rosa Holdings Corp.
| F-15 |
| --- |
Exhibit 99.6
HorebKissimmee Realty, LLC
d/b/a
LaRosa Realty Kissimmee
BalanceSheets
| June 30, 2023 | December 31, 2022 | |||||
|---|---|---|---|---|---|---|
| (Unaudited) | (Audited) | |||||
| Assets | ||||||
| Current Assets | ||||||
| Cash | $ | 212,161 | $ | 124,296 | ||
| Accounts receivable, net | 137,014 | 104,151 | ||||
| Total Current Assets | 349,175 | 228,447 | ||||
| Fixed assets, net | 9,889 | 12,291 | ||||
| Right of use asset | 211,148 | 134,387 | ||||
| Total Assets | $ | 570,212 | $ | 375,125 | ||
| Liabilities and Members' Equity | ||||||
| Current Liabilities | ||||||
| Accounts payable | $ | 129,738 | $ | 75,408 | ||
| Accrued expenses | 139,604 | 121,254 | ||||
| Operating lease liability | 141,925 | 59,001 | ||||
| Note payable, current | - | 7,765 | ||||
| Total Current Liabilities | 411,267 | 263,428 | ||||
| Long-Term Liabilities | ||||||
| Operating lease liability, net of current | 82,453 | 75,386 | ||||
| Note payable, net of current | 150,000 | 142,235 | ||||
| Total Long-Term Liabilities | 232,453 | 217,621 | ||||
| Total Liabilities | 643,720 | 481,049 | ||||
| Commitments and contingencies (Note 5) | ||||||
| Members' Deficit | (73,508 | ) | (105,924 | ) | ||
| Total Liabilities and Members' Equity (Deficit) | $ | 570,212 | $ | 375,125 |
See notes to the unaudited interim financial statements.
| F-1 |
| --- |
HorebKissimmee Realty, LLC
d/b/a
LaRosa Realty Kissimmee
Statementsof Income
| Six Months Ended June 30, | ||||||
|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||
| (Unaudited) | (Unaudited) | |||||
| Revenue | $ | 5,453,824 | $ | 5,787,529 | ||
| Cost of revenue | 4,990,968 | 5,309,087 | ||||
| Gross Profit | 462,856 | 478,442 | ||||
| Operating Expenses | ||||||
| General and administrative expenses | 322,915 | 307,637 | ||||
| Sales and marketing expenses | 17,530 | 29,563 | ||||
| Total Operating Expenses | 340,445 | 337,200 | ||||
| Income From Operations | 122,411 | 141,242 | ||||
| Other Income (Expense) | ||||||
| Other income, net | - | 395 | ||||
| Interest expense | (1,593 | ) | (2,813 | ) | ||
| Total Other Income (Expense) | (1,593 | ) | (2,418 | ) | ||
| Net Income | $ | 120,818 | $ | 138,824 |
See notes to the unaudited interim financial statements.
| F-2 |
| --- |
HorebKissimmee Realty, LLC
d/b/a
LaRosa Realty Kissimmee
Statementsof Members’ Equity (Deficit)
| Amount | |||
|---|---|---|---|
| (unauidted) | |||
| Balance as of January 1, 2023 | $ | (105,924 | ) |
| Member distributions | (88,402 | ) | |
| Net Income | 120,818 | ||
| Balance as of June 30, 2023 | $ | (73,508 | ) |
| Balance as of January 1, 2022 | $ | 317,517 | |
| Member distributions | (510,606 | ) | |
| Net Income | 138,824 | ||
| Balance as of June 30, 2022 | $ | (54,265 | ) |
See notes to the unaudited interim financial statements.
| F-3 |
| --- |
HorebKissimmee Realty, LLC
d/b/a
LaRosa Realty Kissimmee
Statementsof Cash Flows
| Six Months Ended June 30, | ||||||
|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||
| (Unaudited) | (Unaudited) | |||||
| Cash Flows from Operating Activities: | ||||||
| Net Income | $ | 120,818 | $ | 138,824 | ||
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | ||||||
| Depreciation and amortization | 2,719 | 5,943 | ||||
| Changes in Operating Assets and Liabilities: | ||||||
| Accounts receivable | (32,863 | ) | 222,699 | |||
| Prepaid expenses | - | |||||
| Accounts payable | 54,329 | (235,503 | ) | |||
| Accrued expenses | 18,350 | 11,250 | ||||
| Operating lease liabilities | 13,638 | - | ||||
| Net Cash Provided by Operating Activities | 176,990 | 143,213 | ||||
| Cash Flows Used in Investing Activities: | ||||||
| Cash paid for financing lease | (723 | ) | - | |||
| Net Cash Used in Investing Activities | (723 | ) | - | |||
| Cash Flows from Financing Activities: | ||||||
| Distributions paid | (88,402 | ) | (510,606 | ) | ||
| Net Cash Used in Financing Activities | (88,402 | ) | (510,606 | ) | ||
| Net Increase (Decrease) in Cash | 87,865 | (367,393 | ) | |||
| Cash at Beginning of Year | 124,296 | 535,240 | ||||
| Cash at End of Period | $ | 212,161 | 167,847 | |||
| Supplemental Disclosures of Cash Flow Information: | ||||||
| Cash Paid During the Period for: | ||||||
| Interest | $ | 6,554 | $ | - | ||
| Income taxes | $ | - | $ | - | ||
| Non-Cash Activities: | ||||||
| Right-of-use assets obtained in exchange for lease obligations | $ | 155,811 | $ | 187,867 |
See notes to the unaudited interim financial statements.
| F-4 |
| --- |
HorebKissimmee Realty, LLC
d/b/a
LaRosa Realty Kissimmee
Notesto the Interim Unaudited Condensed Consolidated Financial Statements
NOTE 1 - DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
Nature of Organization
Horeb Kissimmee Realty, LLC d/b/a La Rosa Realty Kissimmee (the “Company”) provides residential and commercial real estate brokerage services to the public primarily through sales agents. The business also provides coaching and support services to agents on a fee basis.
Liquidity
The Company is subject to the risks and challenges associated with companies at a similar stage of development. These include dependence on key individuals, successful development and marketing of its offerings, and competition with larger companies with greater financial, technical, and marketing resources. Furthermore, during the period required to achieve substantially higher revenue in order to become consistently profitable, the Company may require additional funds that might not be readily available or might not be on terms that are acceptable to the Company. Based on the Company’s current cash position and resources, management believes the Company has adequate resources to fund its operations for the next twelve months from the date these financial statements are made available.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the Company’s 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.
Accounts Receivable
Accounts receivable consist of balances due from agents and commissions from closings. For the six months ended June 30, 2023 and 2022, the Company did not record any allowance for doubtful accounts, based on the Company’s historical ability to collect substantially all receivables. In determining collectability, historical trends are evaluated and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances.
Fixed Assets
The cost of property and equipment is depreciated using the straight-line method based on the estimated useful lives of the assets: five years for computers; seven years for office furniture and other equipment.
| F-5 |
| --- |
HorebKissimmee Realty, LLC
d/b/a
LaRosa Realty Kissimmee
Notes to the Interim Unaudited Condensed Consolidated Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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<br> prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities; |
|---|---|
| - | Level 2 - Quoted prices<br> for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets<br> or financial instruments for which significant inputs are observable, either directly or indirectly; and |
| - | Level 3 - Prices or valuations<br> 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.
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 following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. At contract inception, the Company assesses the goods or services promised within each contract that falls under the scope of ASC 606, determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied. The application of these five steps necessitates the development of assumptions that require judgment.
The Company records revenue based upon the consideration specified in the client arrangement, and revenue is recognized when the performance obligations in the client arrangement are satisfied. A performance obligation is a contractual promise to transfer a distinct good or service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.
| F-6 |
| --- |
HorebKissimmee Realty, LLC
d/b/a
LaRosa Realty Kissimmee
Notes to the Interim Unaudited Condensed Consolidated Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
RealEstate Brokerage Services (Residential)
The Company serves as a licensed broker in the areas in which it operates for the purpose of processing residential real estate transactions. This portion of revenue consists of commissions generated from real estate brokerage services. The Company is contractually obligated to provide for the fulfillment of transfers of real estate between buyers and sellers. The Company provides these services itself and controls the services of its agents necessary to legally transfer the real estate. Consequently, the Company is defined as the principal in the transaction. The Company, as principal, satisfies its obligation upon the closing of a real estate transaction. The Company has concluded that agents are not employees of the Company, rather deemed to be independent contractors. Upon satisfaction of its obligation, the Company recognizes revenue in the gross amount of consideration it is entitled to receive. The transaction price is calculated by applying the Company’s portion of the agreed-upon commission rate to the property’s selling price. The Company may provide services to the buyer, seller, or both parties to a transaction. When the Company provides services to the seller in a transaction, it recognizes revenue for its portion of the commission, which is calculated as the sales prices multiplied by the commission rate for the “buy” side of the transaction. In instances in which the Company represents both the buyer and the seller in a transaction, it recognizes the full commission on the transaction. Commissions revenue contains a single performance obligation that is satisfied upon the closing of a real estate transaction, at which point the entire transaction price is earned. The Company’s customers remit payment for the Company’s services to the title company or attorney closing the sale of property at the time of closing. The Company receives payment upon close of property within days of the closing of a transaction. The Company is not entitled to any commission until the performance obligation is satisfied and is not owed any commission for unsuccessful transactions, even if services have been provided. In addition to commission, revenue from real estate brokerage services (residential) consists of annual and monthly dues charged to our agents for providing systems, accounting, marketing tools, and compliance services. The annual and monthly dues is recognized each month as services are provided.
CoachingServices
The Company provides mandatory training and guidance to newly licensed agents for their first three sales transactions. Revenue is recognized based on 10% of the commission earned by the agent on these transactions and is recognized upon closing of each real estate transaction. Coaches also provide optional special education services throughout the year to agents. Revenue is recognized over time as the services are provided.
RealEstate Brokerage Services (Commercial)
The Company serves as a licensed broker in the areas in which it operates for the purpose of processing commercial real estate transactions. This portion of revenue consists of commissions generated from real estate brokerage services. The Company is contractually obligated to provide for the fulfillment of transfers of real estate between buyers and sellers. The Company provides these services itself and controls the services of its agents necessary to legally transfer the real estate. Correspondingly, the Company is defined as the principal. The Company, as principal, satisfies its obligation upon the closing of a real estate transaction. The Company has concluded that agents are not employees of the Company, rather deemed to be independent contractors. Upon satisfaction of its obligation, the Company recognizes revenue in the gross amount of consideration it is entitled to receive. The transaction price is calculated by applying the Company’s portion of the agreed-upon commission rate to the property’s selling price. The Company may provide services to the buyer, seller, or both parties to a transaction.
| F-7 |
| --- |
HorebKissimmee Realty, LLC
d/b/a
LaRosa Realty Kissimmee
Notes to the Interim Unaudited Condensed Consolidated Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
RealEstate Brokerage Services (Commercial), continued
When the Company provides services to the seller in a transaction, it recognizes revenue for its portion of the commission, which is calculated as the sales prices multiplied by the commission rate for the “buy” side of the transaction. In instances in which the Company represents both the buyer and the seller in a transaction, it recognizes the full commission on the transaction. Commissions revenue contains a single performance obligation that is satisfied upon the closing of a real estate transaction, at which point the entire transaction price is earned. The Company’s customers remit payment for the Company’s services to the title company or attorney closing the sale of property at the time of closing. The Company receives payment upon closing of property within days of the closing of a transaction at a rate of 10% of the gross commission income. The Company is not entitled to any commission until the performance obligation is satisfied and is not owed any commission for unsuccessful transactions, even if services have been provided.
Revenues from contracts with customers are summarized by category as follows for the six months ended June 30:
| 2023 | 2022 | |||
|---|---|---|---|---|
| (Unaudited) | (Unaudited) | |||
| Real Estate Brokerage Services (Residential) | $ | 5,396,840 | $ | 5,751,595 |
| Coaching Services | 32,893 | 22,858 | ||
| Real Estate Brokerage Services (Commercial) | 24,091 | 13,076 | ||
| Revenue | $ | 5,453,824 | $ | 5,787,529 |
Cost of Revenue
Cost of revenue consists primarily of agent commissions.
Advertising
Advertising costs are expensed as incurred. Advertising expenses for the six months ended June 30, 2023 and 2022 was $12,585 and $14,412, respectively.
Income Taxes
The Company is taxed as an “S” Corporation under the Internal Revenue Code. The Company’s income is included in the members’ income tax returns. Accordingly, the Company generally is not subject to federal or certain state income taxes.
| F-8 |
| --- |
HorebKissimmee Realty, LLC
d/b/a
LaRosa Realty Kissimmee
Notes to the Interim Unaudited Condensed Consolidated Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Leases
In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02 (“ASU 2016-02”), which requires lessees to recognize leases on balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The Company adopted ASC 842 as of January 1, 2022, using the modified retrospective basis with a cumulative effect adjustment as of that date. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company to carry forward the historical determination of contracts as leases, lease classification and not reassess initial direct costs for historical lease arrangements. Accordingly, previously reported financial statements, including footnote disclosures, have not been recast to reflect the application of the new standard to all comparative periods presented.
Lease assets are included within lease right-of-use assets, and the corresponding lease liabilities are recorded as current portion of long-term leases, and within long-term liabilities as long-term leases, net of the current portion on the consolidated balance sheet as of June 30, 2023.
Adoption of the new lease standard on January 1, 2022 had a material impact on the Company’s consolidated balance sheet. As of June 30, 2023, the Company recognized a right-of-use (“ROU”) asset of $211,148 and a lease liability of $224,378 on the consolidated balance sheet. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The standard did not materially impact the Company’s consolidated statement of operations and consolidated statement of cash flows.
| F-9 |
| --- |
HorebKissimmee Realty, LLC
d/b/a
LaRosa Realty Kissimmee
Notes to the Interim Unaudited Condensed Consolidated Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently Issued Accounting Standards
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 is currently continuing evaluating the impact of the pending adoption of the new standard on its financial statements and in assumption that the standard does not have material impact on our business.
NOTE 3 - CONCENTRATIONS OF BUSINESS AND CREDIT RISK
At times throughout the year, the Company may maintain certain bank accounts in excess of FDIC insured limits of $250,000.
NOTE 4 - FIXED ASSETS
Fixed assets consist of the following as of June 30:
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Equipment | 13,300 | 13,300 | ||||
| Furniture | 15,000 | 15,000 | ||||
| Less: accumulated depreciation | (18,411 | ) | (15,175 | ) | ||
| $ | 9,889 | $ | 13,125 |
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Company is obligated under a noncancellable leases for multiple office spaces through December 2024 with monthly payments of $11,772, including annual escalations plus certain occupancy expenses as prescribed in the lease. Rent expense for six months ended June 30, 2023, and 2022 was $78,492 and $47,446, respectively. In addition, the Company is obligated under a noncancellable lease for a color copier through July 2028 with monthly payments of $362.
| F-10 |
| --- |
HorebKissimmee Realty, LLC
d/b/a
LaRosa Realty Kissimmee
Notes to the Interim Unaudited Condensed Consolidated Financial Statements
NOTE 6 - DEBT
NotesPayable
The Company’s notes payable balance consists of the following at June 30:
| 2023 | 2022 | |||
|---|---|---|---|---|
| Economic Injury Disaster Loans | $ | 150,000 | $ | 150,000 |
| Less: Current Portion | - | - | ||
| Notes Payable - Long Term | $ | 150,000 | $ | 150,000 |
EconomicInjury Disaster Loan
On June 10, 2020, the Company received proceeds from an Economic Injury Disaster Loan (“EIDL” or “the “Loan”) from the Small Business Administration (“SBA”), in the amount of $150,000. The Loan, which is in the form of a promissory note dated June 10, 2020, matures on June 10, 2050 and bears interest at a rate of 3.75% per annum. Payments are to be made monthly beginning as of June 1, 2021 in the amount of $731. Each payment is to be applied first to the interest accrued to the date of receipt of each payment, and the remaining balance, if any, will be applied to the principal. The loan terms provide for a collateral interest for the SBA and limit the use of proceeds to working capital to alleviate the effects of COVID-19 on the Company’s economic condition. Unlike the Paycheck Protection Program (“PPP”), established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) enacted March 27, 2020, the EIDL program does not currently provide a mechanism for loan forgiveness.
NOTE 7 - SUBSEQUENT EVENTS
On January 31, 2022, and later amended September 15, 2022, the Company and its sole member entered into an agreement with La Rosa Holdings Corp. pursuant to which La Rosa Holdings Corp. will acquire 51% of the membership interest in Horeb Kissimmee Realty, LLC. La Rosa Franchising LLC, with whom the Company entered into a franchise agreement with in 2019, is a wholly owned subsidiary of La Rosa Holdings Corp. The agreement will close within five days of an underwritten initial public offering of La Rosa Holdings Corp.
| F-11 |
| --- |