Risks and Uncertainties
|9 Months Ended
Sep. 30, 2022
|Risks and Uncertainties
|Risks and Uncertainties
Note 2. Risks and Uncertainties
Certain Significant Risks and Business Uncertainties — The Company is subject to the risks and challenges associated with companies at a similar stage of development. These include the risks associated with economic uncertainties like inflation and rising interest rates on the housing market, dependence on key individuals, successful development and marketing of its offerings, and competition with larger companies with greater financial, technical, and marketing resources. Furthermore, during the period required to achieve substantially higher revenue in order to become consistently profitable, the Company may require additional funds that might not be readily available or might not be on terms that are acceptable to the Company. See “COVID-19 Risks, Impacts and Uncertainties” below, and “Risk Factors” in Part I, Item 1A of the Form 10-K for further detail regarding the risks the Company faces.
Liquidity — The Company has a history of negative cash flows from operations and operating losses. The Company generated net losses of approximately $17.7 million and $8.9 million for the nine months ended September 30, 2022 and 2021, respectively. Additionally, the Company anticipates further expenditures associated with the process of expanding its business organically and via acquisitions. The Company had cash and cash equivalents of $14.5 million and $37.8 million as of September 30, 2022 and December 31, 2021, respectively. Management believes that existing cash from its 2021 common stock offering along with its planned budget, which includes continued increases in the number of its agents and transactions at moderate growth rates, along with increases in transaction fees charged to agents, plus growth from increasing attach rates across the Company’s businesses from internal referrals, and the expected ability to achieve sales volumes necessary to cover forecasted expenses, provide sufficient funding to continue as a going concern for a period of at least one year from the date of the issuance of the unaudited interim consolidated financial statements.
COVID-19 Risks, Impacts and Uncertainties — On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (“COVID-19”) and the risks to the international community as the virus spreads globally. In March 2020, the WHO classified COVID-19 as a pandemic, based on the rapid increase in exposure globally. COVID-19 remains a pandemic as variants develop and spread.
The Company is subject to the risks arising from COVID-19 including its social and economic impacts on the residential real estate industry in the United States. Our management believes that these social and economic impacts, which to date have included but not been limited to the following, could have a significant impact on the Company’s future financial condition, liquidity, and results of operations: (i) restrictions on in-person activities associated with residential real estate transactions arising from shelter-in-place, or similar isolation orders; (ii) decline in consumer demand for in-person interactions and physical home tours; (iii) deteriorating economic conditions, such as increased unemployment rates, recessionary conditions, lower yields on individual investment portfolios, and more stringent mortgage financing conditions; and (iv) global supply chain stresses, which have led to inflation, which had caused the Federal Reserve to increase interest rates.
Given the continuing evolution of COVID-19 and the global responses to curb its spread, the Company is not able to estimate the effects of COVID-19, including any currently known and future variant, on its results of operations, financial condition, or liquidity for the year ending December 31, 2022 and beyond. While the development and availability of multiple COVID-19 vaccines lessened the impact of COVID-19 in 2021 and the nine months ended September 30, 2022, if COVID-19 continues, it may have a material adverse effect on the Company’s financial condition, liquidity, and future results of operations.
Russia and Ukraine Conflict — In February 2022, Russia invaded Ukraine resulting in the United States, Canada, the European Union and other countries imposing economic sanctions on Russia. While this conflict has not impacted the Company directly, the full impact on the United States and other economies is unknown and cannot be predicted. This conflict appears to have and could continue to cause an adverse impact on U.S. economy and financial markets, including the inflationary impact of exacerbated supply chains, which could adversely affect the housing industry and home purchases and sales, which in turn could have a material impact on the Company’s financial condition or results of operations.
Use of Estimates — The preparation of the unaudited interim consolidated financial statements, in conformity with 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 doubtful accounts, legal contingencies, income taxes, deferred tax asset valuation allowances, stock-based compensation, goodwill, estimated lives of intangible assets, and intangible asset impairment. 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 might 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.