Item 1A. Risk Factors.
As a smaller reporting company, we are not required
to include risk factors in this Annual Report.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
The Company maintains cyber
risk management designed to preserve the security of our data and technology infrastructure. On an annual basis we conduct assessments
to identify cyber risks and have developed plans on how to address any such risks for remediation of vulnerabilities.
Risk management and strategy
We design and implement risk
management strategies for identification and management of material risks rising from cybersecurity threats and alerts. Our method involves
a systematic evaluation of all potential threats reported and discovered, vulnerabilities, and their possible impacts on the Company’s
operations, data, and systems health. Our cybersecurity risk management strategy includes:
● Identify the risk to our environment;
● IT to identify and resolve the threat;
● cybersecurity training to our staff; and
● cybersecurity incident response plan.
Management and Board Oversight
Our management is responsible
for the oversight and administration of cyber security protocols.Our management team relies on our third-party providers on administrating
cybersecurity assessments to identify, manage, mitigate, and respond to cybersecurity threats. Management updates the Board as necessary,
regarding any significant cybersecurity occurrences.
Item 2. Properties.
We lease our principal executive office which
is located at 2 Executive Circle, Suite 100, Irvine, CA 92614 (the “Lease Agreement”). The Lease Agreement commenced on September
1, 2023 and terminates on July 31, 2025. The Lease Agreement contains standard commercial lease terms including but not limited to provisions
regarding utilities, alterations, maintenance and repair, insurance and indemnification. We believe that our current leased property is
in good condition and suitable for the conduct of our business.
Item 3. Legal Proceedings.
As of December 31, 2024, to
the knowledge of our management, there was no material litigation, arbitration or governmental proceeding pending against us or any members
of our management team in their capacity as such, and we and the members of our management team have not been subject to any such proceeding.
Item 4. Mine Safety Disclosures.
Not applicable.
7
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.
Market Information
Our Common Stock is not currently listed on a publicly
traded market or exchange.
Holders
As of March 27, 2025, there
were 14,505,000 shares of our Common Stock, held by approximately 23 shareholders of record.
Dividends
We have not paid any dividends on our Common Stock
to date. The payment of cash dividends in the future will be dependent upon revenues and earnings, if any,
capital requirements and general financial condition from time to time. The payment of any cash dividends will be within the discretion
of the Board. Currently we expect that we will retain any earnings for use in our business operations and, accordingly, we do not expect
that the Board will declare any dividends in the foreseeable future.
Transfer Agent
VStock Transfer, LLC., 18 Lafayette Place, Woodmere,
New York 11598.
Securities Authorized for Issuance under Equity Compensation Plans
None.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered
Offerings
From March 12 to March 25, 2024, the Company entered
a series of subscription agreement with certain individual investors to issue 955,000 common shares of the Company for aggregate gross
proceeds of $930,000. Such agreements provided for, among other things, certain restrictions on transferability and registration rights.
Unless otherwise stated, the sales of the above
securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act
(or Regulation D or Regulation S promulgated thereunder), or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions
by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule
701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment
only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed on the stock
certificates issued in these transactions.
Item 6. [Reserved]
8
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
This
management’s discussion and analysis of financial condition and results of operations contains forward-looking statements
that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements” for a discussion of
the uncertainties, risks and assumptions associated with those statements. You should read the following discussion in conjunction with
“Selected Historical Financial and Other Data” and our audited consolidated financial statements and related notes which are
included elsewhere in this prospectus. Our actual results may differ materially from those discussed in the forward-looking statements
as a result of various factors, including, but not limited to, those described under “Risk Factors” and included in other
portions of this prospectus.
This
prospectus includes forward-looking statements. We have based these forward-looking statements on our current expectations
and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties,
and assumptions about us that may cause our actual results, levels of activity, performance, or achievements to be materially different
from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.
In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,”
“would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,”
“continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy
include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings. References
to “we”, “us”, “our,” or the “Company” are to Linkhome Holdings Inc. and its subsidiary,
except where the context requires otherwise.
Overview
Linkhome
Holdings Inc. (“Linkhome,” “Linkhome Holdings,” the “Company,” or “We”) is a corporation
incorporated under the laws of Nevada on November 6, 2023. Linkhome was incorporated as a holding company with no material operations
of its own. Linkhome conducts substantially all of the operations through its subsidiary, Linkhome Realty Group, a California corporation
(“Linkhome Realty”). Located in Irvine, California, Linkhome Realty is presently focused on serving the Southern California
market, and, over time, intends to establish a nationwide marketing network covering multiple states.
Linkhome Realty focuses on comprehensive real estate activities as
a one-stop destination for a variety of real estate needs. By using Artificial Intelligence (“AI”) to streamline the
property search and transaction process, we facilitate property transactions as a real estate agency and provide efficient property management
services. We aim to offer comprehensive assistance to our clients in real estate investments by diversifying our services and providing
clients with access to a wide range of real estate solutions. Further, we aim to provide personalized services to both buyers and sellers
to meet their various real estate needs, and help our clients buy and sell property more efficiently.
Additionally, where possible and when we have sufficient cash on hand
to permit such a purchase, we purchase and sell real estate for our clients through our Cash Offer program. We developed the Cash Offer
program with the intent of increasing the successful rate in our clients’ acquisition of their desired houses. We also use this
service as a marketing tool to help us attract more clients. We use cash to purchase the target property first, and then sell it to our
customer. This service is particularly effective in the competitive U.S. real estate market, where buyers often face competition
and bidding for popular properties during the home purchase bid. Our ability to make all-cash offers helps our clients secure desired
properties quickly, thereby enhancing their chances of success. Our ultimate strategic goal is to become the premier AI driven real estate
technology company, utilizing artificial intelligence to transform the real estate industry, making property transactions more user-friendly,
transparent, and efficient. Currently, our funding for the Cash Offer comes primarily from investments made by our CEO and shareholders.
With the funds generated from this offering, we plan to expand our Cash Offer program. We believe and are confident that, over time, our
revenue will continue to grow and we will become more profitable over time.
Key Factors that Affect
Our Results of Operations
9
Related Party Transactions
Related Parties
The
following individuals are considered related parties due to their roles and shareholdings in the Company:
● Haiyan Ma: Shareholder with 12.41% ownership.
For the Years Ended
December 31, 2024 and 2023
Property Purchases
and Sales Through Cash Offer
For
the year ended December 31, 2024, the Company purchased three properties in cash for $2,884,882 from unrelated parties and subsequently
sold them to Haiyan Ma for $2,940,544. For the year ended December 31, 2023, the Company purchased one property in cash for $ 1,056,370
from an unrelated party and subsequently sold it to Haiyan Ma for $1,069,072.
For
the year ended December 31, 2024, the Company purchased a property in cash for $1,425,930 from Haiyan Ma, which included $1,420,000 paid
to Haiyan Ma as the total consideration and $5,930 in title charges, escrow charges, and other related costs. The Company subsequently
sold the property to Na Li for $1,670,000.
Real Estate Agency
Service
For
the year ended December 31, 2024, the Company provided real estate agency services to Haiyan Ma, assisting with the sale of two properties
and the purchase of one property, for which the Company earned a total of $62,650 in real estate agency commission.
For
the year ended December 31, 2024, the Company provided real estate agency services to Zhen Qin and Na Li, assisting with the purchase
of a property, for which the Company earned $50,000 in real estate agency commission.
10
For
the year ended December 31, 2024, the Company provided real estate agency services to two minority shareholders, assisting one shareholder
with selling a property and the other shareholder with purchasing a property, for which the Company earned a total of $15,550 in real
estate agency commission.
Property Management
Service
For
the year ended December 31, 2024, the Company provided tenant placement services to a minority shareholder, assisting with securing a
rental property, for which the Company earned $1,800 in property management service revenue.
Home Renovation Service
For
the year ended December 31, 2024, the Company provided home renovation services to Haiyan Ma on three home renovation projects, for which
the Company earned $53,012 in home renovation service revenue and incurred $43,332 in renovation costs.
For
the year ended December 31, 2024, the Company provided home renovation services to Na Li on four home renovation projects, for which the
Company earned $64,500 in home renovation service revenue and incurred $56,769 in renovation costs.
Commission Expense
For
the year ended December 31, 2023, the Company incurred commission expenses of $61,400, which were paid to Zhen Qin for real estate transactions
conducted on behalf of the Company. This amount was recorded in cost of revenues.
As of December
31, 2024 and 2023
Due to Related Party
On
May 1, 2024, Zhen Qin lent $530,000 to the Company to support its operational needs. As of December 31, 2024, the Company repaid $475,000
to Zhen Qin, and there was an outstanding balance of $55,000.
Selected Income Statement
Items
Net Revenues
We
derive our net revenues from (i) real estate purchases and sales made through Cash Offer, and (ii) real estate services including
acting as real estate agency for buying and selling properties, property management, home renovation and mortgage referral services. The
following table presents our net revenues by revenue stream for the periods presented:
Years Ended December 31,
Amount % Amount % Amount %
Real estate service revenue
11
Revenue from Property Purchases and Sales
Through Cash Offer
In a competitive real estate market, a buyer who pays in cash is more
likely to secure a property. To give buyers an edge in competitive markets, we offer the Cash Offer program to enable buyers to make all-cash offers
on properties, even if they require financing. Through our Cash Offer program, we provide the funds to make a cash offer once the client
identifies a property. If the seller accepts the cash offer, we purchase the property in cash to secure its ownership and subsequently
sell it to the client within a short period of time. Our property purchases and sales through Cash Offer focus primarily on residential
and commercial properties.
Revenue
from property purchases and sales through our Cash Offer program accounted for 86.25% and 78.04% of net revenues for the years ended December
31, 2024 and 2023, respectively. Our revenue from this program increased by $5,499,332, or 514.40%, from $1,069,072 for the year ended
December 31, 2023, to $6,568,404 for the year ended December 31, 2024. This significant increase was due to the expansion of our Cash
Offer program, which commenced in late 2023. For the years ended December 31, 2024 and 2023, we purchased and sold six and one properties,
respectively, through the Cash Offer program, with average transaction prices of $1.08 million and $1.05 million.
Real Estate Service
Revenue
We offer comprehensive real estate services tailored to meet the diverse
needs of our clients. Our real estate service revenue consists primarily of real estate agency commissions for buying and selling properties
for clients, and revenue generated from property management, home renovation and mortgage referral services.
Real estate service revenue accounted for 13.75% and 21.96% of net
revenues for the years ended December 31, 2024 and 2023, respectively. Our real estate service revenue increased by $746,120, or 248.06%,
from $300,783 for the year ended December 31, 2023, to $1,046,903 for the year ended December 31, 2024. This increase was primarily driven
by growth in real estate agency commission and home renovation service revenue, partially offset by a decrease in mortgage referral fees
and property management service revenue, as explained below.
Real estate agency commission increased by $519,646, or 198.56%, from
$261,705 for the year ended December 31, 2023, to $781,351 for the year ended December 31, 2024. This increase was primarily driven by
a 214.58% increase in transaction volume, resulting from a 130.00% increase in the number of real estate transactions and a 36.78% increase
in the average transaction price. For the year ended December 31, 2024, we achieved a total transaction volume of $48,566,719 by completing
46 real estate transactions at an average transaction price of $1.06 million, while we achieved a total transaction volume of $15,438,435
by completing 20 real estate transactions at an average transaction price of $0.77 million for the year ended December 31, 2023.
The increase in real estate agency commission was partially offset by higher rebates, which we offered in order to attract more clients
and expand our market share. Rebates increased by $167,617, or 413.79%, from $40,508 for the year ended December 31, 2023, to $208,125
for the year ended December 31, 2024, accounting for 21.03% and 13.40% of gross real estate agency commission for the years ended December
31, 2024 and 2023, respectively.
Revenue from home renovation service increased by $236,873, or 2,835.78%,
from $8,353 for the year ended December 31, 2023, to $245,226 for the year ended December 31, 2024. This increase was driven by our
launch of home renovation service in late 2023 in response to a demand for home improvements aimed at enhancing living spaces and increasing
home equity. We completed 15 home renovation projects for the year ended December 31, 2024, compared to one project for the year ended
December 31, 2023.
Revenue
from mortgage referral service decreased by $9,450, or 70.00%, from $13,500 for the year ended December 31, 2023, to $4,050 for the year
ended December 31, 2024. This decrease was primarily due to reduced client demand for mortgage referrals, reflecting higher interest rates
during 2024. We assisted one client in securing a mortgage for the year ended December 31, 2024, compared to six clients for the year
ended December 31, 2023.
Revenue
from property management service decreased by $949, or 5.51%, from $17,225 for the year ended December 31, 2023, to $16,276 for the year
ended December 31, 2024. We had nine tenant placements for the year ended December 31, 2024, compared to eight for the year ended December
31, 2023. In addition to tenant placement services, we began providing ongoing property management services in 2024 and managed three
properties by year-end. The decrease in revenue was primarily due to a lower average revenue per tenant placement in 2024 and the initial
implementation of ongoing property management services, which are structured to generate recurring revenue over time rather than upfront
payments.
12
Cost of Revenues
Our cost of revenues consists primarily of (i) costs related to
property purchases made under Linkhome Realty’s name, which properties are subsequently sold to customers, and (ii) costs associated
with real estate services, including commission expenses for real estate agents working for the Company and renovation costs incurred
for home renovation services.
We
derive our cost of revenues from two revenue streams: (i) property purchases and sales through Cash Offer and (ii) real estate
services. The following table presents our cost of revenues by revenue stream for the periods presented:
Years Ended December 31,
Amount % Amount % Amount %
Cost
of property purchases and sales through Cash Offer increased by $4,872,495, or 461.25%, from $1,056,370 for the year ended December 31,
2023, to $5,928,865 for the year ended December 31, 2024, as we launched this revenue stream in late 2023. The increase was primarily
driven by a higher volume of transactions in 2024 compared to 2023.
Cost
of real estate services increased by $154,661, or 251.89%, from $61,400 for the year ended December 31, 2023, to $216,061 for the year
ended December 31, 2024. The increase was primarily driven by higher renovation costs as we began providing home renovation services in
late 2023. This was partially offset by a reduction in commission expenses paid to our real estate agents, particularly to our CEO, who
devoted more time in 2024 to expanding into new markets.
Selling, General
and Administrative Expenses
Our
selling expenses primarily consist of staging, advertising and marketing costs, including online and offline marketing, photography
and videography. We expect our selling expenses as a percentage of net revenues to modestly increase in the foreseeable future to achieve
high-quality growth.
Our
general and administrative expenses primarily consist of professional service costs, payroll and payroll related costs, rent and other
overhead costs. We anticipate our general and administrative expenses will increase in the short term as a result of increased costs associated
with being a public company, which will likely include increased costs related to the hiring of additional personnel and fees to outside
consultants, attorneys, and accountants; however, we expect our general and administrative expenses as a percentage of net revenues to
decrease over the long term as we continue to enhance overall cost control to improve operating margin.
13
Results of Operations
Comparison of the
Years Ended December 31, 2024 and 2023
The
following table summarized our consolidated results of operations for the years ended December 31, 2024 and 2023:
Years Ended December 31,
2024 % of Revenues 2023 % of Revenues Change Percentage Change
Operating expenses
Net Revenues
Net
revenues for the years ended December 31, 2024 and 2023 were $7,615,307 and $1,369,855, respectively, representing an increase of $6,245,452,
or 455.92%. This increase was primarily driven by a $5,499,332 increase in revenue from property purchases and sales through Cash Offer,
along with a $746,120 increase in real estate service revenue.
Cost of Revenues
Years Ended December 31,
As a percentage of net revenues 80.69 % 81.60 %
Cost
of revenues for the years ended December 31, 2024 and 2023 was $6,144,926 and $1,117,770, respectively, representing an increase of $5,027,156,
or 449.75%. This increase was primarily driven by higher costs associated with increased revenue from property purchases and sales through
Cash Offer, as well as higher renovation costs related to the expansion of our home renovation services.
Gross Profit and
Gross Margin
Years Ended December 31,
Gross Profit Gross Margin Gross Profit Gross Margin
14
Gross
profit for the years ended December 31, 2024 and 2023 was $1,470,381 and $252,085, respectively, representing an increase of $1,218,296,
or 483.29%. The blended gross margin was 19.31% for the year ended December 31, 2024, compared to 18.40% for the year ended December 31,
2023.
Gross
profit from property purchases and sales through Cash Offer as a percentage of revenue from property purchases and sales through Cash
Offer was 9.74% for the year ended December 31, 2024, compared to 1.19% for the year ended December 31, 2023. This increase was primarily
driven by improved pricing strategies and operational efficiencies as we scaled the Cash Offer program.
Gross
profit from real estate services as a percentage of real estate service revenue was 79.36% for the year ended December 31, 2024, compared
to 79.59% for the year ended December 31, 2023. The slight decrease was primarily due to higher renovation costs, partially offset by
lower commission expenses paid to our CEO. As part of our real estate services, we began providing home renovation services in late 2023.
Gross profit from home renovation services as a percentage of home renovation service revenue was 18.03% for the year ended December
31, 2024.
Selling Expenses
Selling
expenses primarily consisted of staging, advertising, and marketing costs. Selling expenses for the years ended December 31, 2024 and
2023 were $15,754 and $4,476, respectively, representing an increase of $11,278, or 251.97%. This increase was primarily driven by higher
advertising and marketing expenditures aimed at attracting more clients and listings, as well as enhancing brand awareness.
General and Administrative
Expenses
The
following table summarized our general and administrative expenses for the years ended December 31, 2024 and 2023:
Years Ended December 31,
As a percentage of net revenues 4.80 % 6.47 %
General
and administrative expenses for the years ended December 31, 2024 and 2023 were $365,207 and $88,761, respectively, representing an increase
of $276,446, or 311.45%. This increase was primarily driven by higher payroll expense, legal and accounting expenses, rent expense, depreciation
expense, and payroll tax expense, which increased by $106,956, $87,096, $31,458, $12,720, and $9,013, respectively. Payroll and payroll
tax expenses increased primarily due to the hiring of new employees. Legal and accounting expenses increased primarily in connection with
the Company’s preparation for its initial public offering. Rent expense increased following the commencement of the Company’s
office lease in September 2023. Depreciation expenses increased due to the acquisition of a vehicle, furniture, and office equipment.
Other Expenses,
Net
Other
expenses were $1,832 for the year ended December 31, 2024, compared to $5,730 for the year ended December 31, 2023. For the year ended
December 31, 2024, other expenses primarily consisted of interest expense of $3,115, bank fees of $456, and other miscellaneous expenses
of $107, partially offset by credit card rebates of $1,166 and bank rewards of $680. For the year ended December 31, 2023, other expenses
primarily consisted of interest expense of $967 and other miscellaneous expenses of $4,871, partially offset by credit card rebates of
$108.
15
Income Tax Expenses
Income
tax expenses for the years ended December 31, 2024 and 2023 were $309,352 and $1,925, respectively, representing an increase of $307,427,
or 15,970.23%. This significant increase was primarily due to higher taxable income and a change in Linkhome Realty’s tax filing
status from an S-corporation to C-corporation, effective January 1, 2024. As a C-corporation, Linkhome Realty is subject
to a federal income tax rate of 21% and a California state income tax rate of 8.84%.
Net Income
Net
income for the years ended December 31, 2024 and 2023 was $778,236 and $151,193, respectively, representing an increase of $627,043, or
414.73%. This increase was primarily driven by the significant growth in net revenues, partially offset by higher operating expenses.
Liquidity and Capital
Resources
In
assessing liquidity, management monitors and analyzes the Company’s cash on-hand, ability to generate sufficient revenue sources
in the future, and operating and capital expenditure commitments. Historically, we have funded our working capital, operations and other
capital requirements primarily through equity contributions from stockholders and cash flow from operations. Our ability to meet our current
expenses and obligations depends on the future realization of our current assets. Management has considered historical experience, current
economic conditions, reasonable and supportable forecasts of future economic conditions, and trends in the real estate industry to evaluate
the expected collectability of accounts receivable as of December 31, 2024 and 2023. Our liquidity may be affected by general
economic, competitive, and other factors, many of which are beyond our control.
We
plan to expand our real estate business, develop our artificial intelligence real estate platform, and increase our own real estate
investment. To accomplish such expansion plan, we estimate the total related capital investment and expenditures to be approximately $2 million
over the next 12 months.
We
believe that our current cash and cash flows provided by operating activities will be sufficient to meet our working capital needs for
existing business over the next 12 months from the issuance date of the financial statements. However, we plan to use part of the
proceeds from this offering to support our business expansion described above. We may also seek additional financing, to the extent needed,
and there can be no assurance that such financing will be available on favorable terms, or at all. Such financing may include the use
of additional debt or the sale of additional equity securities. Any financing which involves the sale of equity securities or instruments
that are convertible into equity securities could result in immediate and possibly significant dilution to our existing stockholders.
If it is determined that the cash requirements exceed the Company’s amounts of cash on hand, the Company may also seek to issue
additional debt or obtain financial support from stockholders. The principal stockholders of the Company have made a commitment to provide
financial support to the Company whenever necessary and will continue to provide support following the consummation of this offering.
Cash Flows For
the Years Ended December 31, 2024 and 2023
As
of December 31, 2024, we had cash and cash equivalents of $1,670,949, other current assets of $1,652,699, current liabilities of $944,447,
net working capital of $2,379,201, and a current ratio of 3.52:1.
16
The
following table presented a summary of our cash flows for the years ended December 31, 2024 and 2023:
Net cash (used in) provided by operating activities $ (4,844 ) $ 223,314
Net cash used in investing activities (3,513 ) (40,522 )
Cash and cash equivalents, beginning of period 651,911 188,963
Net Cash (Used in)
Provided by Operating Activities
Net
cash used in operating activities was $4,844 for the year ended December 31, 2024, primarily derived from (i) net income of $778,236,
adjusted for noncash activities including lease expense of $45,347 and depreciation of $18,762, partially offset by a decrease in
allowance for credit losses of $9,092; (ii) net changes in operating assets and liabilities as of December 31, 2024 compared to December 31,
2023, primarily consisting of (a) an increase in real estate held for sale of $907,061, (b) an increase in deferred IPO costs
of $699,499, (c) a decrease in operating lease liabilities of $45,062, (d) an increase in accounts receivable of $8,676, and
(e) an increase in prepaid expenses and other receivables of $2,971, partially offset by (a) an increase in other current liabilities
of $820,575 and (b) an increase in accounts payable of $4,597.
Net
cash provided by operating activities was $223,314 for the year ended December 31, 2023, primarily derived from (i) net income of
$151,193, adjusted for noncash activities including lease expense of $15,115 and depreciation of $6,042; (ii) net changes in
operating assets and liabilities as of December 31, 2023 compared to December 31, 2022, primarily consisting of (a) a decrease
in accounts receivable of $106,289 and (b) an increase in other current liabilities of $14,548, partially offset by (a) a decrease
in accounts payable of $25,800, (b) an increase in prepaid expenses and other receivables of $25,008, (c) a decrease in operating lease
liabilities of $14,830, and (d) an increase in security deposits of $4,235.
Net
cash used in operating activities was $4,844 for the year ended December 31, 2024, compared to net cash provided by operating activities
of $223,314 for the year ended December 31, 2023, representing an increase in cash outflow of $228,158. This increase was primarily due
to (i) an increase in cash outflow of $907,061 on real estate held for sale, (ii) an increase in cash outflow of $699,499 on
deferred IPO costs, (iii) a decrease in cash inflow of $114,965 on accounts receivable, and (iv) an increase in cash outflow
of $30,232 on operating lease liabilities, partially offset by (i) a decrease in cash outflow of $806,027 on other current liabilities,
(ii) an increase in cash inflow of $660,903 on net income adjusted for noncash activities, (iii) a decrease in cash outflow of $30,397
on accounts payable, (iv) a decrease in cash outflow of $22,037 on prepaid expenses, and (v) a decrease in cash outflow of $4,235
on security deposits.
Net Cash Used in Investing
Activities
Net
cash used in investing activities was $3,513 for the year ended December 31, 2024, which primarily included purchases of office equipment
for $1,082, furniture for $982, and trademarks for $1,449.
Net
cash used in investing activities was $40,522 for the year ended December 31, 2023, which primarily included purchases of a vehicle for
$35,250, furniture for $4,343, and office equipment for $929.
Net Cash Provided
by Financing Activities
Net
cash provided by financing activities was $1,027,395 for the year ended December 31, 2024, which primarily consisted of proceeds from
equity financing of $980,000 and related party advances of $880,000, partially offset by repayments of $825,000 to the related party and
$7,605 on an auto loan.
Net
cash provided by financing activities was $280,156 for the year ended December 31, 2023, which primarily consisted of proceeds from capital
contribution of $303,000, partially offset by dividend payments of $21,154 and repayments of $1,690 on an auto loan.
17
Contractual Obligations
Our
contractual obligations as of December 31, 2024 were as follows:
1 Year or Less More Than 1 Year Total
Off-Balance Sheet
Arrangements
We
did not have any off-balance sheet arrangements as of December 31, 2024 and 2023.
Trend Information
Other
than as disclosed elsewhere in this prospectus, we are not aware of any trends, uncertainties, demands, commitments, or events that are
reasonably likely to have a material effect on our revenue, income from operations, net income, liquidity, or capital resources, or that
would cause reported financial information not necessarily to be indicative of future operating results or financial condition.
Inflation
Inflation
and rising interest rates have significantly influenced the economic environment, impacting our operations and financial performance.
Monetary authorities, in response to heightened inflationary pressures, have raised interest rates, which has increased borrowing costs
and reduced the availability of financing. These changes have directly affected the real estate market by making mortgages less affordable
for potential homebuyers, leading to decreased demand for real estate. We continue to monitor inflation, monetary policy changes, and
their potential adverse effects on our business. Despite these challenges, higher interest rates have reduced competition among buyers,
creating opportunities for some to view this as an advantageous time to purchase real estate.
Critical Accounting
Policies and Estimates
Our
discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. These
financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the
reported amounts of our assets and liabilities and revenue and expenses, to disclose contingent assets and liabilities on the date of
the consolidated financial statements, and to disclose the reported amounts of revenue and expenses incurred during the financial reporting
period. We continue to evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these
evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those
estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We believe that the critical
accounting policies disclosed in this prospectus reflect the more significant judgments and estimates used in preparation of our consolidated
financial statements. Further, as an emerging growth company, we have elected to use the extended transition period for complying with
new or revised accounting standards that have different effective dates for emerging growth companies until the earlier of the date that
we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period
provided in the JOBS Act. As a result, these financial statements contained in our subsequent filings with the SEC may not be comparable
to other public companies.
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The
following critical accounting policies rely upon assumptions and estimates and were used in the preparation of our consolidated financial
statements:
Use of Estimates
The
preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the dates of the consolidated financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. These estimates and judgments include, but are not limited to, revenue recognition,
allowance for credit losses, income taxes, the useful lives of long-lived assets and assumptions used in assessing impairment of
long-lived assets. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Although actual amounts may differ from the estimated amounts, such differences are not likely to be material.
Revenue Recognition
In
accordance with ASC 606, “Revenue from Contracts with Customers,” revenue is recognized when a customer obtains control
of promised goods or services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to
receive in exchange for these goods or services. The Company recognizes revenues following the five-step model prescribed under ASU
No. 2014-09: (i) identifies contract(s) with a customer; (ii) identifies the performance obligations in the contract;
(iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations in the contract;
and (v) recognizes revenues when (or as) it satisfies the performance obligation.
The
Company derives its revenues primarily from real estate services and real estate purchases and sales through Cash Offer.
Real Estate Service
Revenue
The
Company’s real estate service revenue consists primarily of real estate agency commission for buying and selling properties for
clients, revenue generated from property management service, home renovation service, and mortgage referral service.
The
Company earns agency commission revenue, usually at a fixed percentage of property’s selling price, through facilitating the buy
or sale of various types of properties, including residential, commercial, and land parcels. The Company is considered an agent for these
services provided, and reports service revenue earned through these transactions on a net basis. Revenue is recognized when the agency
service is provided, usually at the closing of the escrow.
The Company’s CEO has owned his personal real estate salesperson
license since 2020 and obtained a personal real estate broker license on August 8, 2023. Prior to obtaining the broker license, the
Company performed real estate transactions as a sales agent under a real estate brokerage firm owned by an unrelated third party and earned
sales commissions at fixed rate. On November 17, 2023, Linkhome Realty obtained a real estate broker license for the Company. Thus,
the Company gradually transitioned from operating as a sales agent under a third-party real estate broker to a real estate broker
independently. This transition marks a significant shift in the Company’s business model, as it no longer relies on other firms
to conduct real estate transactions.
The
Company provides property management services, which include two primary activities: tenant placement and ongoing property management.
Tenant placement services involve marketing the property, identifying suitable tenants, and facilitating the rental agreement. For these
services, the Company acts as an agent and charges a rental commission, either as a percentage of the first year’s rent or a fixed
fee. Revenue from tenant placement is recognized at a point in time when a tenant is secured, and the lease contract is executed. Additionally,
the Company provides ongoing property management services, which may include collecting rent on behalf of the landlord, coordinating maintenance
and repairs, and addressing tenant inquiries during the lease term. For these services, the Company also acts as an agent and charges
a service fee. Revenue from ongoing property management is recognized over time as the services are rendered, as the landlord simultaneously
receives and consumes the benefits of the Company’s efforts.
The
Company also offers a full range of home renovation services, from bathroom and kitchen renovations to customized home renovations and
extensions, helping clients prepare their homes for sale or personalize newly purchased properties. The Company considers itself as a
principal for this service as it has control of the specified service at any time before it is transferred to the customer, which is evidenced
by (i) the Company is primarily responsible for fulfilling the promises to provide home renovation services meeting customer specifications,
and assumes fulfilment risk (i.e., risk that the performance obligation will not be satisfied); and (ii) the Company has discretion
in selecting third-party renovation contractors and establishing the price, and bears the risk for services that are not fully paid
for by customers. The renovation period is usually within one to three months; the Company recognizes revenue when the renovation
service is completed, on a gross basis with corresponding costs incurred.
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In
addition, the Company collaborates with lending institutions and mortgage brokers to assist clients in seeking and securing mortgage services,
and aiding clients in the process of obtaining loans or financing for property purchases. The Company receives a referral fee as a percentage
of the loan amount and recognizes revenue when the loan is approved.
Revenue from Property
Purchases and Sales through Cash Offer
The
Company’s revenue from purchases and sales through Cash Offer consists primarily of the Company’s purchasing a hot property
in cash and then selling it to a customer. The Company purchases a property in cash with ownership transferred to Linkhome Realty. Subsequently,
Linkhome Realty sells the property to the customer within a short period of time. Both purchase and sales transactions go through an escrow
company. The Company is the principal of these transactions and recognizes revenue and cost when the property purchased is sold and escrow
is closed. This type of revenue does not contain a financing component due to there being no difference between the amount of promised
consideration and the cash selling price of the promised goods or services, and the length of time between when the Company transfers
the promised goods or services to the customer and when the customer pays for those goods is very short, usually within a few weeks
or a few months.
Credit Losses
On
January 1, 2023, the Company adopted ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments” (“ASC 326”). This standard replaced the incurred loss methodology with an expected
loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of
credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable
and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity
debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured
at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. In addition, CECL
made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as
an allowance rather than as a write-down on available-for-sale debt securities if management does not intend to sell and does not believe
that it is more likely than not they will be required to sell.
The
Company adopted ASC 326 and all related subsequent amendments thereto effective January 1, 2023, using the modified retrospective approach
for all financial assets measured at amortized cost and off-balance sheet credit exposures. The was no transition adjustment of the adoption
of CECL.
The
Company’s accounts receivable and prepaid expense in the consolidated balance sheets are within the scope of ASC Topic 326. As the
Company has limited customers and debtors, the Company uses the loss-rate method to evaluate the expected credit losses on an individual
basis. When establishing the loss rate, the Company makes the assessment on various factors, including historical experience, creditworthiness
of customers and debtors, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors
that may affect its ability to collect from the customers and debtors. The Company also provides specific provisions for allowance when
facts and circumstances indicate that the receivable is unlikely to be collected.
Expected
credit losses are recorded as an allowance for credit losses, which is netted against accounts receivable in the consolidated balance
sheets, and are recognized as an expense in the consolidated statements of income. Receivables are written off against the allowance when
all collection efforts have been exhausted and recovery is deemed remote. If the Company recovers amounts that were previously written
off, the recovered amounts are recognized as a reduction to the provision for credit losses in the consolidated statements of income.
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Accounts Receivable,
Net
Accounts
receivable represent the amounts that the Company has an unconditional right to consideration, which are stated at the historical carrying
amount net of allowance for credit losses. The Company maintains allowances for credit losses for estimated losses. The Company reviews
the accounts receivable on a periodic basis and makes allowances when there is doubt as to the collectability of individual balances.
In evaluating the collectability of individual receivable balances, the Company considers many factors, including historical losses, the
age of the receivable balance, the customer’s historical payment pattens and creditworthiness, current economic conditions, and
reasonable and supportable forecasts of future economic conditions. Accounts are written off against the allowance after all means of
collection have been exhausted and the potential for recovery is considered remote. As of December 31, 2024 and 2023, the Company
had allowances for credit losses of $0 and $9,092, respectively.
Impairment of Long-lived Assets
Long-lived assets,
which include property, plant and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances
indicate the carrying amount of an asset may not be recoverable. The recoverability of long-lived assets to be held and used is measured
by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If
the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount
by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s
expected future discounted cash flows or market value, if readily determinable.
The
Company evaluates events and changes in circumstances that could indicate the carrying amounts of long-lived assets may not be recoverable.
When such events or changes in circumstances occur, the Company assesses the recoverability of long-lived assets by determining whether
the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future undiscounted
cash flows is less than the carrying amount of those assets, the Company records an impairment charge in the period in which such a determination
is made. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Based on the above analysis, no impairment loss was recognized related to these
assets for the years ended December 31, 2024 and 2023.
Income Taxes
The
Company uses the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740, “Income Taxes.”
Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current period and
(ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial
statements or tax returns. Deferred tax assets also include the prior years’ net operating losses carried forward. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred
tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or
all of the deferred tax assets will not be realized.
The