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 Annual Report on Form 10-K. 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 Annual Report on Form 10-K.
This
Annual Report on Form 10-K 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,” “we,” “our,” or “us”)
is a holding company incorporated in the State of Nevada on November 6, 2023. The Company conducts substantially all of its operations
through its wholly owned subsidiary, Linkhome Realty Group, a California corporation (“Linkhome Realty”).
Headquartered in Irvine,
California, the Company currently focuses on the California markets and is gradually expanding its operations into additional markets
across the United States.
Linkhome is developing
an artificial intelligence–enabled real estate services platform designed to improve the efficiency, transparency and accessibility
of residential real estate transactions. Our platform integrates traditional real estate brokerage services with technology-driven tools
that streamline property search, transaction coordination and related services for homebuyers and sellers.
Through our operating
subsidiary, Linkhome Realty, we provide a range of real estate-related services, including residential real estate brokerage services,
fintech-enabled services, property management services and mortgage advisory services. Our objective is to provide clients with a comprehensive
service ecosystem that supports multiple stages of the real estate transaction lifecycle.
In addition, as part
of our fintech initiatives, we operate a Cash Offer program designed to help homebuyers compete more effectively in competitive real estate
markets by enabling them to present all-cash offers on properties. Under this program, the Company may temporarily acquire residential
properties using its own capital and subsequently transfer those properties to the end buyer within a short period of time. We believe
this program enhances our ability to attract clients and facilitates more efficient real estate transactions.
Historically, funding
for the Cash Offer program primarily came from investments made by our Chief Executive Officer and other shareholders. Following our initial
public offering in 2025, we expect to continue expanding the program using a combination of available capital, operating cash flows and
other financing sources.
Our long-term strategy
is to continue developing a technology-driven real estate platform that integrates artificial intelligence with real estate and financial
services, enabling us to improve transaction efficiency, expand our service capabilities and support the long-term growth of our business.
28
Technology and AI
Platform Strategy
We are developing an
artificial intelligence–enabled real estate platform designed to enhance the efficiency, transparency and accessibility of residential
real estate transactions. Our technology strategy focuses on integrating data, artificial intelligence and digital tools into the real
estate transaction process to improve property discovery, transaction coordination and client engagement.
Our platform is designed
to support multiple stages of the real estate transaction lifecycle, including property search, client matching, transaction management
and related financial services. By leveraging artificial intelligence and data analytics, we aim to provide users with more relevant property
information, improve transaction efficiency and enhance the overall customer experience.
Over time, we intend
to expand the capabilities of our platform to include additional technology-enabled services, such as automated property analysis, intelligent
client matching and digital transaction management tools. We believe that integrating technology with traditional real estate services
will enable us to scale our operations more efficiently and strengthen our competitive position in the real estate market.
Our long-term objective
is to build a technology-driven real estate platform that connects property search, brokerage services and financial services within a
unified ecosystem. We believe this approach will enable us to create a more streamlined and transparent path to homeownership while supporting
the long-term growth of our business.
Fintech-Enabled Cash
Offer Program
In competitive housing
markets, sellers often prefer offers that are not contingent on mortgage financing. As part of our fintech-enabled services, we operate
a Cash Offer program designed to help clients present all-cash offers on residential properties, which may increase the likelihood that
their offers are accepted.
Under this program, the
Company may temporarily acquire a residential property using its own capital and subsequently transfer the property to the client once
the client’s financing is finalized. These transactions are typically completed within a short time frame.
We believe our Cash Offer
program represents a fintech-enabled solution within the residential real estate transaction process, providing several strategic benefits:
● improves our clients’ competitiveness in fast-moving housing markets
● enhances transaction efficiency for buyers and sellers
● expands our ability to generate transaction-based revenue
● strengthens client acquisition for our real estate services platform
Key Factors that Affect Our Results of Operations
29
Related Party Transactions
Related Parties
The
following individuals are considered related parties due to their roles and shareholding in the Company:
● Haiyan Ma: The Company’s shareholder.
For the Years Ended
December 31, 2025 and 2024
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, 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, 2025, the Company provided real estate agency services to Na Li, assisting with the sale of one property.
The Company earned $126,000 in real estate agency commission from Na Li but paid a referral fee of $28,440 to Haiyan Ma for introducing
the buyer, resulting in net revenue of $97,560 recognized by the Company.
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.
30
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.
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 real estate agency commission
of $15,550 in total.
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, 2025, the Company incurred commission expenses of $45,000 paid to Na Li in connection with real estate transactions.
This amount was recorded in cost of revenues.
As of December
31, 2025 and 2024
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, 2025, the Company had fully repaid
the outstanding balance to Zhen Qin, resulting in no amount due to the related party. As of December 31, 2024, the Company had repaid
$475,000 to Zhen Qin, leaving 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
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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
the Cash Offer program, we facilitate cash offers for clients and may temporarily acquire properties before transferring them to the clients
within a short period of time. Our property purchases and sales through Cash Offer primarily involve residential properties.
Revenue
from property purchases and sales through our Cash Offer program accounted for 96.00% and 86.25% of net revenues for the years ended December
31, 2025 and 2024, respectively. Our revenue from this program increased by $13,585,858, or 206.84%, from $6,568,404 for the year ended
December 31, 2024 to $20,154,262 for the year ended December 31, 2025.
For
the years ended December 31, 2025 and 2024, we completed 20 and 6 property transactions, respectively, through the Cash Offer program.
The increase in revenue was primarily driven by the higher number of transactions and increased transaction volume. The average transaction
price was approximately $1.02 million and $1.08 million for the years ended December 31, 2025 and 2024, respectively.
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 4.00% and 13.75% of net revenues for the years ended December 31, 2025 and 2024, respectively. Real
estate service revenue decreased by $206,818, or 19.76%, from $1,046,903 for the year ended December 31, 2024 to $840,085 for the year
ended December 31, 2025, primarily due to decreases in real estate agency commissions and home renovation service revenue, partially offset
by increases in property management and mortgage referral services.
Real
estate agency commission revenue decreased by $123,437, or 15.80%, from $781,351 for the year ended December 31, 2024 to $657,914 for
the year ended December 31, 2025. The decrease was primarily driven by a decrease in the number of real estate transactions and overall
transaction volume. For the year ended December 31, 2025, we completed 22 real estate transactions with total transaction volume of approximately
$29.5 million, compared to 46 transactions with total transaction volume of approximately $48.6 million for the year ended December 31,
2024. The average transaction price increased from approximately $1.06 million in 2024 to $1.34 million in 2025. Gross commissions were
partially offset by client rebates, which were $169,946 and $208,125 for the years ended December 31, 2025 and 2024, respectively, representing
approximately 20.53% and 21.03% of gross commissions for the respective periods.
Revenue
from home renovation services decreased by $162,457, or 66.25%, from $245,226 for the year ended December 31, 2024 to $82,769 for the
year ended December 31, 2025. The decrease was primarily attributable to a lower number of renovation projects. We completed three renovation
projects in 2025, compared to 15 renovation projects in 2024.
Revenue
from mortgage referral services increased by $60,204, or 1,486.52%, from $4,050 for the year ended December 31, 2024 to $64,254 for the
year ended December 31, 2025. The increase was primarily driven by an increase in the number of mortgage referrals. We assisted 12 clients
in securing mortgage loans in 2025, compared to one client in 2024.
Revenue
from property management services increased by $18,872, or 115.95%, from $16,276 for the year ended December 31, 2024 to $35,148 for the
year ended December 31, 2025. The increase was primarily attributable to growth in tenant placement services and the number of properties
under ongoing property management. We completed 10 tenant placements in 2025, compared to nine tenant placements in 2024. In addition,
the number of properties under ongoing property management increased to six properties as of December 31, 2025, compared to three properties
as of December 31, 2024.
32
Cost of Revenues
Our
cost of revenues consists primarily of (i) costs related to property purchases made through the Cash Offer program, which properties are
subsequently sold to customers, and (ii) costs associated with real estate services, including commission expenses for real estate agents
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 $14,075,932, or 237.41%, from $5,928,865 for the year ended December 31,
2024 to $20,004,797 for the year ended December 31, 2025. The increase was primarily driven by a higher volume of Cash Offer transactions
in 2025 compared to 2024.
Cost
of real estate services remained relatively stable, increasing by $472, from $216,061 for the year ended December 31, 2024 to $216,533
for the year ended December 31, 2025. The change in cost of real estate services was primarily attributable to higher real estate agency
service costs, partially offset by lower home renovation service costs. Real estate agency service costs increased from $12,926 in 2024
to $146,810 in 2025, primarily due to increased commission expenses associated with real estate agency transactions. In contrast, home
renovation service costs decreased from $201,017 in 2024 to $69,724 in 2025, reflecting the lower number of renovation projects in 2025
compared to 2024.
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 to increase in absolute amounts as we continue to expand our marketing activities; however,
we expect selling expenses as a percentage of net revenues to remain relatively stable or decrease over time as our revenues grow.
Our
general and administrative expenses primarily consist of professional service costs, payroll and payroll-related costs, rent and other
overhead costs. As a public company, we expect to incur additional costs associated with regulatory compliance, legal, accounting and
other professional services. While these costs may increase our general and administrative expenses in absolute amounts, we expect our
general and administrative expenses as a percentage of net revenues to decrease over the long term as we continue to scale our operations
and improve operating efficiency.
33
Results of Operations
Comparison of the
Years Ended December 31, 2025 and 2024
The
following table summarized our consolidated results of operations for the years ended December 31, 2025 and 2024:
Years Ended December 31,
2025 % of Revenues 2024 % of Revenues Change Percentage Change
Operating expenses
Net Revenues
Net
revenues for the years ended December 31, 2025 and 2024 were $20,994,347 and $7,615,307, respectively, representing an increase of $13,379,040,
or 175.69%. This increase was primarily driven by a $13,585,858 increase in revenue from property purchases and sales through Cash Offer,
partially offset by a $206,818 decrease in real estate service revenue. The growth in Cash Offer revenue was primarily attributable to
a higher number of property transactions completed through the Cash Offer program in 2025 compared to 2024.
Cost of Revenues
Years Ended December 31,
As a percentage of net revenues 96.32 % 80.69 %
Cost
of revenues for the years ended December 31, 2025 and 2024 was $20,221,330 and $6,144,926, respectively, representing an increase of $14,076,404,
or 229.07%. The increase was primarily driven by higher costs associated with property purchases and sales through the Cash Offer program
as the number and value of Cash Offer transactions increased significantly in 2025 compared to 2024. Cost of real estate services remained
relatively stable, increasing slightly from $216,061 in 2024 to $216,533 in 2025.
34
Gross Profit and
Gross Margin
Years Ended December 31,
Gross Profit Gross Margin Gross Profit Gross Margin
Gross
profit for the years ended December 31, 2025 and 2024 was $773,017 and $1,470,381, respectively, representing a decrease of $697,364,
or 47.43%. The blended gross margin was 3.68% for the year ended December 31, 2025, compared to 19.31% for the year ended December 31,
2024. The decrease in gross margin was primarily attributable to lower margins on property purchases and sales through the Cash Offer
program as the Company significantly increased transaction volume in 2025.
Gross
profit from property purchases and sales through the Cash Offer program decreased to $149,465 in 2025, compared to $639,539 in 2024, primarily
due to lower margins on these transactions. Gross profit from real estate services decreased from $830,842 in 2024 to $623,552 in 2025,
primarily due to lower home renovation service revenue and lower real estate agency commission revenue.
Selling Expenses
Selling
expenses for the years ended December 31, 2025 and 2024 were $34,141 and $15,754, respectively, representing an increase of $18,387, or
116.71%. The increase was primarily attributable to higher advertising and marketing expenditures as the Company continued to expand its
marketing efforts to support the growth of its real estate transaction volume.
General and Administrative
Expenses
The
following table summarized our general and administrative expenses for the years ended December 31, 2025 and 2024:
Years Ended December 31,
As a percentage of net revenues 3.16 % 4.80 %
General
and administrative expenses for the years ended December 31, 2025 and 2024 were $662,444 and $365,207, respectively, representing an increase
of $297,237, or 81.39%. The increase was primarily driven by higher legal and accounting expenses, rent expenses, payroll and payroll
tax expenses, depreciation and amortization expenses, and other general and administrative expenses.
35
Legal
and accounting expenses increased by $118,887, primarily due to additional costs associated with regulatory compliance, legal, accounting
and other professional services following the Company’s initial public offering. Rent expenses increased by $61,998, primarily due
to the Company relocating to a new office in 2025 with higher lease costs, as well as additional technology-related lease arrangements.
Payroll and payroll tax expenses increased by $31,252, primarily due to the hiring of additional employees. Depreciation and amortization
expenses increased by $28,240, primarily due to purchases of furniture, leasehold improvements, and the capitalization and amortization
of internally developed software, including the Company’s website and mobile application. Other general and administrative expenses
increased by $56,860, primarily due to higher administrative and operational costs associated with the expansion of the Company’s
business activities.
Other Income (Expenses),
Net
Other
income (expenses), net was income of $49,775 for the year ended December 31, 2025, compared to expense of $1,832 for the year ended December
31, 2024. Other income in 2025 primarily consisted of interest income and other miscellaneous income, partially offset by interest expense
and realized loss on trading securities. Other expenses in 2024 primarily consisted of interest expense, partially offset by credit card
rebates and bank rewards.
Income Tax Expense
Income
tax expense for the years ended December 31, 2025 and 2024 were $51,333 and $309,352, respectively, representing a decrease of $258,019,
or 83.41%. The decrease in income tax expense was primarily attributable to lower net income before income taxes in 2025.
Net Income
Net
income for the years ended December 31, 2025 and 2024 were $74,874 and $778,236, respectively, representing a decrease of $703,362, or
90.38%. The decrease in net income was primarily attributable to lower gross profit in 2025, partially offset by the increase in net revenues.
Liquidity and Capital
Resources
Historically,
the Company has funded its operations and working capital requirements primarily through operating cash flows, shareholder contributions
and equity financing.
Our
liquidity position improved significantly during 2025, primarily due to proceeds from the issuance of common stock in connection with
our initial public offering. As of December 31, 2025, the Company had cash and cash equivalents of $7,018,931, compared to $1,670,949
as of December 31, 2024.
We
believe that our current cash position and expected operating cash flows will be sufficient to meet our working capital and operating
requirements for at least the next twelve months from the date of issuance of the consolidated financial statements.
However,
as we continue to expand our business, including potential investments in technology development and real estate transaction activities,
we may seek additional financing from time to time. Such financing may include equity financing, debt financing or other strategic funding
sources.
Any
financing involving the issuance of equity securities or securities convertible into equity could result in dilution to our existing stockholders.
36
Cash Flows For
the Years Ended December 31, 2025 and 2024
As
of December 31, 2025, we had cash and cash equivalents of $7,018,931, other current assets of $128,235, current liabilities of $2,082,601,
net working capital of $5,064,565, and a current ratio of 3.43:1. 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.
The
following table presented a summary of our cash flows for the years ended December 31, 2025 and 2024:
Net cash provided by operating activities $ 524,430 $ 694,655
Net cash used in investing activities (927,726 ) (3,513 )
Net Cash Provided
by Operating Activities
Net
cash provided by operating activities was $524,430 for the year ended December 31, 2025, primarily derived from (i) net income of $74,874,
adjusted for non-cash items including lease expense of $108,570, depreciation and amortization of $47,002, and a realized loss on trading
securities of $2,651, partially offset by deferred tax benefit of $742, and (ii) net changes in operating assets and liabilities as of
December 31, 2025 compared to December 31, 2024, primarily consisting of (a) an increase in other current liabilities of $1,040,459, (b)
a decrease in real estate held for sale of $907,061, (c) an increase in accounts payable of $72,435, and (d) a decrease in prepaid expenses
and other receivables of $9,712, partially offset by (a) a decrease in operating lease liabilities of $999,140, (b) an increase in long-term
prepaid expenses of $617,625, (c) an increase in accounts receivable of $91,808, and (d) an increase in security deposits of $29,019.
Net
cash provided by operating activities was $694,655 for the year ended December 31, 2024, primarily derived from (i) net income of
$778,236, adjusted for non-cash items 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 other current liabilities of $820,575 and (b) an increase in accounts
payable of $4,597, partially offset by (a) an increase in real estate held for sale of $907,061, (b) a decrease in operating
lease liabilities of $45,062, (c) an increase in accounts receivable of $8,676, and (d) an increase in prepaid expenses and other
receivables of $2,971.
Net
cash provided by operating activities was $524,430 for the year ended December 31, 2025, compared to $694,655 for the year ended December
31, 2024, representing a decrease in cash inflow of $170,225. This decrease was primarily due to (i) an increase in cash outflow of $954,078
on operating lease liabilities, (ii) an increase in cash outflow of $617,625 on long-term prepaid expenses, (iii) a decrease in cash inflow
of $600,898 on net income adjusted for noncash items, (iv) a decrease in cash inflow of $83,132 on accounts receivable, and (v) an increase
in cash outflow of $29,019 on security deposits, partially offset by (i) a decrease in cash outflow of $1,814,122 on real estate held
for sale, (ii) a decrease in cash outflow of $219,884 on other current liabilities, (iii) a decrease in cash outflow of $67,838 on
accounts payable, and (iv) a decrease in cash outflow of $12,683 on prepaid expenses.
Net Cash Used in Investing
Activities
Net
cash used in investing activities was $927,726 for the year ended December 31, 2025, which primarily consisted of capitalized internally
developed software and other intangible assets of $571,425, purchases of property and equipment of $303,650, purchases of trading securities
of $274,718, and an investment under the cost method of $50,000, partially offset by proceeds from the sale of trading securities of $272,067.
Net
cash used in investing activities was $3,513 for the year ended December 31, 2024, which primarily consisted of purchases of property
and equipment of $2,064 and purchases of trademarks of $1,449.
37
Net Cash Provided
by Financing Activities
Net
cash provided by financing activities was $5,751,278 for the year ended December 31, 2025, which primarily consisted of proceeds from
the issuance of common stock of $6,203,000 and proceeds from related party advances of $465,347, partially offset by repayments of related
party advances of $520,347, payment of offering costs of $388,624, and repayments of auto loan principal of $8,098.
Net
cash provided by financing activities was $327,896 for the year ended December 31, 2024, which primarily consisted of proceeds from equity
financing of $980,000 and proceeds from related party advances of $880,000, partially offset by repayments of related party advances of
$825,000, payment of offering costs of $699,499, and repayments of auto loan principal of $7,605.
Contractual Obligations
Our
contractual obligations as of December 31, 2025 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, 2025 and 2024.
Trend Information
Other
than as disclosed elsewhere in this Annual Report on Form 10-K, 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,
which may create opportunities for certain buyers in the real estate market.
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 Annual Report on Form 10-K 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.
38
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.
Prior to November 17, 2023, the Company conducted real estate transactions
through a licensed third-party brokerage firm. On November 17, 2023, Linkhome Realty obtained its own real estate broker license, allowing
the Company to conduct brokerage transactions independently.
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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.
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. Revenue is recognized when the related loan transaction is completed and the Company becomes entitled
to the referral fee.
Revenue from Property
Purchases and Sales through Cash Offer
The Company’s revenue from purchases and sales through its Cash
Offer program primarily consists of purchasing residential properties and subsequently reselling those properties to customers within
a short period of time. Under the Cash Offer program, the Company may purchase residential properties using its own capital, with title
transferred to Linkhome Realty, and subsequently resell the properties to customers. 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. There was no transition adjustment upon the
adoption of CECL.
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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.
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, 2025 and 2024, the Company had no allowances for credit losses.
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, 2025 and 2024.
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.
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The
Company follows FASB ASC Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. FASB ASC Topic 740 also provides guidance on recognition of income tax
assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties
associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures.
Under
the provisions of FASB ASC Topic 740, when tax returns are filed, it is likely some positions taken would be sustained upon examination
by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position
that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which,
based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination,
including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more
than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated
with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits
in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon
examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling,
general and administrative expenses in the statements of income. For the years ended December 31, 2025 and 2024, the Company did not take
any uncertain positions that would necessitate recording a tax related liability.
Prior
to January 1, 2024, Linkhome Realty filed its income tax return under Subchapter S of the Internal Revenue Code (“IRS”) as
a S-corporation, and elected to be taxed as a pass-through entity, for which the income, losses, deductions, and credits flow through
to the shareholders of the company for federal income tax purposes. Effective January 1, 2024, Linkhome Realty’s tax status became
C-corporation, and is subject to a federal income tax rate of 21% and California state income tax rate of 8.84%. As a parent holding company
of Linkhome Realty, Linkhome Holdings was incorporated in the State of Nevada on November 6, 2023, and is only subject to a federal income
tax rate of 21%. Effective for the tax year beginning January 1, 2024, and continuing thereafter unless revoked, Linkhome Holdings and
Linkhome Realty have elected to file a consolidated federal income tax return.
New Accounting Pronouncements
The Company considers the
applicability and impact of all ASUs and periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business
Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company
and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these
accounting standards until they would apply to private companies.
Recently Adopted Accounting Pronouncements
In November 2023, the FASB
issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The amendments in the
ASU are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment
expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit
or loss. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple
segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain