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Summary of Significant Accounting Policies | 6 Months Ended
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Jun. 30, 2025
Summary of Significant Accounting Policies |
Summary of Significant Accounting Policies | Note 2 - Summary of Significant Accounting Policies Principles of Consolidation The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and entities that the Company holds a controlling financial interest of, and those in which it owns more than 50% of the voting interest. All significant intercompany accounts and transactions have been eliminated in consolidation. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the SEC applicable to interim financial reporting on Form 10-Q. Accordingly, they do not include all disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring items) necessary for a fair presentation have been included. The condensed consolidated balance sheet as of December 31, 2024 has been derived from the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on April 2, 2025, as amended on May 13, 2025 (the “Form 10-K”). This summary of significant accounting policies is presented to assist in understanding the Company’s financial statements. These accounting policies conform to U.S. GAAP and have been consistently applied in the preparation of the financial statements. The financial statements include the operations, assets, and liabilities of the Company. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary to fairly present the accompanying financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Form 10-K. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year or any other future periods. 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. In the opinion of management, all adjustments necessary in order to make the financial statements not misleading have been included. Actual results could differ from those estimates. Related Party Transactions The Company accounts for related party transactions in accordance with Accounting Standards Codification (“ASC”) 850. A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. The Company conducts business with its related parties in the ordinary course of business. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Concentration of Credit Risks Financial instruments that potentially subject the Company to a significant concentration of credit risk primarily consist of cash, cash equivalents, and accounts receivable. As of December 31, 2024, the Company’s cash was held by financial institutions that management believes have acceptable credit. The Federal Deposit Insurance Corporation insures balances up to $250,000. At times, the Company may maintain balances in excess of the federally insured limits. Accounts receivable are typically unsecured. The risk with respect to accounts receivable is mitigated by regular credit evaluations that the Company performs on its distribution partners and its ongoing monitoring of outstanding balances. In accordance with ASC 326, Investments - Financial Instruments–Credit Losses (“ASC 326”) the Company applies the Current Expected Credit Losses (“CECL”) model to estimate expected credit losses over the lifetime of financial assets measured at amortized cost. The Company has determined that accounts receivable is the only financial asset subject to CECL assessment, as it does not have any loan receivables, held-to-maturity debt securities, or other financial instruments requiring CECL evaluation. The Company’s CECL methodology incorporates historical loss experience, current economic conditions, and forward-looking adjustments to assess credit risk and expected loss reserves. As of June 30, 2025, the Company’s accounts receivable remains fully recoverable. During the six months ended June 30, 2025, the Company collected all previously outstanding receivables attributable to AiChat, its Singapore subsidiary. As a result, the previously recorded CECL reserve of 0.05% was released. However, a new CECL provision was recorded based on updated receivables and risk profiles as of June 30, 2025. There were changes in the Company’s credit risk exposure, CECL methodology, and/or reserve assumptions during the six months ended June 30, 2025. The updated values are as follows:
|  | CECL |
Opening balance, January 1, 2025 |  | $ | 62 |
Current-period provision for expected credit losses |  |  | 59 |
Release of allowance for expected credit losses |  |  | (62 | )
Ending balance, June 30, 2025 |  | $ | 59 |
There have been no material changes to the Company’s significant accounting policies during the six months ended June 30, 2025. Revenue Recognition The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”) when control of services is transferred to the customer. On a standalone basis, the Company generates revenue by providing monthly support services to Turnit related to the myAlphie platform, a digital platform we previously developed and sold on May 17, 2023. Revenue is recognized over time as the services are performed and the customer benefits from them. We recognized rental revenue upon customer control of the assets and recorded deferred revenue for book sales until the delivery obligation was met, both in accordance with ASC 606. AiChat, a company specializing in AI conversational customer experience solutions, adheres to the revenue recognition standards outlined in ASC 606. The license fee for platform access and consulting services are recognized as distinct performance obligations, reflecting their ability to provide value independently within our customer contracts. For the “right to access” license fee, revenue is recognized over the duration of the subscription period, as control and benefits are provided continuously to the customer. Consulting services are recognized based on the nature of the engagement. Revenue for one-time services, such as project setups, is recognized at the point in time of delivery. For ongoing consulting services, revenue is recognized over time, reflecting the continuous benefit transferred to the customer throughout the service period. This approach ensures that revenue recognition accurately matches the ongoing provision of access and the timing of consulting services, as per the guidelines of ASC 606. reAlpha Mortgage, a mortgage brokerage company, complies with ASC 606 by recognizing revenue at the point of loan funding. This moment marks the transfer of control of the loan to the borrower, capturing the completion of reAlpha Mortgage’s primary service successfully securing a loan. All services, including loan origination, application processing, and credit assessment, contribute to this culminating event. Revenue is therefore recognized only when the loan is funded, ensuring that the exact revenue amount is determinable based on the loan amount and agreed commission, accurately reflecting the completion of all related performance obligations. GTG Financial, a mortgage brokerage company, complies with ASC 606 by recognizing revenue at the point of loan funding. This moment marks the transfer of control of the loan to the borrower, capturing the completion of GTG Financial’s primary service successfully securing a loan. All services, including loan origination, application processing, and credit assessment, contribute to this culminating event. Revenue is therefore recognized only when the loan is funded, ensuring that the exact revenue amount is determinable based on the loan amount and agreed commission, accurately reflecting the completion of all related performance obligations. Naamche, a company that provides services related to the development of technology, adheres to ASC 606 for revenue recognition, primarily from its service-based contracts. This approach involves detailed identification of contracts with customers, determination of distinct performance obligations within these contracts, and accurate allocation of transaction prices to these obligations. Revenue is recognized as Naamche satisfies each performance obligation, typically over time, reflecting the ongoing delivery and customer consumption of its tech-driven services. Recent Accounting Pronouncements Accounting Pronouncements Issued But Not Yet Adopted In April 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2025-04, Revenue from Contracts with Customers (Topic 606) and Compensation—Stock Compensation (Topic 718), which clarifies how to account for equity instruments (such as shares or RSUs) granted to customers as part of a revenue arrangement. The update aims to help entities properly reflect such transactions and avoid misclassification between marketing expenses and revenue reductions. ASU 2025-04 is effective for fiscal years beginning after December 15, 2026, including interim periods within those years, with early adoption permitted. The Company is currently evaluating the impact this update may have on its financial statements and related disclosures. In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topics 805 and 810) (“ASU 2025-03”), which provides guidance on identifying the acquirer in a business combination involving a variable-interest entity (“VIE”). This amendment helps ensure accurate consolidation and goodwill recognition in complex acquisition structures. ASU 2025-03 is effective for fiscal years beginning after December 15, 2026, including interim periods within those years, with early adoption permitted. The Company does not expect this update to have a material impact in the near term, but will reassess if new VIE-related transactions occur. Proposed Accounting Standards Updates In April 2025, the FASB released a proposed update to ASC 815, Derivatives and Hedging (“ASC 815”), which may revise the accounting treatment of derivatives and embedded features in financial instruments by clarifying when embedded features must be separated and measured at fair value. No effective date has been announced; the Company is monitoring developments. In March 2025, the FASB proposed changes to ASC 326 to simplify the CECL model for trade receivables and contract assets, reducing volatility and easing application for non-financial entities. This proposal is also not yet finalized; the Company will evaluate its impact once finalized.

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