EX-99.1 2 ex99-1.htm

Exhibit 99.1

NOTICE TO READER

The Real Brokerage Inc. (the Company) adopted U.S. GAAP as issued by the Financial Accounting Standards Board (FASB) as the basis of preparation for the consolidated financial statements for the period ended December 31, 2024.

As required pursuant to section 4.3(4) of National Instrument 51-102 - Continuous Disclosure Obligations of the Canadian Securities Administrators, the Company must re-present its interim financial reports for the year ended December 31, 2024 in accordance with GAAP, such interim financial reports having previously been prepared in accordance with the International Financial Reporting Standards as issued by the International Accounting Standards Board.

The attached re-presented unaudited interim condensed consolidated financial statements for the period ended June 30, 2024 (Q2 2024 Interim Financial Statements) have been prepared in accordance with GAAP and provide financial information for the period ended June 30, 2024, as re-presented on March 6, 2025. Other than as expressly set forth above, the Q2 2024 Interim Financial Statements do not, and do not purport to, update or re-present the information in the original unaudited interim condensed consolidated financial statements or reflect any events that occurred after the date of the filing of the original unaudited interim condensed consolidated financial statements.

The Company’s Annual Report on Form 40-F for the year ended December 31, 2024 (2024 40-F), filed on March 6, 2025, is available under the Company’s profile on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov. Readers are cautioned that these Q2 2024 Interim Financial Statements should be read in conjunction with the 2023 consolidated financial statements, presented as comparative information to the audited consolidated financial statements for the year ended December 31, 2024 included in the 2024 40-F.

Table of Contents

Interim Condensed Consolidated Financial Statements (Unaudited):

Interim Condensed Consolidated Balance Sheets | 2
Interim Condensed Consolidated Statements of Comprehensive Loss | 3
Interim Condensed Consolidated Statements of Changes in Equity | 4
Interim Condensed Consolidated Statement of Cash Flows | 5
Notes to the Interim Condensed Consolidated Financial Statements | 6-19

1

THE REAL BROKERAGE INC.

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of U.S. dollars)

UNAUDITED

|  | As of |
|  | June 30, 2024 |  |  | December 31, 2023 |
ASSETS |  |  |  |  |  |  |  |
CURRENT ASSETS |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 23,316 |  |  | $ | 14,707 |
Restricted cash |  |  | 33,124 |  |  |  | 12,948 |
Funds held in restricted escrow account |  |  | 9,250 |  |  |  | - |
Investments in financial assets |  |  | 10,276 |  |  |  | 14,222 |
Trade receivables |  |  | 18,631 |  |  |  | 6,441 |
Other receivables |  |  | 56 |  |  |  | 63 |
Prepaid expenses and deposits |  |  | 1,541 |  |  |  | 2,132 |
TOTAL CURRENT ASSETS |  |  | 96,194 |  |  |  | 50,513 |
NON-CURRENT ASSETS |  |  |  |  |  |  |  |
Intangible assets |  |  | 2,996 |  |  |  | 3,442 |
Goodwill |  |  | 8,993 |  |  |  | 8,993 |
Property and equipment |  |  | 1,977 |  |  |  | 1,600 |
TOTAL NON-CURRENT ASSETS |  |  | 13,966 |  |  |  | 14,035 |
TOTAL ASSETS |  |  | 110,160 |  |  |  | 64,548 |
LIABILITIES AND EQUITY |  |  |  |  |  |  |  |
CURRENT LIABILITIES |  |  |  |  |  |  |  |
Accounts payable |  |  | 1,196 |  |  |  | 571 |
Accrued liabilities |  |  | 33,629 |  |  |  | 13,374 |
Customer deposits |  |  | 33,124 |  |  |  | 12,948 |
Other payables |  |  | 11,028 |  |  |  | 302 |
Warrants liability |  |  | 356 |  |  |  | - |
TOTAL CURRENT LIABILITIES |  |  | 79,333 |  |  |  | 27,195 |
NON-CURRENT LIABILITIES |  |  |  |  |  |  |  |
Warrants liability |  |  | - |  |  |  | 269 |
TOTAL NON-CURRENT LIABILITIES |  |  | - |  |  |  | 269 |
TOTAL LIABILITIES |  |  | 79,333 |  |  |  | 27,464 |
Commitments and contingencies |  |  |  |  |  |  |  |
EQUITY |  |  |  |  |  |  |  |
EQUITY ATTRIBUTABLE TO OWNERS |  |  |  |  |  |  |  |
Common Shares, $0 par value, unlimited Common Shares authorized, 194,496 Shares issued and 191,869 outstanding (in thousands) at June 30, 2024; and 183,605 Shares issued and 183,430 outstanding (in thousands) at December 31, 2023 |  |  | - |  |  |  | - |
Additional paid-in capital |  |  | 136,095 |  |  |  | 115,504 |
Deficit |  |  | (95,517 | ) |  |  | (78,205 | )
Accumulated other comprehensive income (loss) |  |  | 422 |  |  |  | (167 | )
Treasury stock, at cost, 2,627 and 175 Common Shares (in thousands) at June 30, 2024 and December 31, 2023, respectively |  |  | (10,435 | ) |  |  | (257 | )
EQUITY ATTRIBUTABLE TO OWNERS |  |  | 30,565 |  |  |  | 36,875 |
Non-controlling interests |  |  | 262 |  |  |  | 209 |
TOTAL EQUITY |  |  | 30,827 |  |  |  | 37,084 |
TOTAL LIABILITIES AND EQUITY |  |  | 110,160 |  |  |  | 64,548 |

The accompanying notes form an integral part of the condensed consolidated financial statements.

2

THE REAL BROKERAGE INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Expressed in thousands of U.S. dollars, except for per share amounts)

UNAUDITED

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Revenues |  | $ | 340,778 |  |  | $ | 185,332 |  |  | $ | 541,521 |  |  | $ | 293,177 |
Cost of Sales |  |  | 308,910 |  |  |  | 167,573 |  |  |  | 488,894 |  |  |  | 264,610 |
Gross Profit |  |  | 31,868 |  |  |  | 17,759 |  |  |  | 52,627 |  |  |  | 28,567 |
General and administrative expenses |  |  | 14,015 |  |  |  | 9,654 |  |  |  | 26,151 |  |  |  | 18,292 |
Marketing expenses |  |  | 15,889 |  |  |  | 10,266 |  |  |  | 28,518 |  |  |  | 17,950 |
Research and development expenses |  |  | 2,608 |  |  |  | 1,579 |  |  |  | 5,070 |  |  |  | 3,103 |
Settlement of litigation |  |  | - |  |  |  | - |  |  |  | 9,250 |  |  |  | - |
Operating Expenses |  |  | 32,512 |  |  |  | 21,499 |  |  |  | 68,989 |  |  |  | 39,345 |
Operating Loss |  |  | (644 | ) |  |  | (3,740 | ) |  |  | (16,362 | ) |  |  | (10,778 | )
Other income (expenses), net |  |  | 57 |  |  |  | 40 |  |  |  | 230 |  |  |  | 68 |
Finance expenses, net |  |  | (523 | ) |  |  | (272 | ) |  |  | (1,075 | ) |  |  | (577 | )
Net Loss |  |  | (1,110 | ) |  |  | (3,972 | ) |  |  | (17,207 | ) |  |  | (11,287 | )
Net income attributable to noncontrolling interests |  |  | 105 |  |  |  | 146 |  |  |  | 105 |  |  |  | 226 |
Net Loss Attributable to the Owners of the Company |  |  | (1,215 | ) |  |  | (4,118 | ) |  |  | (17,312 | ) |  |  | (11,513 | )
Other comprehensive income/(loss), Items that will be reclassified subsequently to profit or loss: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Unrealized gain on investments in financial assets |  |  | 51 |  |  |  | 42 |  |  |  | 94 |  |  |  | 135 |
Foreign currency translation adjustment |  |  | 376 |  |  |  | (85 | ) |  |  | 495 |  |  |  | 62 |
Total Comprehensive Loss Attributable to Owners of the Company |  |  | (788 | ) |  |  | (4,161 | ) |  |  | (16,723 | ) |  |  | (11,316 | )
Total Comprehensive Income Attributable to Non-Controlling Interest |  |  | 105 |  |  |  | 146 |  |  |  | 105 |  |  |  | 226 |
Total Comprehensive Loss |  |  | (683 | ) |  |  | (4,015 | ) |  |  | (16,618 | ) |  |  | (11,090 | )
Loss per share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic and diluted loss per share |  |  | (0.01 | ) |  |  | (0.02 | ) |  |  | (0.09 | ) |  |  | (0.06 | )
Weighted-average shares, basic and diluted |  |  | 189,046 |  |  |  | 179,764 |  |  |  | 186,568 |  |  |  | 178,252 |

The accompanying notes form an integral part of the condensed consolidated financial statements.

3

THE REAL BROKERAGE INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(U.S. dollar in thousands)

UNAUDITED

|  | Additional Paid-in Capital |  |  | Deficit |  |  | Accumulated Other Comprehensive Income (Loss) |  |  | Treasury Stock |  |  | Equity Attributable to Owners |  |  | Non-Controlling Interests |  |  | Total Equity |
Balance at, January 1, 2024 |  |  | 115,504 |  |  |  | (78,205 | ) |  |  | (167 | ) |  |  | (257 | ) |  |  | 36,875 |  |  |  | 209 |  |  |  | 37,084 |
Total net income (loss) |  |  | - |  |  |  | (17,312 | ) |  |  | - |  |  |  | - |  |  |  | (17,312 | ) |  |  | 105 |  |  |  | (17,207 | )
Total other comprehensive income |  |  | - |  |  |  | - |  |  |  | 589 |  |  |  | - |  |  |  | 589 |  |  |  | - |  |  |  | 589 |
Distributions to non-controlling interests |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (52 | ) |  |  | (52 | )
Acquisition of commons shares for Restricted Share Unit (RSU) Plan |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (15,226 | ) |  |  | (15,226 | ) |  |  | - |  |  |  | (15,226 | )
Release of treasury shares |  |  | (5,048 | ) |  |  | - |  |  |  | - |  |  |  | 5,048 |  |  |  | - |  |  |  | - |  |  |  | - |
Exercise of stock options |  |  | 3,623 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3,623 |  |  |  | - |  |  |  | 3,623 |
Exercise of warrants |  |  | 377 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 377 |  |  |  | - |  |  |  | 377 |
Shares withheld for taxes |  |  | (741 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (741 | ) |  |  | - |  |  |  | (741 | )
Equity-settled share-based payment |  |  | 22,380 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 22,380 |  |  |  | - |  |  |  | 22,380 |
Balance at, June 30, 2024 |  |  | 136,095 |  |  |  | (95,517 | ) |  |  | 422 |  |  |  | (10,435 | ) |  |  | 30,565 |  |  |  | 262 |  |  |  | 30,827 |
Balance at, January 1, 2023 |  |  | 94,531 |  |  |  | (50,704 | ) |  |  | (469 | ) |  |  | (14,962 | ) |  |  | 28,396 |  |  |  | 263 |  |  |  | 28,659 |
Total net income (loss) |  |  | - |  |  |  | (11,513 | ) |  |  | - |  |  |  | - |  |  |  | (11,513 | ) |  |  | 226 |  |  |  | (11,287 | )
Total other comprehensive income |  |  | - |  |  |  | - |  |  |  | 197 |  |  |  | - |  |  |  | 197 |  |  |  | - |  |  |  | 197 |
Acquisition of commons shares for Restricted Share Unit (RSU) Plan |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,411 | ) |  |  | (1,411 | ) |  |  | - |  |  |  | (1,411 | )
Release of treasury shares |  |  | (12,045 | ) |  |  | - |  |  |  | - |  |  |  | 12,045 |  |  |  | - |  |  |  | - |  |  |  | - |
Exercise of stock options |  |  | 212 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 212 |  |  |  | - |  |  |  | 212 |
Equity-settled share-based payment |  |  | 11,836 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 11,836 |  |  |  | - |  |  |  | 11,836 |
Balance at, June 30, 2023 |  |  | 94,534 |  |  |  | (62,217 | ) |  |  | (272 | ) |  |  | (4,328 | ) |  |  | 27,717 |  |  |  | 489 |  |  |  | 28,206 |

The accompanying notes form an integral part of the condensed consolidated financial statements.

4

THE REAL BROKERAGE INC.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(U.S. dollar in thousands)

UNAUDITED

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
OPERATING ACTIVITIES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net Loss |  | $ | (1,110 | ) |  | $ | (3,972 | ) |  | $ | (17,207 | ) |  | $ | (11,287 | )
Adjustments for: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 340 |  |  |  | 284 |  |  |  | 666 |  |  |  | 553 |
Equity-settled share-based payment |  |  | 13,536 |  |  |  | 6,075 |  |  |  | 22,380 |  |  |  | 11,836 |
Finance costs |  |  | 71 |  |  |  | (7 | ) |  |  | 200 |  |  |  | 218 |
Changes in fair value of warrants liability |  |  | 200 |  |  |  | 123 |  |  |  | 471 |  |  |  | 81 |
Changes in operating asset and liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Funds Held in Restricted Escrow Account |  |  | (9,250 | ) |  |  | - |  |  |  | (9,250 | ) |  |  | - |
Trade receivables |  |  | (9,096 | ) |  |  | (526 | ) |  |  | (12,190 | ) |  |  | (378 | )
Other receivables |  |  | 34 |  |  |  | 23 |  |  |  | 7 |  |  |  | 22 |
Prepaid expenses and deposits |  |  | (319 | ) |  |  | (306 | ) |  |  | 591 |  |  |  | (530 | )
Accounts payable |  |  | 103 |  |  |  | 776 |  |  |  | 625 |  |  |  | 672 |
Accrued liabilities |  |  | 12,415 |  |  |  | 6,333 |  |  |  | 20,255 |  |  |  | 9,414 |
Customer deposits |  |  | 8,684 |  |  |  | 14,144 |  |  |  | 20,176 |  |  |  | 22,099 |
Contingent consideration |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (600 | )
Other payables |  |  | 362 |  |  |  | 625 |  |  |  | 10,726 |  |  |  | 670 |
NET CASH PROVIDED BY OPERATING ACTIVITIES |  |  | 15,970 |  |  |  | 23,573 |  |  |  | 37,450 |  |  |  | 32,770 |
INVESTING ACTIVITIES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchase of property and equipment |  |  | (501 | ) |  |  | (110 | ) |  |  | (597 | ) |  |  | (250 | )
Purchase of financial assets |  |  | (1,542 | ) |  |  | (3,223 | ) |  |  | (1,713 | ) |  |  | (4,519 | )
Sale of financial assets |  |  | 5,730 |  |  |  | 845 |  |  |  | 5,752 |  |  |  | 845 |
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |  |  | 3,687 |  |  |  | (2,488 | ) |  |  | 3,442 |  |  |  | (3,924 | )
FINANCING ACTIVITIES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchase of common shares for Restricted Share Unit (RSU) Plan |  |  | (10,603 | ) |  |  | (810 | ) |  |  | (15,226 | ) |  |  | (1,411 | )
Payment of employee taxes on certain share-based arrangements |  |  | (420 | ) |  |  | - |  |  |  | (741 | ) |  |  | - |
Proceeds from exercise of stock options |  |  | 3,010 |  |  |  | 146 |  |  |  | 3,623 |  |  |  | 212 |
Distribution to non-controlling interest |  |  | (14 | ) |  |  | - |  |  |  | (52 | ) |  |  | - |
NET CASH USED IN FINANCING ACTIVITIES |  |  | (8,027 | ) |  |  | (664 | ) |  |  | (12,396 | ) |  |  | (1,199 | )
Net change in cash, cash equivalents and restricted cash |  |  | 11,630 |  |  |  | 20,421 |  |  |  | 28,496 |  |  |  | 28,437 |
Cash, cash equivalents and restricted cash, beginning of period |  |  | 44,512 |  |  |  | 26,411 |  |  |  | 27,655 |  |  |  | 18,327 |
Effect of foreign exchange rate changes on cash and cash equivalents |  |  | 298 |  |  |  | (87 | ) |  |  | 289 |  |  |  | (19 | )
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ENDING BALANCE |  | $ | 56,440 |  |  | $ | 46,745 |  |  | $ | 56,440 |  |  | $ | 46,745 |
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Warrants exercised |  |  | 377 |  |  |  | - |  |  |  | 377 |  |  |  | - |

The accompanying notes form an integral part of the consolidated financial statements

5

THE REAL BROKERAGE INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED June 30, 2024, AND 2023

UNAUDITED

1. | BUSINESS

Description of the Business

The Real Brokerage Inc. (“Real” or the “Company”) is a growing real estate technology company located in the United States and Canada. Real is taking a first principles approach to redefining the role of a real estate brokerage in the lives of agents and within the broader housing ecosystem. The Company focuses on developing technology to enhance real estate agent performance while building a scalable, efficient brokerage operation that is not dependent on a cost-heavy brick and mortar presence in the markets in which Real operates. Real’s goal is to establish the Company as the destination brokerage for agents, by offering an unmatched combination of technology, support, and financial incentives. Real’s vision is to transform home buying under the guidance of an agent via an integrated consumer portal and app, while growing attachment of ancillary services including mortgage brokerage and title insurance. Concurrently, Real plans to expand its suite of tools and products tailored for agents, including mobile banking, payment solutions, and wealth management tools, to facilitate their journey towards generational wealth.

The consolidated operations of Real include the subsidiaries of Real, including those involved in the brokerage, title and mortgage broker operations.

Common Shares

On May 17, 2021, the TSX Venture Exchange (the “TSXV”) accepted the Company’s Notice of Intention to implement a normal course issuer bid (“NCIB”). On May 19, 2022, the Company announced that it renewed its NCIB to be transacted through the facilities of the NASDAQ Capital Market (“NASDAQ”) and other stock exchanges and/or alternative trading systems in the United States and/or Canada. Pursuant to the NCIB, Real was able to purchase up to 8.9 million common shares of the Company (“Common Shares”), representing approximately 5% of the total 178.3 million Common Shares issued and outstanding as of May 19, 2022. On May 24, 2023, the Company announced that it renewed its NCIB pursuant to which Real may purchase up to approximately 9.0 million Common Shares, representing approximately 5% of the total 180 million Common Shares issued and outstanding as of May 18, 2023. On May 14, 2024, the Company announced that it renewed its NCIB again pursuant to which Real may purchase up to approximately 9.47 million Common Shares, representing approximately 5% of the total 189 million Common Shares issued and outstanding as of May 1, 2024. Purchases are made at prevailing market prices and may be conducted during the twelve-month period ended May 28, 2025.

The NCIB is being conducted to acquire Common Shares for the purposes of satisfying restricted share unit (each, an “RSU”) obligations. The Company appointed CWB Trust Services (the “Trustee”) as the trustee for the purposes of arranging the acquisition of Common Shares and to hold the Common Shares in trust for the purposes of satisfying RSU payments as well as to manage other administrative matters. RBC Capital Markets was engaged to undertake purchases under the NCIB.

6

THE REAL BROKERAGE INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED June 30, 2024, AND 2023

UNAUDITED

2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies described below have been applied consistently to all periods presented.

A. | Basis of preparation

The Interim Condensed Consolidated Financial Statements and accompanying notes have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”).

The financial information as of December 31, 2023, that is included in this quarterly report is derived from the audited Consolidated Financial Statements and notes for the year ended December 31, 2023. Such financial information should be read in conjunction with the notes of the Consolidated Financial Statements included in our annual report.

All dollar amounts are in U.S. dollars unless otherwise stated.

B. | Basis of consolidation

The Condensed Consolidated Financial Statements incorporate the financial statements of the Company, its wholly-owned subsidiaries and entities in which we have a controlling voting interest in. Intercompany transactions and balances are eliminated upon consolidation.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the year are included in profit or loss from the date the Company gains control until the date when the Company ceases to control the subsidiary.

Where necessary, adjustments are made to the financial statements of subsidiaries to ensure subsidiaries’ accounting policies are in line with Company’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses, and cash flows relating to transactions between the members of the Company and its subsidiaries are eliminated on consolidation.

C. | Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to legal contingencies, income taxes, revenue recognition, stock-based compensation, intangible assets, goodwill and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

7

THE REAL BROKERAGE INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED June 30, 2024, AND 2023

UNAUDITED

D. | Cash and Cash Equivalents and Restricted Cash

In the condensed consolidated balance sheets, cash and bank balances comprise cash (i.e. cash on hand and demand deposits) and cash equivalents. Cash equivalents consist primarily of money market fund and other short-term (generally with original maturity of three months or less), highly liquid investments that are readily convertible to a known amount of cash and which are subject to an insignificant risk of changes in value. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

Bank balances for which use by the Company is subject to third party contractual restrictions are included in Restricted cash in the Consolidated Balance Sheets. Restricted cash consists of cash held in escrow by the Company’s brokers and agents on behalf of real estate buyers. The Company recognizes a corresponding Customer deposit liability until the funds are released. Once the cash is transferred from escrow, the Company reduces the respective Customers deposit liability.

The following table provides a reconciliation of Cash, cash equivalents and Restricted cash reported within the Consolidated Balance Sheet that sum to the total of the same amounts shown on the Statement of Cash Flows.

|  | June 30, 2024 |  |  | June 30, 2023 |
Cash and cash equivalents |  | $ | 23,316 |  |  | $ | 17,165 |
Restricted cash |  |  | 33,124 |  |  |  | 29,580 |
Total cash, cash equivalents, and restricted cash, ending balance |  | $ | 56,440 |  |  | $ | 46,745 |

E. | Income Taxes

The Company has not recorded any income tax expense or benefit in either the six months ended June 30, 2024 or the six months ended June 30, 2023 as it has had cumulative tax losses in all jurisdictions where it conducts business. Since our inception, we have not recorded any income tax benefits for the net losses we have incurred or for our other deferred tax assets, as we believe that it is more likely than not that all of our deferred tax assets will not be realized. Accordingly, we have recorded a full valuation allowance against our net deferred tax assets.

F. | Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncement

The Financial Accounting Standard Board (“FASB”) issued Accounting Standard Update (“ASU’) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. This ASU does not alter the methodology employed by the Company in identifying its operating segments, aggregating those operating segments or applying the quantitative thresholds to determine its reportable segments. Instead, the new ASU adds required disclosures concerning significant segment expenses that are regularly provided to or easily computed from information regularly provided to by the chief operating decision maker (“CODM”) and included within the Company’s reported measure of segment profit of loss, as well as certain other disclosures. The new ASU also allows disclosure of multiple measures of segment profitability if those measures are used to allocate resources and assess performance by the CODM. Furthermore, certain annual disclosures will be required on an interim basis. The ASU is effective for annual financial statements of public business entities for fiscal years beginning after December 15, 2023 and in interim periods in fiscal years beginning after December 15, 2024, with early adoption permitted. The new guidance should be adopted retrospectively unless impracticable. The Company has adopted ASU 2023-07 retrospectively beginning from January 1, 2023.

New Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), to require disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information on income taxes paid. The new requirements should be applied on a prospective basis with an option to apply them retrospectively. ASU 2023-09 will be effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.

8

THE REAL BROKERAGE INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED June 30, 2024, AND 2023

UNAUDITED

3. | Revenue

The following table presents a breakdown of operating expenses (in thousands):

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Main revenue streams |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commissions |  |  | 338,574 |  |  |  | 184,022 |  |  |  | 537,826 |  |  |  | 291,137 |
Title |  |  | 1,255 |  |  |  | 948 |  |  |  | 2,050 |  |  |  | 1,546 |
Mortgage Income |  |  | 949 |  |  |  | 362 |  |  |  | 1,645 |  |  |  | 494 |
Total Revenue |  |  | 340,778 |  |  |  | 185,332 |  |  |  | 541,521 |  |  |  | 293,177 |

4. | Expenses By Nature

In the following table, Cost of sales represents real estate commissions paid to the Company’s agents, as well as to outside brokerages in Canada, and Title Fee Expenses (in thousands).

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Cost of Sales |  |  | 308,910 |  |  |  | 167,573 |  |  |  | 488,894 |  |  |  | 264,610 |
Operating Expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
General and Administrative Expenses |  |  | 14,015 |  |  |  | 9,654 |  |  |  | 26,151 |  |  |  | 18,292 |
Salaries and Benefits |  |  | 6,566 |  |  |  | 4,689 |  |  |  | 12,434 |  |  |  | 9,167 |
Stock Based Compensation |  |  | 2,066 |  |  |  | 1,128 |  |  |  | 3,420 |  |  |  | 2,087 |
Administrative Expenses |  |  | 933 |  |  |  | 905 |  |  |  | 1,769 |  |  |  | 1,590 |
Professional Fees |  |  | 3,304 |  |  |  | 1,968 |  |  |  | 6,422 |  |  |  | 3,615 |
Depreciation Expense |  |  | 340 |  |  |  | 284 |  |  |  | 666 |  |  |  | 553 |
Other General and Administrative Expenses |  |  | 806 |  |  |  | 680 |  |  |  | 1,440 |  |  |  | 1,280 |
Marketing Expenses |  |  | 15,889 |  |  |  | 10,266 |  |  |  | 28,518 |  |  |  | 17,950 |
Salaries and Benefits |  |  | 237 |  |  |  | 203 |  |  |  | 442 |  |  |  | 310 |
Stock Based Compensation for Employees |  |  | 1 |  |  |  | 11 |  |  |  | 5 |  |  |  | 22 |
Stock Based Compensation for Agents |  |  | 2,335 |  |  |  | 1,640 |  |  |  | 4,472 |  |  |  | 3,181 |
Revenue Share |  |  | 12,475 |  |  |  | 7,684 |  |  |  | 21,539 |  |  |  | 13,118 |
Other Marketing and Advertising Cost |  |  | 841 |  |  |  | 728 |  |  |  | 2,060 |  |  |  | 1,319 |
Research and Development Expenses |  |  | 2,608 |  |  |  | 1,579 |  |  |  | 5,070 |  |  |  | 3,103 |
Salaries and Benefits |  |  | 1,322 |  |  |  | 748 |  |  |  | 2,713 |  |  |  | 1,406 |
Stock Based Compensation |  |  | 198 |  |  |  | 75 |  |  |  | 333 |  |  |  | 125 |
Other Research and Development |  |  | 1,088 |  |  |  | 756 |  |  |  | 2,024 |  |  |  | 1,573 |
Settlement of Litigation |  |  | - |  |  |  | - |  |  |  | 9,250 |  |  |  | - |
Operating Expenses |  |  | 32,512 |  |  |  | 21,499 |  |  |  | 68,989 |  |  |  | 39,345 |
Total Cost of Sales and Operating Expenses |  |  | 341,422 |  |  |  | 189,072 |  |  |  | 557,883 |  |  |  | 303,955 |

9

THE REAL BROKERAGE INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED June 30, 2024, AND 2023

UNAUDITED

Finance Expenses

The following table provides a detailed breakdown of Finance costs (in thousands) as reported in the Condensed Consolidated Statement of Comprehensive Loss:

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
Description |  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Change in Fair Value of Warrants Outstanding |  |  | 200 |  |  |  | 123 |  |  |  | 471 |  |  |  | 81 |
Realized Losses (Gains) |  |  | (55 | ) |  |  | 77 |  |  |  | (2 | ) |  |  | 85 |
Bank Fees |  |  | 201 |  |  |  | 156 |  |  |  | 311 |  |  |  | 278 |
Finance Costs |  |  | 177 |  |  |  | (84 | ) |  |  | 295 |  |  |  | 133 |
Total Finance Expenses |  |  | 523 |  |  |  | 272 |  |  |  | 1,075 |  |  |  | 577 |

5. | INCOME TAXES

The Company has not recorded any income tax expense or benefit in either the six months ended June 30, 2024 or the six months ended June 30, 2023 as it has had cumulative tax losses in all jurisdictions where it conducts business. Since our inception, we have not recorded any income tax benefits for the net losses we have incurred or for our other deferred tax assets, as we believe that it is more likely than not that all of our deferred tax assets will not be realized. Accordingly, we have recorded a full valuation allowance against our net deferred tax assets.

6. | OPERATING segments disclosures

Segment information aligns with how the Chief Operating Decision Maker (“CODM”), the Chief Executive Officer, manages the business and allocates resources into three operating segments:

| ● | North American Brokerage: generates revenue by processing real estate transactions which entitles the Company to commissions.

| ● | One Real Title: generates revenue by offering title insurance and closing services for residential and/or commercial transactions.

| ● | One Real Mortgage: derives revenue from premiums associated with facilitating mortgage transactions between borrowers and lenders.

The Company determines an operating segment if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has discrete financial information and is (iii) regularly reviewed by the CODM. Once operating segments are identified, the Company performs a quantitative analysis of the current and historic revenues and profitability for each operating segment, together with a qualitative assessment to determine if operating segments have similar operating characteristics.

The Company has determined that it operates as a single reporting segment - North American Brokerage which comprises of more than 90% of Group’s total revenue and income (loss) from operations. The other two segments One Real Title and One Real Mortgage are not considered as reporting segments as their revenue and net loss do not meet quantitative threshold set for reporting segments. These two segments are disclosed in an ‘Other segments’ category below.

The presentation in this note for prior periods has been restated following the retrospective adoption of ASU 2023-07.

The CODM uses revenues, gross profits and operating income (loss) from operations as key metrics to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions. All segments follow the same basis of presentation and accounting policies as those described throughout the Notes to the Interim Condensed Consolidated Financial Statements included herein. The following table provides information about the Company’s reportable segments (in thousands). Financial information for the comparable prior periods presented have been revised to conform with the current year presentation.

10

THE REAL BROKERAGE INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED June 30, 2024, AND 2023

UNAUDITED

|  | For the Three Months Ended June 30, 2024 |
|  | North American Brokerage |  |  | Other Segments |  |  | Total |
Revenues |  |  | 338,574 |  |  |  | 2,204 |  |  |  | 340,778 |
Cost of sales |  |  | 308,268 |  |  |  | 642 |  |  |  | 308,910 |
Gross Profit |  |  | 30,306 |  |  |  | 1,562 |  |  |  | 31,868 |
Operating Expenses(1)(2) |  |  | 29,983 |  |  |  | 2,529 |  |  |  | 32,512 |
Operating Income (Loss) |  |  | 323 |  |  |  | (967 | ) |  |  | (644 | )
Reconciliation of profit or loss (segment profit/(loss) |  |  |  |  |  |  |  |  |  |  |  |
Other income (expenses), net |  |  |  |  |  |  |  |  |  |  | 57 |
Finance expenses, net |  |  |  |  |  |  |  |  |  |  | (523 | )
Net Loss |  |  |  |  |  |  |  |  |  |  | (1,110 | )

1Operating expenses includes General and administrative expenses, Marketing expenses, Research and development expenses, and Settlement of litigation.

2Operating expenses includes Revenue share expense of approximately 12,475 thousand and is recorded in the North American Brokerage segment.

|  | For the Six Months Ended June 30, 2024 |
|  | North American Brokerage |  |  | Other Segments |  |  | Total |
Revenues |  |  | 537,826 |  |  |  | 3,695 |  |  |  | 541,521 |
Cost of sales |  |  | 487,736 |  |  |  | 1,158 |  |  |  | 488,894 |
Gross Profit |  |  | 50,090 |  |  |  | 2,537 |  |  |  | 52,627 |
Operating Expenses(1)(2) |  |  | 64,404 |  |  |  | 4,585 |  |  |  | 68,989 |
Operating Loss |  |  | (14,314 | ) |  |  | (2,048 | ) |  |  | (16,362 | )
Reconciliation of profit or loss (segment profit/(loss) |  |  |  |  |  |  |  |  |  |  |  |
Other income (expenses), net |  |  |  |  |  |  |  |  |  |  | 230 |
Finance expenses, net |  |  |  |  |  |  |  |  |  |  | (1,075 | )
Net Loss |  |  |  |  |  |  |  |  |  |  | (17,207 | )

1Operating expenses includes General and administrative expenses, Marketing expenses, Research and development expenses, and Settlement of litigation.

2Operating expenses includes Revenue share expense of approximately 21,539 thousand and is recorded in the North American Brokerage segment.

|  | For the Three Months Ended June 30, 2023 |
|  | North American Brokerage |  |  | Other Segments |  |  | Total |
Revenues |  |  | 184,022 |  |  |  | 1,310 |  |  |  | 185,332 |
Cost of sales |  |  | 167,204 |  |  |  | 369 |  |  |  | 167,573 |
Gross Profit |  |  | 16,818 |  |  |  | 941 |  |  |  | 17,759 |
Operating Expenses(1)(2) |  |  | 19,707 |  |  |  | 1,793 |  |  |  | 21,499 |
Operating Loss |  |  | (2,889 | ) |  |  | (852 | ) |  |  | (3,740 | )
Reconciliation of profit or loss (segment profit/(loss) |  |  |  |  |  |  |  |  |  |  |  |
Other income (expenses), net |  |  |  |  |  |  |  |  |  |  | 40 |
Finance expenses, net |  |  |  |  |  |  |  |  |  |  | (272 | )
Net Loss |  |  |  |  |  |  |  |  |  |  | (3,972 | )

1Operating expenses includes General and administrative expenses, Marketing expenses, Research and development expenses, and Settlement of litigation.

2Operating expenses includes Revenue share expense of approximately 7,684 thousand and is recorded in the North American Brokerage segment.

11

THE REAL BROKERAGE INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED June 30, 2024, AND 2023

UNAUDITED

|  | For the Six Months Ended June 30, 2023 |
|  | North American Brokerage |  |  | Other Segments |  |  | Total |
Revenues |  |  | 291,137 |  |  |  | 2,040 |  |  |  | 293,177 |
Cost of sales |  |  | 264,067 |  |  |  | 543 |  |  |  | 264,610 |
Gross Profit |  |  | 27,070 |  |  |  | 1,497 |  |  |  | 28,567 |
Operating Expenses(1)(2) |  |  | 35,713 |  |  |  | 3,633 |  |  |  | 39,346 |
Operating Loss |  |  | (8,643 | ) |  |  | (2,136 | ) |  |  | (10,778 | )
Reconciliation of profit or loss (segment profit/(loss) |  |  |  |  |  |  |  |  |  |  |  |
Other income (expenses), net |  |  |  |  |  |  |  |  |  |  | 68 |
Finance expenses, net |  |  |  |  |  |  |  |  |  |  | (577 | )
Net Loss |  |  |  |  |  |  |  |  |  |  | (11,287 | )

1Operating expenses includes General and administrative expenses, Marketing expenses, Research and development expenses, and Settlement of litigation.

2Operating expenses includes Revenue share expense of approximately 13,118 thousand and is recorded in the North American Brokerage segment.

Segment revenue reported above represents revenue generated from external customers. There were no intersegment sales in the current and in the prior year.

The assets and liabilities of each segment are not reported to the CODM on a regular basis therefore they are not disclosed in these Condensed Consolidated Financial Statements.

Depreciation and Amortization

|  | For the Three Months Ended |
|  | June 30, 2024 |  |  | June, 2023 |
North American Brokerage |  |  | 146 |  |  |  | 116 |
Other Segments |  |  | 194 |  |  |  | 168 |
Total Company |  |  | 340 |  |  |  | 284 |

|  | For the Six Months Ended |
|  | June 30, 2024 |  |  | June, 2023 |
North American Brokerage |  |  | 277 |  |  |  | 217 |
Other Segments |  |  | 389 |  |  |  | 336 |
Total Company |  |  | 666 |  |  |  | 553 |

12

THE REAL BROKERAGE INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED June 30, 2024, AND 2023

UNAUDITED

The amount of Revenue from external customers, by geography, is shown in the table below:

|  | For the Three Months Ended |
|  | June 30, 2024 |  |  | June 30, 2023 |
United States |  |  | 296,261 |  |  |  | 157,645 |
Canada |  |  | 44,517 |  |  |  | 27,687 |
Total revenue by region |  |  | 340,778 |  |  |  | 185,332 |

|  | For the Six Months Ended |
|  | June 30, 2024 |  |  | June 30, 2023 |
United States |  |  | 472,750 |  |  |  | 253,354 |
Canada |  |  | 68,771 |  |  |  | 39,823 |
Total revenue by region |  |  | 541,521 |  |  |  | 293,177 |

7. | BASIC AND DILUTED Loss Per Share

Basic loss per share is computed by dividing the loss for the period by the weighted average number of Common Shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) less any preferred dividends for the period by the weighted average number of Common Shares outstanding plus any potentially dilutive Common Shares outstanding during the period. The Company does not pay dividends or have participating shares outstanding.

The following table outlines the number of Common Shares (in thousands) and basic and diluted loss per share.

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Issued Common Shares at the beginning of the period |  |  | 187,188 |  |  |  | 178,629 |  |  |  | 183,606 |  |  |  | 178,201 |
Effect of Treasury Purchases |  |  | (1,522 | ) |  |  | - |  |  |  | (2,168 | ) |  |  | - |
Release of Shares |  |  | 517 |  |  |  | - |  |  |  | 1,037 |  |  |  | - |
Effect of Warrant Exercise |  |  | 29 |  |  |  | - |  |  |  | 15 |  |  |  | - |
Effect of Treasury Issuance |  |  | 1,822 |  |  |  | 205 |  |  |  | 2,824 |  |  |  | - |
Effect of Share Options Exercise |  |  | 1,012 |  |  |  | 930 |  |  |  | 1,254 |  |  |  | 51 |
Weighted-average numbers of Common Shares |  |  | 189,046 |  |  |  | 179,764 |  |  |  | 186,568 |  |  |  | 178,252 |
Loss per share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic and diluted loss per share |  |  | (0.01 | ) |  |  | (0.02 | ) |  |  | (0.09 | ) |  |  | (0.06 | )

The following potential common shares are anti-dilutive and are therefore excluded from the weighted average number of common shares for the purpose of diluted earnings per share.

|  | For the Period Ended |
|  | June 30, 2024 |  |  | June 30, 2023 |
Options |  |  | 18,787 |  |  |  | 22,740 |
RSU |  |  | 25,551 |  |  |  | 22,071 |
Total |  |  | 44,338 |  |  |  | 44,811 |

13

THE REAL BROKERAGE INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED June 30, 2024, AND 2023

UNAUDITED

8. | Share-Based Payment Arrangements

A. | Description of share-based payment arrangements

Stock option plan (equity-settled)

On January 20, 2016, the Company established a stock option plan (the “Stock Option Plan”) that entitles key management personnel and employees to purchase shares in the Company. Under the Stock Option Plan, holders of vested Options are entitled to purchase Common Shares for the exercise price as determined at the grant date.

On February 26, 2022, the Company established an omnibus incentive plan providing for up to 20% of the issued and outstanding Common Shares as of the date thereof (being 35.6 million Common Shares, less RSUs and Options outstanding under other equity inventive plans) to be issued as RSUs or Options to directors, officers, employees, and consultants of the Company (the “Omnibus Incentive Plan”). The Omnibus Incentive Plan was approved by shareholders of the Company on June 13, 2022.

In connection with the graduation to the TSX, the Company amended its Omnibus Incentive Plan (the “A&R Plan”) on July 13, 2022, and the Company’s shareholders approved the A&R Plan on June 9, 2023. Pursuant to the A&R Plan, the maximum number of Common Shares issuable pursuant to outstanding Options at any time shall be limited to 15% of the aggregate number of issued and outstanding Common Shares as of the applicable award date less the number of Common Shares issuable pursuant to Options under the A&R Plan or any other security-based compensation arrangement of the Company. In addition, the Company is authorized to grant up to 70,000,000 RSUs pursuant to the A&R Plan. The RSU limit is separate and distinct from the maximum number of Common Shares reserved for issuance pursuant to Options under the A&R Plan.

The following table depicts the number of Options granted (in thousands):

Grant Date |  | Number of Options |  |  | Vesting Conditions |  | Contractual Life of Options
Balance January 1, 2023 |  |  | 27,057 |  |  |  |  |
On March, 2023 |  |  | 1,500 |  |  | 16.7% on first anniversary, then quarterly vesting |  | 10 years
On March, 2023 |  |  | 15 |  |  | 3 years quarterly vest |  | 10 years
On June, 2023 |  |  | 65 |  |  | 33.3% on first anniversary, then quarterly vesting |  | 10 years
On August, 2023 |  |  | 85 |  |  | 3 years quarterly vest |  | 10 years
On November, 2023 |  |  | 10 |  |  | 33.3% on first anniversary, then quarterly vesting |  | 10 years
Balance December 31, 2023 |  |  | 28,732 |  |  |  |  |
Balance January 1, 2024 |  |  | 28,732 |  |  |  |  |
On April, 2024 |  |  | 45 |  |  | 3 years vest |  | 10 years
Balance June 30, 2024 |  |  | 28,777 |  |  |  |  |

B. | Measurement of fair value

The fair value of the Options has been measured using the Black-Scholes formula. The Black-Scholes model requires management to make certain assumptions including the expected life of the stock options, volatility and risk-free interest rate. Service and non-market performance conditions attached to the arrangements were not considered in measuring fair value. The inputs used in the measurement of the fair value at the grant and measurement date of options granted in the period were as follows:

|  | June 30, 2024 |  |  | June 30, 2023 |
Share price |  | $ | 4.31 |  |  | $ | 1.91 |
Expected volatility (weighted-average) |  |  | 95 | % |  |  | 108 | %
Expected life (weighted-average) |  |  | 10 years |  |  |  | 10 years |
Expected dividends |  |  | - | % |  |  | - | %
Risk-free interest rate (based on US government bonds) |  |  | 4.26 | % |  |  | 3.62 - 3.65% |
Weighted-average grant date fair value |  | $ | 4.31 |  |  | $ | 1.26 |

Expected volatility has been based on an evaluation of historical volatility of the company’s share price.

14

THE REAL BROKERAGE INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED June 30, 2024, AND 2023

UNAUDITED

C. | Reconciliation of outstanding stock-options

The following table outlines the number of Options (in thousands) and weighted-average exercise price:

|  | June 30, 2024 |  |  | December 31, 2023 |
|  | Number of Options |  |  | Weighted-Average Exercise Price |  |  | Number of Options |  |  | Weighted-Average Exercise Price |
Outstanding at beginning of year |  |  | 21,943 |  |  | $ | 0.92 |  |  |  | 21,746 |  |  | $ | 0.87 |
Granted |  |  | 45 |  |  |  | 4.31 |  |  |  | 1,675 |  |  |  | 1.28 |
Forfeited/ Expired |  |  | (50 | ) |  |  | 2.38 |  |  |  | (312 | ) |  |  | 1.41 |
Exercised |  |  | (3,151 | ) |  |  | 0.62 |  |  |  | (1,166 | ) |  |  | 0.36 |
Outstanding at end of period |  |  | 18,787 |  |  | $ | 0.98 |  |  |  | 21,943 |  |  | $ | 0.92 |
Exercisable at end of period |  |  | 14,270 |  |  |  | 0.81 |  |  |  | 15,566 |  |  |  | 0.72 |

The Options outstanding as of June 30, 2024, had a weighted average exercise price of $0.98 (December 31, 2023: $0.92) and a weighted-average remaining contractual life of 6.9 years (December 31, 2023: 8.8 years).

D. | Restricted share unit plan

Restricted share unit plan

Under the Company’s agent performance grant program, the Company issues RSUs to agents based on an agent meeting certain performance metrics, and successfully attracting other performing agents to the Company. Each RSU, which has a vesting term of up to 3 years and is subject to forfeiture in certain circumstances, entitles the holder to one Common Share or the equivalent cash value, as determined in the Company’s discretion. The Company recognizes expense from the issuance of these RSUs during the applicable vesting period based upon the best available estimate of the number RSUs expected to vest with a corresponding increase in stock-based compensation reserve. The expense recognized from the issuance of RSU awards for the period ended June 30, 2024, was $2 million, and was classified as Marketing expense.

Under the Company’s agent stock purchase program, agents purchase RSUs, which vests immediately but have a one-year restriction period, using a percentage of the agent’s commission that is withheld by the Company. Each RSU entitles the holder to one Common Share or the equivalent cash value, as determined in the Company’s sole discretion. The RSUs are expensed in the period in which they are issued with a corresponding increase in Equity. Each agent pays the Company 15% of commissions until the commission paid to the Company totals that agent’s “cap” amount (the “Cap”). As an incentive to participate in the program, the Company issues additional RSUs (“Bonus RSUs”) with a value of (i) 10% of the commission withheld (the percentage was 15% previously) if an agent has not met the Cap and (ii) 20% of the commission withheld (the percentage was 30% previously) if an agent has met the Cap. On January 1, 2024, the Company updated the Bonus RSUs structure to matching (i) 10% of the commission withheld if an agent has not met the Cap and (ii) 20% of the commission withheld if an agent has met the Cap. The Bonus RSUs have a one-year vesting term and are subject to forfeiture in certain circumstances. The RSUs purchased under the program are expensed to Cost of sales and the Bonus RSUs are expensed based on the nature of the role of the employee or agent granted the Bonus RSUs. RSUs purchased under the program are expensed immediately and Bonus RSUs are amortized over the vesting period with a corresponding increase in Stock-based compensation reserve.

Stock compensation awards granted to full time employees (“FTEs”) are classified as a general and administrative, research and development, or marketing expense based on the appropriate department within the Condensed Consolidated Statements of Comprehensive Loss.

15

THE REAL BROKERAGE INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED June 30, 2024, AND 2023

UNAUDITED

The following table illustrates the Company’s stock activity (in thousands of units) for the restricted share units under its equity plan.

|  | Restricted Share Units |
Balance at, December 31, 2022 |  |  | 16,908 |
Granted |  |  | 23,400 |
Vested and Issued |  |  | (10,631 | )
Forfeited |  |  | (4,089 | )
Balance at, December 31, 2023 |  |  | 25,588 |
Granted |  |  | 9,727 |
Vested and Issued |  |  | (8,721 | )
Forfeited |  |  | (1,043 | )
Balance at, June 30, 2024 |  |  | 25,551 |

Stock Based Compensation Expense

The following table provides a detailed breakdown of the Stock-based compensation expense (in thousands) as reported in the Condensed Consolidated Statement of Comprehensive Loss.

|  | For the Period Ended |
|  | June 30, 2024 |  |  | June 30, 2023 |
|  | Options Expense |  |  | RSU Expense |  |  | Total |  |  | Options Expense |  |  | RSU Expense |  |  | Total |
Cost of Sales –Agent Stock Based Compensation |  |  | - |  |  |  | 14,150 |  |  |  | 14,150 |  |  |  | - |  |  |  | 6,422 |  |  |  | 6,422 |
Marketing Expenses – Agent Stock Based Compensation |  |  | 211 |  |  |  | 4,261 |  |  |  | 4,472 |  |  |  | 687 |  |  |  | 2,494 |  |  |  | 3,181 |
Marketing Expenses – FTE Stock Based Compensation |  |  | 1 |  |  |  | 4 |  |  |  | 5 |  |  |  | 4 |  |  |  | 18 |  |  |  | 22 |
Research and Development – FTE Stock Based Compensation |  |  | 15 |  |  |  | 318 |  |  |  | 333 |  |  |  | 54 |  |  |  | 70 |  |  |  | 124 |
General and Administrative – FTE Stock Based Compensation |  |  | 1,065 |  |  |  | 2,355 |  |  |  | 3,420 |  |  |  | 1,389 |  |  |  | 698 |  |  |  | 2,087 |
Total Stock Based Compensation |  |  | 1,292 |  |  |  | 21,088 |  |  |  | 22,380 |  |  |  | 2,134 |  |  |  | 9,702 |  |  |  | 11,836 |

9. | Investments in Available for Sale Securities at Fair Value

The following table provides a detailed breakdown of short-term investments (in thousands) as reported in the Condensed Consolidated Balance Sheets:

Description |  | Cost or Amortized Cost December 31, 2023 |  |  | Cost or Amortized Cost June 30, 2024 |  |  |  | Estimated Fair Value December 31, 2023 |  |  | Deposit / (Withdraw) |  |  | Dividends, Interest & Income |  |  | Gross Unrealized Gains / (Losses) |  |  | Estimated Fair Value June 30, 2024 |
Cash Investments |  |  | 6,531 |  |  |  | 8,244 |  |  |  |  | 6,531 |  |  |  | 1,488 |  |  |  | 225 |  |  |  | - |  |  |  | 8,244 |
Fixed Income |  |  | 7,274 |  |  |  | 1,859 |  |  |  |  | 7,597 |  |  |  | (5,738 | ) |  |  | - |  |  |  | 93 |  |  |  | 1,952 |
Investment Certificate |  |  | 94 |  |  |  | 80 |  |  |  |  | 94 |  |  |  | (14 | ) |  |  | - |  |  |  | - |  |  |  | 80 |
Total |  |  | 13,899 |  |  |  | 10,183 |  |  |  |  | 14,222 |  |  |  | (4,264 | ) |  |  | 225 |  |  |  | 93 |  |  |  | 10,276 |

Investment securities are recorded at fair value. The Company’s investment securities portfolio consists primarily of cash investments, debt securities issued by U.S. government agencies, local municipalities and certain corporate entities. The products in the Company’s investment portfolio have maturity dates ranging from less than one year to over 20 years.

The fair value of investment securities is impacted by interest rates, credit spreads, market volatility, and liquidity conditions. Net unrealized gains and losses in the portfolio are included in Other comprehensive income (loss).

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THE REAL BROKERAGE INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED June 30, 2024, AND 2023

UNAUDITED

Available-for-sale debt securities in an unrealized loss position at each measurement date are individually evaluated for expected credit losses. The Company evaluates whether the unrealized loss is due to market factors or changes in the investment holdings’ credit rating. An expected credit loss will be recorded when an investment in an unrealized loss position is determined to have lost value from a decreased credit rating. For the periods ended June 30, 2024 and December 31, 2023, no allowance for credit losses was recorded.

10. | Property and Equipment

Property and equipment, net consisted of the following (in thousands)

|  | June 30, 2024 |  |  | December 31, 2023 |
Computer hardware and software |  |  | 2,662 |  |  |  | 2,082 |
Furniture, fixture, and equipment |  |  | 10 |  |  |  | 10 |
Total property and equipment |  |  | 2,672 |  |  |  | 2,092 |
Less: accumulated depreciation |  |  | (695 | ) |  |  | (492 | )
Property and equipment, net |  |  | 1,977 |  |  |  | 1,600 |

For the periods ended June 30, 2024 and December 31, 2023, depreciation expense was $220 and $316 respectively.

11. | INTANGIBLE ASSETS

The Company’s intangible assets are finite lived and consist primarily of customer relationships which is amortized on a straight-line basis over its useful life of 5 years. The following table presents the gross carrying amount and accumulated amortization of intangible assets:

|  | Intangible Assets |
Cost |  |  |  |
Balance at December 31, 2022 |  |  | 3,933 |
Measurement Period Adjustment |  |  | 530 |
Balance at December 31, 2023 |  |  | 4,463 |
Additions |  |  | - |
Balance at June 30, 2024 |  |  | 4,463 |
Accumulated Depreciation |  |  |  |
Balance at December 31, 2022 |  |  | 225 |
Depreciation |  |  | 796 |
Balance at December 31, 2023 |  |  | 1,021 |
Depreciation |  |  | 446 |
Balance at June 30, 2024 |  |  | 1,467 |
Carrying Amounts |  |  |  |
Balance at December 31, 2023 |  |  | 3,442 |
Balance at June 30, 2024 |  |  | 2,996 |

As of June 30, 2024, expected amortization related to Intangible assets will be:

Expected Amortization |  |  |  |
2024, excluding the six months ended June 30, 2024 |  | $ | 447 |
2025 |  |  | 893 |
2026 |  |  | 780 |
2027 |  |  | 780 |
2028 |  |  | 96 |
2029 and thereafter |  |  | — |
TOTAL |  | $ | 2,996 |

17

THE REAL BROKERAGE INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED June 30, 2024, AND 2023

UNAUDITED

12. | GOODWILL

We record Goodwill associated with acquisitions of businesses when the purchase price of the business exceeds the fair value of the net tangible and intangible assets acquired. We review Goodwill for impairment on an annual basis in the fiscal fourth quarter or on an interim basis if an event occurs or circumstances change that indicate Goodwill may be impaired.

|  | Realty Crunch |  |  | Expetitle |  |  | LemonBrew |  |  | Total |
Cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at December 31, 2022 |  |  | 602 |  |  |  | 8,393 |  |  |  | 1,267 |  |  |  | 10,262 |
Impairment |  |  | - |  |  |  | (723 | ) |  |  | - |  |  |  | (723 | )
Adjustments |  |  | - |  |  |  | - |  |  |  | (546 | ) |  |  | (546 | )
Balance at December 31, 2023 |  |  | 602 |  |  |  | 7,670 |  |  |  | 721 |  |  |  | 8,993 |
Impairment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Balance at June 30, 2024 |  |  | 602 |  |  |  | 7,670 |  |  |  | 721 |  |  |  | 8,993 |

|  | Realty Crunch |  |  | Expetitle |  |  | LemonBrew |  |  | Total |
Accumulated Impairment Loss at December 31, 2022 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Goodwill Impairment |  |  | — |  |  |  | 723 |  |  |  | — |  |  |  | 723 |
Accumulated Impairment Loss at December 31, 2023 |  |  | — |  |  |  | 723 |  |  |  | — |  |  |  | 723 |
Goodwill Impairment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Accumulated Impairment Loss at June 30, 2024 |  |  | — |  |  |  | 723 |  |  |  | — |  |  |  | 723 |

13. | Capital and Reserves

Common Shares

All Common Shares rank equally with regards to the Company’s residual assets. The following table is presented in thousands:

|  | June 30, 2024 |  |  | December 31, 2023 |
Common shares, Beginning Balance |  |  | 183,605 |  |  |  | 179,922 |
Release of Restricted Stock Units |  |  | 7,876 |  |  |  | 1,231 |
Stock Options Exercised |  |  | 2,944 |  |  |  | 2,452 |
Warrants Exercised |  |  | 71 |  |  |  | — |
Common shares, Ending Balance |  |  | 194,496 |  |  |  | 183,605 |

Treasury Stock

Treasury Stock is recognized at cost of purchase and presented as a deduction from equity. The following table shows the changes in treasury stock shares for the periods presented in thousands:

|  | June 30, 2024 |  |  | December 31, 2023 |
Treasury Stock, Beginning Balance |  |  | 175 |  |  |  | 5,771 |
Repurchases of Common Shares |  |  | 4,425 |  |  |  | 1,988 |
Issuance of Treasury Stock |  |  | (1,973 | ) |  |  | (7,584 | )
Treasury Stock, Ending Balance |  |  | 2,627 |  |  |  | 175 |

18

THE REAL BROKERAGE INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED June 30, 2024, AND 2023

UNAUDITED

14. | Financial Instruments – Fair Value

Items measured at fair value (in thousands)

|  | For the Period Ended June 30, 2024 |  |  | For the Year Ended December 31, 2023 |
|  | Level 1 |  |  | Level 2 |  |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Total |
Financial Assets Measured at Fair Value (FV) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investments in Financial Assets |  |  | 10,183 |  |  |  | - |  |  |  | 10,183 |  |  |  | 14,222 |  |  |  | - |  |  |  | 14,222 |
Total Financial Assets Measured at Fair Value (FV) |  |  | 10,183 |  |  |  | - |  |  |  | 10,183 |  |  |  | 14,222 |  |  |  | - |  |  |  | 14,222 |
Financial Liabilities Measured at Fair Value (FV) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Warrants liability |  |  | - |  |  |  | 356 |  |  |  | 356 |  |  |  | - |  |  |  | 269 |  |  |  | 269 |
Total Financial Liabilities Measured at Fair Value (FV) |  |  | - |  |  |  | 356 |  |  |  | 356 |  |  |  | - |  |  |  | 269 |  |  |  | 269 |

During the periods ended June 30, 2024, and December 31, 2023, there have been no transfers between Level 1, Level 2 and Level 3.

15. | COMMITMENTS AND CONTINGENCIES

In December 2023, the Company was named as a defendant in a putative class action lawsuit, captioned Umpa v. The National Association of Realtors, et al., which was filed in the United States District Court for the Western District of Missouri (the “Class Action”). The Class Action alleges that certain real estate brokerages, including the Company, participated in practices that resulted in inflated buyer broker commissions, in violation of federal antitrust laws. On April 7, 2024, the Company entered into a settlement agreement to resolve the Class Action on a nationwide basis. This settlement conclusively addresses all claims asserted against the Company in the Class Action, releasing the Company, its subsidiaries, and affiliated agents from these claims. The settlement does not constitute an admission of liability by the Company, nor does it concede or validate any of the claims asserted in the litigation. Pursuant to the terms of the settlement agreement, the Company paid $9.25 million into a qualified settlement fund following the court’s preliminary approval of the settlement agreement. This settlement amount is presented as a current asset in funds held in restricted escrow account, and as a current liability in other payables, on the Company’s Consolidated Statements of Financial Position for the period ended June 30, 2024.

Additionally, the Company agreed to implement specific changes to its business practices. These changes include clarifications about the negotiability of commissions, prohibitions on claims that buyer agent services are free, and the inclusion of listing broker compensation offers in communications with clients. The Company will also develop training materials to support these practice changes. The settlement agreement awaits final court approval and will take effect upon such final approval. The Company does not foresee the settlement terms having a material impact on its future operations.

On June 14, 2024, the Company was named as a defendant in a putative class action lawsuit, captioned Kyle Miholich v. The Real Brokerage Inc., et al., which was filed in the United States District Court for the Southern District of California (“Class Action”). The Class Action alleges that real estate agents affiliated with the Company through an Independent Contractor Agreement sent text messages that violated the federal Telephone Consumers Privacy Act. The Company’s policies requires the independent contractor real estate agents to comply with the Telephone Consumers Privacy Act. The plaintiffs are seeking certification of the Class Action, injunctive relief prohibiting future violations of the Telephone Consumers Privacy Act, monetary damages for each alleged statutory violation and reimbursement of their litigation costs and attorneys’ fees. The Company will vigorously defend against the claims asserted in the Class Action, and the Company is unable to predict the outcome of the Class Action or whether an outcome unfavorable to the Company would have a material adverse effect on its results of operations or financial condition.

19