The Real Brokerage Inc.: Form 6-K - Filed by newsfilecorp.com

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 6-K


REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2022

Commission File Number: 001-40442


THE REAL BROKERAGE INC.

(Registrant)


133 Richmond Street West, Suite 302

Toronto, Ontario M5H 2L3 Canada

(Address of Principal Executive Offices)


Indicate by check mark whether the Registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☐            Form 40-F  ☒

Indicate by check mark if the Registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the Registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

THE REAL BROKERAGE INC.

 

(Registrant)

 

 

 

Date August 11, 2022

By

/s/ Tamir Poleg

 

 

Tamir Poleg

 

 

Chief Executive Officer



EXHIBIT INDEX

Exhibit

Description of Exhibit

 

 

99.1

Interim Condensed Consolidated Financial Statements for the period ended June 30, 2022

 

 

99.2

Management's Discussion and Analysis for the period ended June 30, 2022

   
99.3 Certification of Interim Filings CEO dated August 11, 2022
   
99.4 Certification of Interim Filings CFO dated August 11, 2022
   
99.5 Press Release dated August 11, 2022 – The Real Brokerage Inc. Announces Second Quarter 2022 Financial Results


The Real Brokerage Inc.: Exhibit 99.1 - Filed by newsfilecorp.com



Interim Condensed Consolidated Financial Statements (Unaudited):  
   
Interim Condensed Consolidated Statements of Financial Positions 2
   
Interim Condensed Consolidated Statements of Loss and Other 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 6-25

THE REAL BROKERAGE, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONS
(Expressed in thousands of U.S. dollars)

UNAUDITED

    Unaudited     Audited  
    June 30, 2022     December 31, 2021  
ASSETS  
CURRENT ASSETS  
Cash $ 32,520   $ 29,082  
Restricted cash   -     47  
Investments in available-for-sale securities at fair value   4,429     8,811  
Trade receivables   240     254  
Other receivables   66     23  
Prepaid expenses and deposits   1,299     448  
TOTAL CURRENT ASSETS   38,554     38,665  
NON-CURRENT ASSETS            
Intangible assets   395     451  
Goodwill   12,527     602  
Property and equipment   754     170  
Right-of-use assets   67     109  
TOTAL NON-CURRENT ASSETS   13,743     1,332  
TOTAL ASSETS   52,297     39,997  
             
LIABILITIES AND EQUITY            
CURRENT LIABILITIES            
Accounts payable and accrued liabilities   12,124     6,604  
Other payables   15,103     3,351  
Lease liabilities   86     91  
TOTAL CURRENT LIABILITIES   27,313     10,046  
NON-CURRENT LIABILITIES            
Lease liabilities   -     40  
Accrued stock-based compensation   6,319     2,268  
Warrants outstanding   254     639  
TOTAL NON-CURRENT LIABILITIES   6,573     2,947  
TOTAL LIABILITIES   33,886     12,993  
             
EQUITY            
EQUITY ATTRIBUTABLE TO OWNERS            
Share Premium   63,537     63,397  
Stock-based compensation reserves   10,836     6,725  
Deficit   (38,648 )   (30,127 )
Other Reserves   (346 )   (347 )
Treasury Stock, at cost   (17,103 )   (12,644 )
EQUITY ATTRIBUTABLE TO OWNERS   18,276     27,004  
Non-controlling interests   135     -  
TOTAL EQUITY   18,411     27,004  
TOTAL LIABILITIES AND EQUITY   52,297     39,997  


THE REAL BROKERAGE, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND 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,  
    2022      2021      2022     2021  
Revenues $ 112,356     23,095     174,005     32,404  
Cost of Sales   103,064     20,667     158,851     28,739  
Gross Profit   9,292     2,428     15,154     3,665  
                         
General and administrative expenses   6,116     2,819     11,490     5,124  
Marketing expenses   5,700     1,214     9,416     1,864  
Research and development expenses   1,680     1,185     2,719     3,180  
Operating Loss   (4,204 )   (2,790 )   (8,471 )   (6,503 )
                         
Other income   (257 )   -     (436 )   -  
Finance expenses, net   208     158     372     268  
Net Loss   (4,155 )   (2,948 )   (8,407 )   (6,771 )
Non-controlling interest (NCI)   53     -     114     -  
Net Loss Attributable to the Owners of the Company   (4,208 )   (2,948 )   (8,521 )   (6,771 )
Other comprehensive income/(loss):                        
Unrealized loss on available for sale investment portfolio   (116 )   -     (393 )   -  
Foreign currency translation adjustment   190     -     394     -  
Comprehensive Loss Attributable to Owners of the Company $ (4,134 )   (2,948 )   (8,520 )   (6,771 )
Comprehensive Income Attributable to NCI   53     -     114     -  
Comprehensive Loss $ (4,081 )   (2,948 )   (8,406 )   (6,771 )
Loss per share                        
Basic and diluted loss per share $ (0.02 )   (0.03 )   (0.05 )   (0.06 )
Weighted-average shares, basic and diluted   178,330     110,655     178,330     110,655  


THE REAL BROKERAGE, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(U.S. dollar in thousands)

UNAUDITED

    Share
Premium
    Stock-Based
Compensation
Reserve
    Foreign
Exchange
Translation
Reserve
    Investments
Revaluations
Reserve
    Deficit     Treasury
Stock
    Non-
Controlling
Interests
    Total Equity
(Deficit)
 
Balance at, January 1, 2021   21,668     2,760     -     -     (18,448 )   -     14,818     20,798  
Total loss and comprehensive loss   -     -     -     -     (6,771 )   -     -     (6,771 )
Exercise of warrants   26,475     -     -     -     -     -     -     26,475  
Acquisitions of commons shares for Restricted Share Unit (RSU) plan   (919 )   -     -     -     -     -     -     (919 )
Exercise of stock options   10     -     -     -     -     -     -     10  
Equity-settled share-based payment   -     4,616     -     -     -     -     -     4,616  
Balance at, June 30, 2021   47,234     7,376     -     -     (25,219 )   -     14,818     44,209  
                                                 
Balance at, January 1, 2022   63,397     6,725     5     (352 )   (30,127 )   (12,644 )   -     27,004  
Total loss   -     -     -     -     (8,521 )   -     114     (8,407 )
Total other comprehensive loss   -     -     394     (393 )   -     -     -     1  
Acquisitions of commons shares for Restricted Share Unit (RSU) plan   -     -     -     -     -     (5,692 )   -     (5,692 )
Release of vested common shares from employee benefit trusts   93     -     -     -     -     1,233     -     1,326  
Adjustment arising from change in non-controlling interest   -     -     -     -     -     -     21     21  
Exercise of stock options   47     -     -     -     -     -     -     47  
Equity-settled share-based payment   -     4,111     -     -     -     -     -     4,111  
Balance at, June 30, 2022   63,537     10,836     399     (745 )   (38,648 )   (17,103 )   135     18,411  


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,  
    2022           2021     2022     2021  
OPERATING ACTIVITIES          
Net Loss $ (4,155 )   (2,948 )   (8,407 )   (6,771 )
Adjustments for:                        
Depreciation   135     44     138     86  
Equity-settled share-based payment transactions   274     1,868     1,211     4,616  
Unrealized loss on short-term investments   (277 )   -     -     -  
Gain on short-term investments   (62 )   -     (135 )   -  
Finance costs, net   100     158     209     268  
Changes in operating asset and liabilities:                        
Restricted cash   47     -     47     -  
Trade receivables   111     518     14     (92 )
Other receivables   21     1     (43 )   198  
Prepaid expenses and deposits   149     (12 )   (851 )   (86 )
Accounts payable and accrued liabilities   4,071     622     5,520     2,429  
Accrued stock compensation   2,481     205     4,051     312  
Other payables   (1,583 )   250     11,752     256  
NET CASH PROVIDED BY OPERATING ACTIVITIES   1,312     706     13,506     1,216  
                         
INVESTING ACTIVITIES                        
Purchase of property and equipment   (249 )   (29 )   (625 )   (43 )
Acquisition of subsidiary (Note 4 and Note 6)   -     -     (7,445 )   (1,100 )
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES   (249 )   (29 )   (8,070 )   (1,143 )
                         
FINANCING ACTIVITIES                        
Investment in securities   3,989     (8,857 )   3,989     (8,857 )
Proceeds from exercise of Warrants   -     26,475     -     26,475  
Purchase of common shares for Restricted Share Unit
(RSU) Plan
 
(1,180
 
)
  (919 )   (5,692 )  
(919
 
)
Proceeds from exercise of stock options   24     10     47     10  
Payment of lease liabilities   (22 )   (21 )   (45 )   (41 )
Cash distribution for non-controlling interest   (43 )         (43 )      
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES   2,768     16,688     (1,744 )   16,668  
                         
Net change in cash and cash equivalents   3,831     17,365     3,692     16,741  
                         
Cash and equivalents, beginning of year   28,941     20,527     29,082     21,226  
Effect of exchange rate changes on cash and cash equivalents   (252 )   12     (254 )   (63 )
CASH AND CASH EQUIVALENTS, END OF YEAR $ 32,520     37,904     32,520     37,904  
SUPPLEMETAL DISCLOSURE OF NON CASH ACTIVITIES                        
Cash grants payable as part of Expetitle acquisition $ -     -     75     -  
Share-based compensation as part of Expetitle acquisition $ -     -     4,325     -  
Release of vested common shares from benefit trusts $     764     -     1,326     -  


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED

1. GENERAL INFORMATION

The Real Brokerage Inc. ("Real" or the "Company") is a technology-powered real estate brokerage firm, licensed in over 44 U.S. states, the District of Columbia, and 2 provinces in Canada with over 5,600 agents. Real offers agents a mobile focused tech-platform to run their business, as well as attractive business terms and wealth building opportunities.

The consolidated operations of Real include the wholly-owned subsidiaries of Real Technology Broker Ltd. incorporated on June 29, 2014 in Israel, Real PIPE, LLC incorporated on November 5, 2020 under the laws of the state of Delaware, Real Broker MA, LLC incorporated on July 11, 2018 under the laws of the state of Delaware, Real Broker CT, LLC incorporated on July 11, 2018 under the laws of the state of Delaware, Real Broker, LLC (formerly Realtyka, LLC) incorporated on October 17, 2014 under the laws of the state of Texas,  Real Broker Commercial LLC incorporated on July 29, 2019 under the laws of the state of Texas, The Real Title Inc. incorporated on January 1, 2021 under the laws of the state of Delaware, Real Broker BC Ltd. incorporated on February 23, 2021 in the province of British Columbia, Real Broker AB Ltd. incorporated on February 23, 2021 in the province of Alberta, and Real Broker ON Ltd incorporate on August 27 2021 in the province of Ontario.

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"). Pursuant to the NCIB, the Company may, during the 12-month period commencing May 20, 2021 and ending May 20, 2022, purchase up to 7,170 common shares of the Company ("Common Shares"), constituting approximately 5% of the total 143,404 Common Shares issued and outstanding as of April 30, 2021.

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 restricted share unit (each, an "RSU") payments as well as deal with other administration matters. Through the Trustee, RBC Capital Markets has been engaged to undertake purchases under the NCIB. RBC Capital Markets is required to comply with the TSXV and the NASDAQ Capital Market ("NASDAQ") NCIB rules in respect of the purchases of Common Shares as the Trustee is a non-independent trustee by the TSXV for the purposes of the NCIB rules.

The Common Shares acquired will be held by the Trustee until the same are sold in the market with the proceeds to be transferred to designated participants or until the Common Shares are delivered to designated participants, in each case under the terms of the Company's equity incentive plans to satisfy the Company's obligations in respect of redemptions of vested RSUs held by such designated participants. See Note 10.D for more information. A total of 812 Common Shares have been released from the trust to satisfy the Company's obligations in respect of redemptions of vested RSU held by designated participants.

On May 19, 2022, the Company announced that it is renewing the 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 (other than the TSXV), if eligible. Pursuant to the NCIB, Real may purchase up to 8,915 common shares of the Company, representing approximately 5% of the total 178,309 Common Shares issued and outstanding as of May 19, 2022.

As of June 30, 2022, the Company has repurchased 7,089 Common Shares in the amount of $18,336. The purpose of the purchase of common shares under the NCIB is to enable the Company to acquire shares to satisfy the RSU Plan (see Note 10(D) for more information). The NCIB shall terminate on the earlier of May 20, 2023 and the date on which the maximum number of Common Shares purchasable under the NCIB is acquired by the Company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Company's annual consolidated financial statements for the year ended December 31, 2021.


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED

A. Basis of preparation

The unaudited interim condensed consolidated financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting as issued by the International Accounting Standards Board (IASB). The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the Company's annual audited consolidated financial statements for the period ended December 31, 2021. These unaudited interim condensed consolidated financial statements were authorized for issuance by the Company's Board of Directors on August 9, 2022.

B. Significant judgments, estimates and assumptions

The preparation of Real's unaudited interim condensed consolidated financial statements require management to make judgments, estimates and assumptions that affect the amounts reported. In the process of applying Real's accounting policies, management was required to apply judgment in certain areas. Estimates and assumptions made by management are based on events and circumstances that existed at the unaudited interim condensed consolidated balance sheet date. Accordingly, actual results may differ from these estimates.

The significant judgments, estimates and assumptions in the preparation of the unaudited interim condensed consolidated financial statements are consistent with those followed in the preparation of the Company's annual consolidated financial statements for the years ended December 31, 2021 and 2020.

3. PIPE TRANSACTION

On December 2, 2020, the Company completed an equity investment in private equity funds indirectly controlled by Insight Holdings Group, LLC (the "Insight Partners") for gross proceeds of USD $20 million (approximately CAD $26.28 million)

Insight Partners were issued 17,287 preferred units (the "Preferred Units") of a newly and wholly owned subsidiary of the Company, Real PIPE, LLC formed under the laws of the State of Delaware, that were exchangeable into the same number of Common Shares and 17,287 Common Share purchase warrants of the Company that were exercisable for Common Shares ("Warrants"). Each Warrant entitled the holder to subscribe and purchase one Common Share at an exercise price of $1.48 (CAD $1.9) for a period of 5 years, subject to certain acceleration terms.

On June 15, 2021, in connection with the listing of Real's common shares on the NASDAQ, Real delivered an Acceleration Notice to certain funds managed by Insight Partners providing for the acceleration of the expiry date to June 30, 2021, of an aggregate 17,287, previously issued Warrants. All Warrants held by Insight Partners were exercised into Common Shares for gross proceeds of $26.6 million (CAD $32.8 million) on June 28, 2021.

On August 3, 2021, Insight Partners were issued an aggregate of 17,287 Common Shares in exchange of the Insight Partners' Preferred Units in connection with the Forced Exchange Event.

4. REALTYCRUNCH ACQUISITION

On January 11, 2021, Real completed the acquisition of the business assets and intellectual property of RealtyCrunch Inc. (the "RealtyCrunch Transaction"). The RealtyCrunch Transaction was settled in cash for an aggregate purchase price of USD $1,100 plus 184 Common Share purchase warrants of Real. Each warrant is exercisable into one Common Share at a price of CAD $1.36 for a period of four years. In connection with the RealtyCrunch Transaction, Real also granted 2,441 stock options ("Options"), which vest over a 4-year period. The Company has determined that the acquisition meets the definition of business combinations within the scope of IFRS 3, Business Combination and has completed the determination to allocate the price among the assets purchased and amount attributable to goodwill. The expense incurred related to the acquisition was $38 for the year ended December 31, 2021.


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED

The following table summarizes the fair value of the acquired assets and assumed liabilities, with reference to the acquisition as of the acquisition date:

    Balance at January 11, 2021  
Identifiable assets acquired and goodwill      
Proprietary Technology   563  
Goodwill   602  
Total Purchase Price   1,165  
Cash Paid   1,100  
Warrants Issued   65  

We have completed the valuation of the acquired assets and assumed liabilities and have assigned $563 as the fair value of the Company's developed technology and $602 as the residual goodwill.

5. SCOTT BENSON REAL ESTATE INC.

On December 3, 2021, Real completed the acquisition of the common shares of Scott Benson Real Estate Inc in Ontario, Canada. The transaction was settled in nominal cash consideration for an aggregate purchase price of one CAD Dollar. The Company has determined that the acquisition meets the definition of business combinations within the scope of IFRS 3, Business Combination and recorded an immaterial gain from bargain purchase. The Company has 12 months from the date of purchase to determine the purchase price allocation among the purchased assets and liabilities assumed and do not expect material adjustments to the bargain gain that was recognized.

6. EXPETITLE ACQUISITION

On January 21, 2022, the Company completed the acquisition of 100% of the issued and outstanding equity interests of Expetitle, Inc. ("Expetitle") pursuant to a stock purchase agreement dated January 20, 2022 (the "Expetitle Transaction"). As part of the Expetitle Transaction, the Company also acquired 51% ownership of five subsidiaries of Expetitle Inc. The noncontrolling ownership interest in these five subsidiaries of Expetitle recognised at the acquisition date was measured by reference to the fair value of the non-controlling interest and amounted to $21. The aggregate purchase price for 100% of the issued and outstanding equity interests of Expetitle was comprised from cash consideration of $7,432 payable at the closing of the Expetitle Transaction and contingent consideration of  $800 in cash subject to escrow, that will be released after twelve (12) months upon the satisfaction or waiver of the following terms and conditions: (i) the key employees remain at their current position with the Company for at least twelve (12) months after the Closing Date and (ii) Expetitle will become licenced to operate in at least fifteen states, including the current states of operation, Florida, Georgia, and Texas. Such contingent consideration was assessed as zero as we believe that it is probable that these conditions will not be met.

As part of the Expetitle transaction, Real also granted an aggregate of 700 Options and an aggregate of 1,100 RSUs to members of the Expetitle team. The fair value of those options was $4,776 from which $4,325 was determined to be part of the consideration and $451 that was recorded immediately to the statement of loss and comprehensive loss as post transaction employees compensation which vests immediately.  The Options are exercisable for a period of 3 years at $3.60 per Common Share. In addition, and as part of the transaction, the Company also provided cash grants to the Expetitle Inc. employees in the amount of $168. The Company has determined that the Expetitle Transaction meets the definition of business combinations within the scope of IFRS 3, Business Combination and has 12 months from the date of purchase to determine the purchase price allocation among the assets purchased and any amounts attributable to goodwill.


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED


    Balance at January 21, 2022  
Recognized amounts of assets acquired and liabilities assumed      
Cash   80  
Other Current Assets   42  
In Trust Cash   960  
Accounts Payables and Accrued Liabilities   (103 )
Held in Trust Funds   (960 )
Payables Other   (19 )
Net Assets Acquired   -  
       
Consideration      
Cash   7,432  
Contingent consideration   -  
Cash grants to Employees recognized as liabilities   75  
Cash grants to Employees   93  
Equity-settled shared-based consideration   4,325  
Total Consideration   11,925  
       
Cash Flow      
Total Consideration   (11,925 )
Acquired Cash   80  
Cash grants to Employees recognized as liabilties   75  
Equity-settled share-based payment   4,325  
From Investing Activities Cash
  (7,445 )


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED

7. REVENUE

In the following table, revenue from contracts with customers is disaggregated by major service lines as well as timing of revenue recognition.

    Three Months Ended June 30,     Six Months Ended June 30,  
        2022     2021     2022     2021  
Main revenue streams                        
Commissions   110,999     22,927     171,505     32,186  
Title   506     -     908     -  
Fee Income   639     -     1,085     -  
Other   212     168     507     218  
Total Revenue   112,356     23,095     174,005     32,404  
                         
Timing of Revenue Recognition                        
Products transferred at a point in time   112,144     22,927     173,498     32,186  
Revenue from Contracts with Customers   112,144     22,927     173,498     32,186  
                         
Other revenue   212     168     507     218  
Total Revenues   112,356     23,095     174,005     32,404  

8. EXPENSES BY NATURE

In the following table, cost of sales represents real estate commission paid to Company's agent as well as to outside brokerages in Canada and Title Fee Expenses.

    Three Months Ended June 30,     Six Months Ended June 30,  
        2022     2021     2022     2021  
Cost of Sales   103,064     20,667     158,851     28,739  
                         
Operating Expenses                        
General and Administrative Expenses   6,116     2,819     11,490     5,124  
Salaries and Benefits   2,656     1,095     4,821     1,164  
Stock Based Compensation   931     1,062     2,052     2,035  
Administrative Expenses   471     53     822     126  
Professional Fees   1,552     526     2,971     1,401  
Depreciation Expense   135     44     138     86  
Other General and Administrative Expenses   371     39     686     312  
Marketing Expenses   5,700     1,214     9,416     1,864  
Salaries and Benefits   171     75     283     173  
Stock Based Compensation for Employees   (27 )   -     (16 )   -  
Stock Based Compensation for Agents   547     272     1,129     479  
Revenue Share   4,376     697     7,078     958  
Other Marketing and Advertising Cost   633     170     942     254  
Research and Development Expenses   1,680     1,185     2,719     3,180  
Salaries and Benefits   734     130     1,126     522  
Stock Based Compensation   (7 )   710     66     2,278  
Other Research and Development   953     345     1,527     380  
Total Cost of Sales and Operating Expenses   116,560     25,885     182,476     38,907  
                         


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED

Finance Expenses

The following table summarizes details behind Finance costs as reported in the unaudited interim condensed consolidated Statement of Income (Loss)

    Three Months Ended June 30,     Six Months Ended June 30,  
Description       2022     2021     2022     2021  
Unrealized Losses (Gains)   (132 )   109     (385 )   210  
Realized Losses (Gains)   1     -     53     -  
Bank Fees   108     16     163     23  
Finance Cost   232     33     541     35  
Other   (1 )   -     -     -  
Total Finance Expenses   208     158     372     268  

9. LOSS PER SHARE

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 shares of common stock 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 shares of common stock outstanding plus, if potentially dilutive common shares outstanding during the period. The Company does not pay dividends or have participating shares outstanding.

    Three Months Ended June 30,     Six Months Ended June 30,  
        2022     2021     2022     2021  
Issued ordinary shares at the beginning
of the period
  174,746     101,847     170,483     101,847  
Effect of Warrant Exercise   3,584     8,808     7,847     8,808  
Weighted-average numbers of
ordinary shares
  178,330     110,655     178,330     110,655  
                         
Loss per share                        
Basic and diluted loss per share   (0.02 )   (0.03 )   (0.05 )   (0.06 )

10. 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 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 shares based for the exercise price as determined at grant date.

On February 26, 2021, 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 35,641Common Shares, less Common Shares previously 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 was approved by shareholders of the Company on June 13, 2022.


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED


Grant Date

Number of
Instruments

Vesting Conditions

Contractual Life
of Options

Balance December 31, 2020

13,813

 

 

On January, 2020

60

25% on first anniversary, then quarterly vesting

10 years

On March, 2020

244

immediate

10 years

On March, 2020

100

quarterly vesting

10 years

On March, 2020

250

25% on first anniversary, then quarterly vesting

10 years

On January, 2021

2,441

25% immediately, 25% on first anniversary, then quarterly vesting

10 years

On January, 2021

165

25% on first anniversary, then quarterly vesting

10 years

On January, 2021

1,670

quarterly vesting

10 years

On March, 2021

241

25% on first anniversary, then quarterly vesting

10 years

On March, 2021

114

quarterly vesting

10 years

On May, 2021

190

25% on first anniversary, then quarterly vesting

10 years

On May, 2021

705

3 years quarterly

10 years

On August, 2021

65

25% on first anniversary, then quarterly vesting

10 years

On August, 2021

450

quarterly vesting

10 years

On November, 2021

1,220

25% on first anniversary, then quarterly vesting

10 years

On November, 2021

559

3 years quarterly

10 years

Balance December 31, 2021

22,287

 

 

 

 

 

 

          On March, 2022

240

3 years quarterly vest

10 years

          On May, 2022

320

3 years quarterly vest

10 years

Balance June 30, 2022

22,847

 

 

B. Measurement of fair value

The fair value of the Options has been measured using the Black-Scholes formula which was also used to determine the Company's share value. 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 were as follows:

    June 30, 2022     December 31, 2021  
Share price $ 1.52   $ 3.69  
Exercise price $ 1.87 to $2.88   $ 0.87 to $3.40  
Expected volatility (weighted-average)   108.0%     156.0%  
Expected life (weighted-average)   10 years     10 years  
Expected dividends   - %     - %  
Risk-free interest rate (based on US government bonds)   1.95 - 2.30%     1.45%  

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

C. Reconciliation of outstanding stock-options

    June 30, 2022     December 31, 2021  
    Number of
Options
    Weighted-
Average
Exercise Price
    Number of
Options
    Weighted-
Average
Exercise Price
 
Outstanding at beginning of year   20,815   $ 0.81     12,851   $ 0.27  
Granted   560     2.12     8,474     1.70  
Forfeited/ Expired   (1,668 )   (1.80 )   (370 )   -  
Exercised   (148 )   (0.32 )   (140 )   (0.13 )
Outstanding at end of period   19,559   $ 0.68     20,815   $ 0.71  
Exercisable as at end of period   12,152           10,295        


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED

The stock-options outstanding as of June 30, 2022 had a weighted average exercise price of $0.68 (December 31, 2021: $0.71) and a weighted-average contractual life of 10 years (December 31, 2021: 10 years).

D. Restricted share unit plan

Restricted share unit plan

On September 21, 2020, the Company established a restricted share unit plan (the "RSU Plan"). Under the RSU Plan agents are eligible to receive RSUs that, upon vesting, entitle the holder to a Common Share or cash payment in lieu of a Common Share. The RSUs are earned in recognition of personal performance and ability to attract agents to Real. The expense recognized in relation to these awards for the period ended June 30, 2022 was $2,020. The stock compensation attributable to agent growth was classified as marketing expense. The stock compensation award granted to FTEs was classified as a General and Administrative expense on the unaudited interim condensed consolidated statements of loss and comprehensive loss.

RSUs awarded in the agent incentive program purchase plan are based on a percentage of commission withheld to purchase Common Shares. These RSUs are expensed in the period in which those awards are deemed to be earned with a corresponding increase in liability. All awards under this plan are subject to a 12-month vesting period. The liability will be classified into equity after the 12-month holding period has passed. The Company will grant an additional 25% of shares if an agent hasn't capped and 50% of shares if the agent has capped as a bonus after the 12-month vesting period has passed. The bonuses were adjusted to 15% pre-cap and 30% post-cap when the Company surpassed the 5,000 agents milestone on June 16, 2022. Agents pay the Company 15% of commissions until the commission paid to the Company totals $12, which is defined as the agent "cap" amount (the "Cap"). The bonus RSUs are expensed in the period the original award is deemed earned with a corresponding increase in stock-based compensation reserve.

RSUs awarded for personal performance and the ability to attract agents earned in recognition of personal performance conditions and are subject to a 3-year vesting period. The Company recognizes this expense during the applicable vesting period based upon the best available estimate of the number of equity instruments expected to vest with a corresponding increase in stock-based compensation reserve.

The following table illustrates changes in the Company's stock compensation liability for the periods presented:

    Amount  
Balance at, December 31, 2020   15  
Stock Grant Liability Increase   2,482  
Stock Grants Released from liability to equity   (229 )
Balance at, December 31, 2021   2,268  
Stock Grant Liability Increase   5,284  
Stock Grants Released from liability to equity   (1,233 )
Balance at, June 30, 2022   6,319  

The following table illustrates the Company's stock activity (in units) for the restricted share unit plan.

    Amount  
Balance at, December 31, 2020   121  
Granted   3,951  
Vested and Issued   (76 )
Forfeited   (31 )
Balance at, December 31, 2021   3,965  
Granted   5,335  
Vested and Issued   (622 )
Forfeited   (238 )
Balance at, June 30, 2022   8,440  


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED

The following table provides a detailed breakdown of the stock-based compensation expense as reported in the Consolidated Statement of Loss and Comprehensive Loss.

Stock Based Compensation Expense

  June 30, 2022     June 30, 2021  
  Options
Expense
    RSU
Expense
    Total     Options
Expense
    RSU
Expense
    Total  
Marketing Expenses - Agent Stock Based Compensation 520     609     1,129     315     165     480  
Marketing Expenses - FTE Stock Based Compensation (16 )   -     (16 )   -     -     -  
Research and Development - FTE Stock Based Compensation 23     43     66     2,278     -     2,278  
General and Administrative - FTE Stock Based Compensation 684     1,368     2,052     2,035     -     2,035  
Total Stock Based Compensation 1,211     2,020     3,231     4,628     165     4,793  

11. CASH

    June 30, 2022     December 31, 2021  
Cash   32,520     29,082  
Restricted Cash   -     47  
Total Cash   32,520     29,129  

12. INVESTMENTS IN AVAILABLE FOR SALE SECURITIES AT FAIR VALUE

Description   Cost      
 
Deposit /
(Withdrawal)
    Dividends,
Interest &
Income
    Gross
Unrealized
Losses
    Estimated
Fair Value
June 30, 2022
 
U.S. Government Bonds   5,033     (3,905 )   101     (196 )   1,033  
Municipal Bonds   2,900     (258 )   34     (166 )   2,510  
Alternative Strategies   878     -     -     (31 )   847  
Investment Certificate   -     39     -     -     39  
Short Term Investments   8,811     (4,124 )   135     (393 )   4,429  

Investment securities are recorded at fair value. The company's investment securities portfolio consists primarily of cash investments and debt securities issued by U.S government agencies, local municipalities, and certain corporate entities. Alternative strategies include number of securities such as Bank Loans, Treasury Notes, Treasury futures, Currencies, FX Forwards, FX Futures, FX Swap, Corporate Debt, Federal Reserve Repos and mortgage-backed securities. The products in 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). An unrealized loss exists when the current fair value of an individual security is less than the amortized cost basis.


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED

13. PROPERTY AND EQUIPMENT, INTANGIBLE ASSETS

Reconciliation of Carrying Amounts

    Computer
Equipment
     
Software
    Furniture and
Equipment
    Total  
Cost                        
Balance at December 31, 2020   33     -     69     102  
Additions   172     -     -     172  
Balance at December 31, 2021   205     -     69     274  
Additions   223     400     -     625  
Balance at June 30, 2022   428     400     69     899  
Accumulated Depreciation                        
Balance at December 31, 2020   24     -     64     88  
Depreciation   15     -     1     16  
Balance at December 31, 2021   39     -     65     104  
Depreciation   32     8     -     40  
Balance at June 30, 2022   71     8     65     144  
                         
Carrying Amounts                        
Balance at December 31, 2021   166     -     4     170  
Balance at June 30, 2022   358     392     4     754  

     
Intangible Assets
     
Goodwill
     
Total
 
Cost                  
Balance at December 31, 2020   -     -     -  
Additions   563     602     1,165  
Balance at December 31, 2021   563     602     1,165  
Additions   -     11,925     11,925  
Balance at June 30, 2022   563     12,527     13,090  
Accumulated Depreciation                  
Balance at December 31, 2020   -     -     -  
Depreciation   113     -     113  
Balance at December 31, 2021   113     -     113  
Depreciation   55     -     55  
Balance at June 30, 2022   168     -     168  
                   
Carrying Amounts                  
Balance at December 31, 2021   451     602     1,053  
Balance at June 30, 2022   395     12,527     12,922  


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED

14. CAPITAL AND RESERVES

Share capital and share premium

All Common Shares rank equally with regards to the Company's residual assets. Preference shareholders participate only to the extent of the face value of the shares.

    Share Premium     Non-controlling Interests     Non-redeemable Preference Shares  
    June 30, 2022     December 31, 2021     June 30, 2022     December 31, 2021     June 30, 2022     December 31, 2021  
In issue at beginning
of year
  50,753     21,668     -     14,818     -     -  
Issued for cash   -     26,475     -     -     -     -  
Conversion   -     14,818     -     (14,818 )   -     -  
Exercise of stock options   47     207     -     -     -     -  
Acquisition of
common shares for
RSU Plan
  (5,692 )   (12,644 )   -     -     -     -  
Release of vested
common shares from
employee benefit trusts
  1,326     229     -     -     -     -  
Non-controlling interest   -     -     135     -     -     -  
In issue at end of year
- fully paid
  46,434     50,753     135     -     -     -  
Authorized
(thousands of shares)
  Unlimited     Unlimited     Unlimited     Unlimited     66,000     66,000  


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED

Share Consolidation and Share Split

On May 26, 2021, the Company consolidated all of its issued and outstanding Common Shares on the basis of one (1) post-consolidation Common Share for each four (4) pre-consolidation Common Shares.

On July 12, 2021, the Company implemented a forward split of all of its issued and outstanding Common Shares on the basis of four (4) post-split Common Shares for each one (1) pre-split Common Share.

Non- controlling interests

On December 2, 2020, the Company completed the Insight Partners investment whereby a wholly owned subsidiary of the Company issued 17,287 Preferred Units at a price of $1.19 (CAD $1.52) per Preferred Unit. The Company also issued 17,287 common share purchase warrants (each, a "Warrant"), each exercisable into one Common Share at a price of $1.48 (CAD $1.9)

On June 28, 2021, all Warrants held by the Insight Partners were exercised for an aggregate gross price of $26.6 million (CAD $32.8 million)

On August 3, 2021, the Insight Partners were issued an aggregate of 17,287 Common Shares in the exchange of all of the Preferred Units.

On January 21, 2022, the Company completed the acquisition of 100% of the issued and outstanding equity interests of Expetitle. As part of this transaction, the company also acquired non-controlling interest of $21 which includes the income/ (loss) allocated to non- controlling interest holders of certain subsidiaries of Expetitle.

15. CAPITAL MANAGEMENT

Real defines capital as its equity. It is comprised of common shares, contributed capital, retained deficit, and accumulated other comprehensive loss. The Company's capital management framework is designed to maintain a level of capital that funds the operations and business strategies and builds long-term shareholder value.

The Company's objective is to manage its capital structure in such a way as to diversify its funding sources, while minimizing its funding costs and risks. The Company expects to be able to satisfy all of its financing requirements through use of some or all of the following: cash on hand, cash generated by operations, sale of securities held for investment, and through the public and private offerings of equity securities.

Real's objective is met by retaining adequate liquidity to provide the possibility that cash flows from its assets will not be sufficient to meet operational, investing and financing requirements. There have been no changes to the Company's capital management policies during the periods ended June 30, 2022 and December 31, 2021.

The following table presents the Company's liquidity:

    For the Period Ended  
    June 30, 2022     December 31, 2021  
Cash   32,520     29,082  
Restricted Cash   -     47  
Trade Receivables   240     254  
Other Receivables   66     23  
Short Term Investments   4,429     8,811  
Total Liquidity   37,225     38,217  
Loans and Borrowings   -     -  


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED

16. LEASE LIABILITY AND RIGHT OF USE ASSET

The Company subleases corporate office in New York, NY under a lease agreement dated December 1, 2017, which expires on June 30, 2023. A summary of the changes in the right-of-use asset for the periods ended June 30, 2022, and December 31, 2021 is as follows:

    Right-of-Use Asset  
Cost      
Balance at December 31, 2020   502  
Additions   -  
Balance at December 31, 2021   502  
Additions   -  
Balance at June 30, 2022   502  
Accumulated Depreciation      
Balance at December 31, 2020   309  
Depreciation   84  
Balance at December 31, 2021   393  
Depreciation   42  
Balance at June 30, 2022   435  
       
Carrying Amounts      
Balance at December 31, 2021   109  
Balance at June 30, 2022   67  

On December 1, 2017, the Company entered into lease agreement which resulted in the lease liability of $131 (undiscounted value of $135, discount rate 4%). This liability represents the monthly lease payment from January 1, 2022 to June 30, 2023. A summary of the changes in the lease liability during the periods ended June 30, 2022, and December 31, 2021 is as follows:

    June 30, 2022     December 31, 2021  
Maturity analysis - contractual undiscounted cash flows            
Less than one year   86     94  
One year to five years   -     41  
More than five years   -     -  
Total undiscounted lease liabilities   86     135  
Lease liabilities included in the balance sheet   86     131  
Current   86     91  
Non-current   -     40  

The following is a schedule of the Company's future lease payments (base rent portion) under lease obligations:

    Future lease payments  
July 1, 2022 to June 30, 2023   86  
Less: imputed interest   -  
Lease liability as at June 30, 2022   86  


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED

17. OTHER PAYABLES

The other payables primarily consist of escrow funds payables. This is the 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.

    June 30, 2022     December 31, 2021  
Escrow Funds Payables   14,546     3,264  
Other Payables   557     91  
Total Other Payables   15,103     3,351  


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED

18. FINANCIAL INSTRUMENTS - FAIR VALUE AND RISK MANAGEMENT

A. Accounting classifications and fair value

    For the Year Ended December 31, 2021  
    Carrying Amount           Fair Value  
    Financial Assets Not
Measured at FV
    Other Financial
Liabilities
    Total     Level 1     Total  
Financial Assets Measured at Fair Value (FV)                              
Short Term Investments   -     -     -     8,811     8,811  
Total Financial Assets Measured at Fair Value (FV)   -     -     -     8,811     8,811  
Financial Assets Not Measured at Fair Value (FV)                              
Cash   29,082     -     29,082     -     -  
Restricted Cash   47     -     47     -     -  
Trade Receivables   254     -     254     -     -  
Other Receivables   23     -     23     -     -  
Total Financial Assets Not Measured at Fair Value (FV)   29,406     -     29,406     -     -  
Financial Liabilities Not Measured at Fair Value (FV)                              
Accounts Payable   -     6,604     6,604     -     -  
Other Payables   -     3,351     3,351     -     -  
Total Financial Liabilities Not Measured at Fair Value (FV)   -     9,955     9,955     -     -  


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED


    For the Period Ended June 30, 2022  
    Carrying Amount           Fair Value  
    Financial Assets Not 
Measured at FV
    Other Financial
Liabilities
    Total     Level 1     Total  
Financial Assets Measured at Fair Value (FV)                              
Short Term Investments   -     -     -     4,429     4,429  
Total Financial Assets Measured at Fair Value (FV)   -     -     -     4,429     4,429  
Financial Assets Not Measured at Fair Value (FV)                              
Cash   32,520     -     32,520     -     -  
Trade Receivables   240     -     240     -     -  
Other Receivables   66     -     66     -     -  
Total Financial Assets Not Measured at Fair Value (FV)   32,826     -     32,826     -     -  
Financial Liabilities Not Measured at Fair Value (FV)                              
Accounts Payable   -     12,124     12,124     -     -  
Other Payables   -     15,103     15,103     -     -  
Total Financial Liabilities Not Measured at Fair Value (FV)   -     27,227     27,227     -     -  


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED

B. Transfers between levels

During the periods ended June 30, 2022, and December 31, 2021, there have been no transfers between Level 1, Level 2 and Level 3.

C. Financial risk management

The Company has exposure to the following risks arising from financial instruments:

- credit risk (see (ii));

- liquidity risk (see (iii));

- market risk (see (iv)); and

- investment risk (see (v)).

i. Risk management framework

The Company's activity exposes it to a variety of financial risks, including credit risk, liquidity risk, market risk and investment risk. These financial risks are managed by the Company under policies approved by the Board of Directors. The principal financial risks are actively managed by the Company's finance department, within the policies and guidelines.

On an ongoing basis, the finance department actively monitors the market conditions, with a view of minimizing exposure of the Company to changing market factors, while at the same time limiting the funding costs of the Company.

The Company's audit committee oversees how management monitors compliance with the Company's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.

ii. Credit risk

Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company's receivables from customers. The receivables are processed through an intermediary trustee, as part of the structure of every deal, which ensures collection on the close of a successful transaction. In order to mitigate the residual risk, the Company contracts exclusively with reputable and credit-worthy partners.

Loss rates are calculated using a 'roll rate' method based on the probability of a receivable progressing through successive stages of delinquency to write-off. Roll rates are calculated separately for exposures in different CGUs based on the following common credit risk characteristics - geographic region, credit information about the customer and the type of home purchased.

Loss rates are based on actual credit loss experience. These rates are multiplied by scalar factors to reflect differences between economic conditions during the period over which the historical data has been collected, compared to current conditions of the Company's view of economic conditions over the expected lives of the receivables.

The carrying amount of financial assets and contract assets represents the maximum credit exposure.


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED

Trade receivables and contract assets

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers other factors may influence the credit risk of the customer base, including the default risk associated with the industry and the country in which the customers operate.

The Company does not require collateral in respect to trade and other receivables. The Company does not have trade receivable and contract assets for which no loss allowance is recognized because of collateral.

As at June 30, 2022, the exposure to credit risk for trade receivables and contract asset by geographic region was as follows:

    June 30, 2022     December 31, 2021  
US   210     230  
Other Regions   30     24  
Trade Receivables   240     254  

The Company uses an allowance matrix to measure the ECLs of trade receivables from individual customers, which comprise a very large number of small balances.

iii. Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or other financial asset. The Company's approach to maintaining liquidity is to ensure, as far as possible, that it will have sufficient cash and cash equivalents and other liquid assets to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.

iv. Market risk

Market risk is the risk that changes according to market prices - e.g., foreign exchange rates, interest rates and equity prices - will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

Currency risk

The Company is exposed to transactional foreign currency risk to the extent there is a mismatch between currencies in which purchases and receivables are denominated and the respective functional currencies of the Company. The currencies in which transactions are primarily denominated are US dollars, Israeli shekel, and Canadian dollar.

Sensitivity analysis

A reasonably possible strengthening (weakening) of the US dollar (USD), Israeli shekel (ILS), or Canadian Dollar (CAD) against all other currencies in which the Company operates as of June 30, 2022, and December 31, 2021 would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED


    Average Rate     Period-end Spot Rate  
    Strengthening     Weakening     Strengthening     Weakening  
Balance at, June 30, 2022                        
CAD (-5% movement)   21     (21 )   26     (26 )
ILS (-5% movement)   21     (21 )   68     (68 )
Balance at, December 31, 2021                        
CAD (-5% movement)   43     (43 )   4     (4 )
ILS (-5% movement)   39     (39 )   54     (54 )

Foreign Currency Risk Management

The Group undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilizing forward foreign exchange contracts.

The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:

    Liabilities     Assets  
    June 30, 2022     December 31, 2021     June 30, 2022     December 31, 2021  
CAD   (13,007 )   (1,331 )   13,182     3,291  
ILS   (69 )   (1,420 )   7,899     191  
Total Exposure   (13,076 )   (2,751 )   21,081     3,482  

v. Investment risk

The Company invested funds from the Insight Partners investment transaction into a managed investment portfolio, exposing it to risk of losses based on market fluctuations. Securities are purchased on behalf of the Company and are actively managed through multiple investment accounts. Funds apportioned for investment are allocated accordingly to the investment guidelines set forth by Management. Investments are made in U.S. currency.

The Company follows a conservative investment approach with limited risk for investment activities and has allocated the funds in Level 1 assets to reduce market risk exposure.

Information about the Company's investment activity is included in Note 13.

19. COMMITMENTS AND CONTINGENCIES

The Company may have various other contractual obligations in the normal course of operations. The Company is not contingently liable with respect to litigation, claims and environmental matters, including those that could result in mandatory damages or other relief. Any expected settlement of claims in excess of amounts recorded will be charged to profit or loss as and when such determination is made.


THE REAL BROKERAGE, INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2022 and 2021
(U.S. dollar in thousands unless otherwise noted)

UNAUDITED

20. KEY MANAGEMENT PERSONNEL

The Company's key management personnel are comprised of the CEO, the CFO, the Chief Technology Officer, and other members of the executive team. Executive officers participate in the Company's Omnibus Incentive Plan (see Note 10). Directors and officers of the Company control approximately 38.11% of the voting shares of the Company. Key management personnel compensation for the period consists of the following:

    Period Ended  
    June 30, 2022     June 30, 2021  
Salaries and Benefits   1,009     614  
Consultancy   -     180  
Stock-based Compensation   642     3,076  
Compensation Expenses Related to Management   1,651     3,870  

21. SUBSEQUENT EVENTS

On July 26, 2022, the Company's Common Shares commenced trading on the Toronto Stock Exchange (the "TSX") under the symbol "REAX". Concurrent to the graduation to the TSX, the Common Shares were voluntarily delisted from the TSXV. Trading of the Common Shares will continue on the NASDAQ under the same symbol, "REAX".


The Real Brokerage Inc.: Exhibit 99.2 - Filed by newsfilecorp.com


Building Your Future, Together

The Real Brokerage Inc. (the "Company" or "Real") is a technology-powered real estate brokerage, using its innovative approach to change the way people buy and sell homes. Real's model focuses on creating value and financial opportunity for agents, enabling them to deliver a better experience to their clients.

Real creates financial opportunities for agents in four key ways:

 

1. Keep more commission

Our unique compensation structure favors the agent, allowing them to keep 85%-100% of commissions.

 

 

2. 100% mobile brokerage services

We are 100% mobile - so agents have what they need to close the deal at their fingertips and aren't paying for unused office space.

 

 

3. Build equity

Agents can earn equity through Real's incentive program that allows them to share in the wealth as they help to build a more valuable company.

 

 

4. Earn more with revenue sharing

Agents can earn a share of revenue generated by agents referred to Real. Each referral earns an agent 5% of Real's portion of an agents' gross commission income up to an annual cap.

 



2022 Highlights

Real was founded in 2014 and is headquartered in Toronto and New York City. We provide brokerage services for the real estate market in the United States and Canada. At June 30, 2022, Real was licensed in 44 states and the District of Columbia in the United States and in Alberta and Ontario, Canada. Real's fast-growing network of agents allows for strong relationship building, access to a nationwide referral network and seamless expansion opportunities.

5,600 47 $174.0M $6,540M

Agents, Q2 2022

(44 states, D.C., and 2
provinces in Canada), Q2
2022

Revenue, Q2 YTD 2022

Value of sold homes, YTD
Q2 2022



THE REAL BROKERAGE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE PERIOD ENDED JUNE 30, 2022 AND 2021

(in thousands of U.S. dollars and in thousands per unit amounts)

UNAUDITED

MANGAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

INTRODUCTION

This Management's Discussion and Analysis (the "MD&A") is provided to enable a reader to assess the results of operations and financial condition of The Real Brokerage Inc. ("Real" or the "Company") for the period ended June 30, 2022, and 2021. This MD&A is dated August 9, 2022 and should be read in conjunction with unaudited interim condensed financial statements and related notes for the period ended June 30, 2022 and 2021 (the "Financial Statements"). Unless the context indicates otherwise, references to "Real", "the Company", "we", "us" and "our" in this MD&A refer to The Real Brokerage Inc. and its subsidiaries.

CAUTION REGARDING FORWARD-LOOKING INFORMATION

Certain information included in this MD&A contains forward-looking information within the meaning of applicable Canadian securities laws. This information includes, but is not limited to, statements made in "Business Overview and Strategy", "Results from Operations", and other statements concerning Real's objectives, its strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, circumstances, performance, or expectations that are not historical facts. Forward-looking information generally can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "would", "expect", "intend", "estimate", "anticipate", "believe", "should", "plan", "continue", or similar expressions suggesting future outcomes or events or the negative thereof. Such forward-looking information reflects management's current beliefs and is based on information currently available. All forward-looking information in this MD&A is qualified by the following cautionary statements.

Forward looking information necessarily involves known and unknown risks and uncertainties, which may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections, or conclusions will not prove to be accurate, assumptions may not be correct and objectives, strategic goals and priorities may not be achieved. A variety of factors, many of which are beyond Real's control, affect the operations, performance and results of the Company and its subsidiaries, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results.

Although Real believes that the expectations reflected in such forward-looking information are reasonable and represent the Company's projections, expectations and beliefs at this time, such information involves known and unknown risks and uncertainties which may cause the Company's actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking information. See "Risks and Uncertainties" for further information. The reader is cautioned to consider these factors, uncertainties, and potential events carefully and not to put undue reliance on forward-looking information, as there can be no assurance that actual results will be consistent with such forward-looking information.

The forward-looking information included in this MD&A is made as of the date of this MD&A and should not be relied upon as representing Real's views as of any date subsequent to the date of this MD&A. Management undertakes no obligation, except as required by applicable law, to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

BUSINESS OVERVIEW AND STRATEGY

Real is a growing technology-powered real estate brokerage in the United States and Canada. We focus our operations on development of technology that helps real estate agents perform better as well as building a scalable, efficient brokerage operation that is not dependent on a cost-heavy brick and mortar presence in the markets that we operate in.

As a licensed real estate brokerage, our revenue is generated, primarily, by processing real estate transactions which entitle us to commissions. We pay a portion of our commission revenue to our agents and brokers.

Our strength is our ability to offer real estate agents a higher value, through a proprietary technology stack, at a lower cost, compared to other brokerages, while operating efficiently and scaling quickly with increased brokerage oversite. We also identify a major opportunity in improving the home-buying experience for consumers and will be building technology and processes that will enhance transparency and provide our agents' clients more convenience and control of the process.             


THE REAL BROKERAGE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE PERIOD ENDED JUNE 30, 2022 AND 2021

(in thousands of U.S. dollars and in thousands per unit amounts)

UNAUDITED

Real has also identified a major opportunity in improving the homebuying experience for consumers, and as such, a core component of our go-forward strategy will be adding ancillary services to develop a one-stop shop customer-facing portal. The goal is to pair our best-in-class technology with the trusted guidance of the agent-led experience to enhance the predictability, organization, and transparency for homebuyers, resulting in a more seamless and customer-friendly transaction process.

To this end, Real is focused on developing a comprehensive consumer-facing mobile application while looking to integrate existing and planned ancillary services. In January, Real acquired a title company, which has rebranded to Real Title, and we are actively seeking acquisition targets within the mortgage space. Real is focused on lending services within the short-term and will be planning to evaluate building, buying, or partnering to deliver additional ancillary services within the medium-term as part of this holistic one-stop shop strategy. Real believes it can deliver value to shareholders by adding ancillary services with historically high margins and seeks to create a technology-enhanced game-changing experience for consumers.

Accelerated Growth

Following our listing on the TSX Venture Exchange (the "TSXV") and the Nasdaq Capital Market (the "NASDAQ"), as well as the launch of our Agent Equity Program, we have entered a period of growth, driven by an increase in the number of agents joining us on a monthly basis, as well as higher productivity of those newer cohorts. The growth is now well reflected in our Q2 2022 revenue figures, and we expect this trend to continue in the following quarters.

Our non-brick and mortar-based model is becoming increasingly desirable, enabling agents to work from anywhere, without being tied to a physical office by leveraging our best-in-class technology.

Focus on Technology


The real estate industry is generally considered to be very slow at adopting technology and as such, real estate transactions remain notoriously difficult to manage. We believe there is an opportunity to produce agent focused software products that will create differentiation between Real and other brokerages. We also acknowledge that profitability in our industry is closely tied to the improvement of internal operations efficiency through automation and the ability to scale and expand rapidly.

We see a tremendous opportunity in improving the home buying and selling experience for consumers using technology, while keeping real estate agents in the center of the transaction. This approach will enable consumers to experience a faster, smoother, and more enjoyable digital based journey, while still benefiting from the guidance of a human real estate expert throughout this exciting and highly emotional transaction. We are beginning to allocate resources towards building the technology, which will enable us to capitalize on this opportunity.

Recent developments

Normal Course Issuer Bid

On May 17, 2021, the TSXV accepted the Company's Notice of Intention to implement a normal course issuer bid ("NCIB"). Pursuant to the NCIB, the Company may, during the 12-month period commencing May 20, 2021, and ending May 20, 2022, purchase up to 7,170 common shares of the Company ("Common Shares"), being approximately 5% of the total 143,404 Common Shares issued and outstanding as of April 30, 2021.

On May 19, 2022, the Company announced that it is renewing the NCIB to be transacted through the facilities of the NASDAQ and other stock exchanges and/or alternative trading systems in the United States and/or Canada (other than the TSXV), if eligible. Pursuant to the NCIB, Real may purchase up to 8,915 Common Shares, representing approximately 5% of the total 178,309 Common Shares issued and outstanding as of May 19, 2022.


THE REAL BROKERAGE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE PERIOD ENDED JUNE 30, 2022 AND 2021

(in thousands of U.S. dollars and in thousands per unit amounts)

UNAUDITED

The Company appointed CWB Trust Services (the "Trustee") as the trustee for the purposes of arranging for the acquisition of Common Shares and to hold the Common Shares in trust for the purposes of satisfying restricted share unit ("RSU") obligations and to perform other administration matters related to the NCIB. Through the Trustee, RBC Capital Markets has been engaged to undertake purchases under the NCIB. RBC Capital Markets is required to comply with the TSXV and NASDAQ NCIB rules in respect of the purchases of Common Shares as the Trustee is considered to be a non-independent trustee by the TSXV for the purposes of the NCIB rules.

The Common Shares acquired will be held by the Trustee until the same are sold in the market with the proceeds to be transferred to designated participants or until the Common Shares are delivered to designated participants, in each case under the terms of the Company's equity incentive plans to satisfy the Company's obligations in respect of redemptions of vested RSUs held by such designated participants.

The Company repurchased 7,089 Common Shares in the amount of $18,336 as of June 30, 2022 pursuant to the NCIB. A total of 698 Common Shares have been released from the trust to satisfy the Company's obligations in respect of redemptions of vested RSU held by designated participants.

Business Strategy

Revenue share model

As the vast majority of real estate agents are independent contractors, we believe that it is our responsibility to create multiple revenue sources and improve financial opportunities for agents. Our attractive commission split coupled with the equity incentives for agents provide great opportunities. We are now offering agents the opportunity to earn revenue-share, paid out of Real's portion of commissions, for new agents that they personally refer to Real. The program launched in November 2019 is having a major impact on our agent count and revenue growth.

We are witnessing momentum in several markets, attributed to the enthusiasm generated locally by influential agents who continue to join Real and attract their colleagues to Real.

Agent's experience


We focus on creating an unparalleled agent experience through development of a unique and comprehensive mobile platform. At its core, our technology is an operating system that allows agents to build their business more rapidly, assisting them with their marketing, productivity, support, education, transaction management and more.

As part of those efforts, on August 8, 2021, we launched a new and improved agent mobile application that delivers our agents better visibility into their business, transactions, and financials. We continue to develop new features for the benefit of our agents.

Focus on teams

Real estate teams have a unique structure and are typically formed by a high producing agent who attracts other agents to work with them and enjoy the lead flow and mentoring provided by the team leader. To attract teams, we enhanced our team offering to include the full benefits of revenue sharing and the equity program. These incentive programs allow agents and brokers a financial mechanism to build teams across geographical boundaries in any of the markets that we serve. Agents and brokers can build teams without incurring significant additional expense, oversight responsibility or liability, at the same time preserving and enhancing their own personal brands. The growth in brokerage teams joining Real is having a positive impact, as reflected in this year's revenue growth.

OBJECTIVES

Real seeks to become one of the leading real estate brokerages in the United States and Canada. Using our proprietary technology, we look to provide agents with all the tools they need to successfully manage and market their business. Real plans to accomplish this through: (i) proprietary integration of technology and tools focused on facilitating and improving tasks performed by agents. (ii) the offering of attractive business terms to agents and creation of multiple potential revenue streams for agents. (iii) providing excellent support and service to our agents. (iv) the creation of a nationwide collaborative community of agents, and (v) offering wealth building opportunities through equity grants.


THE REAL BROKERAGE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE PERIOD ENDED JUNE 30, 2022 AND 2021

(in thousands of U.S. dollars and in thousands per unit amounts)

UNAUDITED

Leveraging the engagement of real estate agents and homebuyers and sellers, Real will seek to generate revenue through a variety of different channels.

PRESENTATION OF FINANCIAL INFORMATION AND NON-IFRS MEASURES

Presentation of financial information

Unless otherwise specified herein, financial results, including historical comparatives, contained in this MD&A are based on the Financial Statements, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and the interpretations of the IFRS Interpretations Committee.

Non-GAAP measures

In addition to the reported IFRS measures, industry practice is to evaluate entities giving consideration to certain non-GAAP performance measures, such as earnings before interest, taxes, depreciation and amortization ("EBITDA") or adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA").

Management believes that these measures are helpful to investors because they are measures that the Company uses to measure performance relative to other entities. In addition to IFRS results, these measures are also used internally to measure the operating performance of the Company.

These measures are not in accordance with GAAP and have no standardized definitions, and as such, our computations of these non-GAAP measures may not be comparable to measures by other reporting issuers. In addition, Real's method of calculating non-GAAP measures may differ from other reporting issuers, and accordingly, may not be comparable.

Earnings before Interest, Taxes, Depreciation and Amortization

EBITDA is used as an alternative to net income because it excludes major non-cash items such as interest, taxes, and amortization, which management considers non-operating in nature. It provides useful information about our core profit trends by eliminating our taxes, amortization, and interest which provides a more accurate comparison between our competitors. A reconciliation of EBITDA to IFRS net income is presented under the section "Results from Operations" of this MD&A.

Adjusted Earnings before Interest, Taxes, Depreciation and Amortization

Management believes that Adjusted EBITDA provides useful information about our financial performance and allows for greater transparency with respect to a key metric used by the Company for financial and operational decision-making. We believe that Adjusted EBITDA helps identify underlying trends in our business that otherwise could be masked by the effect of the expenses that we exclude in Adjusted EBITDA. In particular, we believe the exclusion of stock and stock option expenses provides a useful supplemental measure in evaluating the performance of our operations and provides additional transparency into our results of operations.

Adjusted EBITDA is used as an addition to net income (loss) and comprehensive income (loss) because it excludes major non-cash items such as amortization, interest, stock-based compensation, current and deferred income tax expenses and other items management considers non-operating in nature.

A reconciliation of Adjusted EBITDA to IFRS net income is presented under the section "Results from Operations" of this MD&A.


THE REAL BROKERAGE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE PERIOD ENDED JUNE 30, 2022 AND 2021

(in thousands of U.S. dollars and in thousands per unit amounts)

UNAUDITED

RESULTS FROM OPERATIONS

Select interim information

    For the Three Months Ended   For the Six Months Ended  
    June 30, 2022     June 30, 2021     June 30, 2022     June 30, 2021  
Operating Results                        
Total Revenues   112,356     23,095     174,005     32,404  
Loss from Continuing Operations   (4,155 )   (2,991 )   (8,407 )   (6,771 )
Total Comprehensive Loss Attributable to
Owners of the Parent
  (4,134 )   (2,948 )   (8,520 )   (6,771 )
                         
Per Share Basis                        
Basic and diluted loss per share (ii)   (0.02 )   (0.05 )   (0.05 )   (0.12 )
                         
EBITDA (i) (iii)   (3,622 )   (2,636 )   (7,503 )   (6,417 )
Adjusted EBITDA (i) (iii)   (2,021 )   (496 )   (3,991 )   (1,419 )

(i) Represents a non-GAAP measure. Real's method for calculating non-GAAP measures may differ from other reporting issuers' methods and accordingly may not be comparable. For definitions and basis of presentation of Real's non-GAAP measures, refer to the non-GAAP measures section.

(ii) Basic and diluted loss per share are calculated based on weighted average of Common Shares outstanding during the period.

(iii) EBITDA and Adjusted EBITDA are calculated on a trailing twelve-month basis. Refer to non-GAAP measures section of this MD&A for further details.

Earnings before interest, taxes, depreciation and amortization

    For the Three Months Ended     For the Six Months Ended  
    June 30, 2022     June 30, 2021     June 30, 2022     June 30, 2021  
Net Loss and Comprehensive Loss   (4,134 )   (2,948 )   (8,520 )   (6,771 )
Add (Deduct):                        
Finance Costs   377     268     879     268  
Depreciation   135     44     138     86  
EBITDA   (3,622 )   (2,636 )   (7,503 )   (6,417 )


THE REAL BROKERAGE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE PERIOD ENDED JUNE 30, 2022 AND 2021

(in thousands of U.S. dollars and in thousands per unit amounts)

UNAUDITED

Adjusted earnings before interest, taxes, depreciation, and amortization

    For the Three Months Ended     For the Six Months Ended  
    June 30, 2022     June 30, 2021     June 30, 2022     June 30, 2021  
Net Loss and Comprehensive Loss   (4,134 )   (2,948 )   (8,520 )   (6,771 )
Add:                        
Finance Costs   377     158     879     268  
Depreciation   135     44     138     86  
Stock-Based Compensation   1,446     2,045     3,231     4,793  
NASDAQ Listing Expenses   -     145     -     145  
Restructuring Expenses   -     60     -     60  
Extraordinary Expenses   155     -     281     -  
Adjusted EBITDA   (2,021 )   (496 )   (3,991 )   (1,419 )

Balance Sheet overview

    June 30, 2022     December 31, 2021  
ASSETS            
Current Assets   38,554     38,665  
Non-Current Assets   13,743     1,332  
TOTAL ASSETS   52,297     39,997  
             
LIABILITIES            
Current Liabilities   27,313     10,046  
Non-Current Liabilities   6,573     2,947  
TOTAL LIABILITIES   33,886     12,993  
TOTAL EQUITY   18,411     27,004  
TOTAL LIABILITIES AND EQUITY   52,297     39,997  

For the six-month period ended June 30, 2022, total revenues amounted to $174,005 compared to $32,404 for the six-month period ended June 30, 2021, thus demonstrating the effects of the Company's growth. The Company generates substantially all its revenue from commissions from the sale of real estate properties. Other sources of revenue include fee income from the brokerage-platform and other revenues relating to auxiliary services. The increase in revenues is attributable to an increase in productive agents on our platform, as well as expanding the number of states and countries in which we operate. We are continually investing in the acquisition of productive agents on our platform, which we anticipate will further translate into a larger transaction volume closed by our agents. As we further widen our footprint within the United States and Canada, we expect this momentum to progress.

For the six-month period ended June 30, 2022, total cost of sales amounted to $158,851 compared to $28,739 for the six-month period ended June 30, 2021. Cost of sales represents real estate commission paid to Company's agent as well as to outside brokerages in Canada and Title Fee Expenses.

Adjusted EBITDA excludes stock-based compensation expense related to our agent incentive program and stock options expense for full time employees and management personnel. Stock-based compensation expense is affected by awards granted and/or awards forfeited throughout the year as well as increases in fair value and is more fully disclosed in Note 10, Share-based payment arrangements, of the Financial Statements.


THE REAL BROKERAGE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE PERIOD ENDED JUNE 30, 2022 AND 2021

(in thousands of U.S. dollars and in thousands per unit amounts)

UNAUDITED

A further breakdown in revenues generated during the period is included below:

    For the Three Months Ended     For the Six Months Ended  
    June 30, 2022     June 30, 2021     June 30, 2022     June 30, 2021  
Major Service Lines                        
Commissions   110,999     22,927     171,505     32,186  
Title   506     -     908     -  
Fee Income   639     -     1,085     -  
Other   212     168     507     218  
Total Revenue   112,356     23,095     174,005     32,404  
                         
Timing of Revenue Recognition                        
Products and Services Transferred at a Point in Time   112,144     22,927     173,498     32,186  
Revenue from Customers with Contracts   112,144     22,927     173,498     32,186  
Other Revenue   212     168     507     218  
Total Revenue   112,356     23,095     174,005     32,404  

A further breakdown in expenses during the period is included below:

    For the Three Months Ended     For the Six Months Ended  
    June 30, 2022     June 30, 2021     June 30, 2022     June 30, 2021  
Cost of Sales   103,064     20,667     158,851     28,739  
                         
Operating Expenses                        
General and Administration Expense   6,116     2,819     11,490     5,124  
Salaries and Benefits   2,656     1,095     4,821     1,164  
Stock-Based Compensation (G&A)   931     1,062     2,052     2,035  
Administrative Expenses   471     53     822     126  
Professional Fees   1,552     526     2,971     1,401  
Depreciation   135     44     138     86  
Other General and Administrative Expenses   371     39     686     312  
Marketing Expenses   5,700     1,214     9,416     1,864  
Salaries and Benefits   171     75     283     173  
Stock-Based Compensation (Marketing - FTE)   (27 )   -     (16 )   -  
Stock-Based Compensation (Marketing - Agents)   547     272     1,129     479  
Revenue Share   4,376     697     7,078     958  
Other Marketing and Advertising Cost   633     170     942     254  
Research and Development Expenses   1,680     1,185     2,719     3,180  
Salaries and Benefits   734     130     1,126     522  
Stock-Based Compensation (Research & Development)   (7 )   710     66     2,278  
Other Research and Development   953     345     1,527     380  
Total Cost of Sales and Operating Expenses   116,560     25,885     182,476     38,907  


THE REAL BROKERAGE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE PERIOD ENDED JUNE 30, 2022 AND 2021

(in thousands of U.S. dollars and in thousands per unit amounts)

UNAUDITED

We believe that growth can and should be balanced with profits and therefore plan and monitor spend responsibly to ensure we decrease our losses and work towards being EBITDA positive. Our loss as a percentage of total revenue was 5% for the six-month period ended June 30, 2022, and 21% for the six-month period ended June 30, 2021. More detailed explanations for movements in expenses represented above can be found in the paragraphs below.

    For the Six Months Ended  
    June 30, 2022     June 30, 2021  
Revenues   174,005     32,404  
Cost of Sales   158,851     28,739  
Cost of Sales as a Percentage of Revenues   91%     89%  

The total cost of sales for the six-month period ended June 30, 2022, was $158,851 in comparison to $28,739 for the six-month period ended June 30, 2021. We typically pay our agents 85% of the gross commission earned on every real estate transaction with 15% of said commissions being paid to the Company. Agents pay the Company 15% of commissions until the commission paid to the Company totals $12, which is defined as the agent "cap" amount (the "Cap"). Each agent Cap cycle resets on an annual basis. As the total revenue increases, the total commission to agents' expense increases accordingly. Our margins are affected by the increase in the number of agents who achieve their Cap, the increase in volume and increases in unit prices, resulting in a downward pressure as we continue to attract high producing agents. We expect to offset this pressure and increase margins through the launch of title services through "Real Title", the introduction of financial services, such as our "Instant Payments" program and by adding additional ancillary services.

Our salaries and benefits expenses for the six-month period ended June 30, 2022 was $6,230 in comparison to $1,859 for the six-month period ended June 30, 2021. The increase in salaries and benefits expenses were mainly due to an increase in number of full-time employees from 41 at June 30, 2021 to 107 at June 30, 2022. The increase is attributable to Real's commitment to better serve its agents and to the growth and expansion of the Company. These investments in key management and employee personnel allow us to offer best in class service to our agents. As the Company continues in this period of growth, it is necessary to scale operations in order to support that growth. Increases in headcount, as well as the investments Real is making in its technology infrastructure, allow us to scale at an accelerated pace and serve as key contributors to our growth. With year over year revenue growth at 437%, we believe we have proven our ability to do so in a highly efficient manner and with minimal impact on our operational costs. Real's Full-time employee to Agent ratio as of June 30, 2022 is 1:63 compared to 1:60 as of June 30, 2021. 

Our stock-based compensation expense for the period ended June 30, 2022 was $3,231 in comparison to $4,793 for the period ended June 30, 2021. The decrease in stock-based compensation is primarily due to equity sign on bonuses granted in connection with the acquisition of RealtyCrunch 2021. For the six-month period ended June 30, 2022 and June 30, 2021, we reclassified agent related stock compensation expense for from incentive stock options ("Options") and RSUs to Marketing expenses. For the six-month period ended June 30, 2022 and June 30, 2021, stock-based compensation expense related to full-time employees ("FTEs") within Marketing and Research and Development are included in the Marketing and Research and Development expense categories.

    June 30, 2022     June 30, 2021  
    Options Expense     RSU Expense     Total     Options Expense     RSU Expense     Total  
Marketing Expenses -
Agent Stock-Based Compensation
  520     609     1,129     315     165     480  
Marketing Expenses -
FTE Stock-Based Compensation
  (16 )   -     (16 )   -     -     -  
Research and Development -
FTE Stock-Based Compensation
  23     43     66     2,278     -     2,278  
General and Administrative -
FTE Stock-Based Compensation
  684     1,368     2,052     2,035     -     2,035  
Total Stock-Based Compensation Expense   1,211     2,020     3,231     4,628     165     4,793  


THE REAL BROKERAGE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE PERIOD ENDED JUNE 30, 2022 AND 2021

(in thousands of U.S. dollars and in thousands per unit amounts)

UNAUDITED

Our consultancy expenses for the six-month period ended June 30, 2022 was $2,971 in comparison to $1,401 for period ended June 30, 2021. The increase in consultancy expenses was largely due to an increase in legal and professional fees associated with the Expetitle acquisition and an increase in our broker and recruiter consulting fees as a result of our expanding geographic footprint.

Our marketing expenses the period ended June 30, 2022, was $9,416 compared to $1,864 for the six-month period ended June 30, 2021, due to our efforts to attract agents. This increase is primarily comprised of $7,078 in revenue share paid to agents, as part of our revenue share model and agent related stock-based compensation expense of $1,129. Agents earn revenue share for new agents that they personally refer to Real and are eligible for the equity incentive program based on certain attracting and performance criteria. Real chooses to limit its expenses paid using traditional marketing channels and focuses primarily on marketing through its agents as the main cost of acquisition. Therefore, as agent counts increase so does our expense related to the revenue share and equity incentive programs.

Our Research and Development expenses for the six-month period ended June 30, 2022, was $2,719 compared to $3,180 for the six-month period ended June 30, 2021. The decrease is primarily due to the capitalization of costs associated with developing our internal-use cloud-based residential real-estate transaction system. These costs are primarily related to costs incurred in relation to internally created software during the application development stage including costs for upgrades and enhancements that result in additional functionality.

Financial Instruments

Financial assets and financial liabilities are recognized on the Company's consolidated statements of financial position when Real becomes party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Classification and subsequent measurement

Financial assets - Policy

On initial recognition, a financial asset is classified as measured at: fair value; Fair Value through Other Comprehensive Income (FVOCI) - debt investment; FVOCI - equity investment; or Fair Value through profit and loss (FVTPL).

Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortized cost if it meets both of the following conditions as is not designated as FVTPL:

- it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as FVTPL:

- it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and


THE REAL BROKERAGE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE PERIOD ENDED JUNE 30, 2022 AND 2021

(in thousands of U.S. dollars and in thousands per unit amounts)

UNAUDITED

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets - Business model assessment

The Company assesses the objective of the business model in which a financial asset is held at a portfolio level, because this best reflects the way the business is managed, and information is provided to management. The information considered includes:

- the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management's strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows;

- how the performance of the portfolio is evaluated and reported to the Company's management;

- the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

- how managers of the business are compensated - e.g., whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

- the frequency, volume, and timing of sales of financial assets in prior periods, the reasons for such sales and the expectations of future sales activity.

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales, consistent with the Company's continuing recognition of the assets.

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

Financial assets - Subsequent measurement and gains and losses

Financial assets at

FVTPL

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

Financial assets at

amortized cost

These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

Debt investments at

FVOCI

These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

Equity investments at

FVOCI

These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses recognized in OCI and are never reclassified to profit or loss.



THE REAL BROKERAGE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE PERIOD ENDED JUNE 30, 2022 AND 2021

(in thousands of U.S. dollars and in thousands per unit amounts)

UNAUDITED

Financial liabilities - Classification, subsequent measurement and gains and losses

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and their net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

Derecognition

Financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

Financial liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows or the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

Offsetting

Financial assets and financial liabilities are offset, and the net amount presented on the consolidated statements of financial position, only when the Company has a legally enforceable right to offset the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.


THE REAL BROKERAGE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE PERIOD ENDED JUNE 30, 2022 AND 2021

(in thousands of U.S. dollars and in thousands per unit amounts)

UNAUDITED

A breakdown of financial instruments for the period ended June 30, 2022 is included below:

    For the Period Ended June 30, 2022  
            Carrying Amount                 Fair Value  
    Financial Assets Not
Measured at FV
    Other Financial
Liabilities 
    Total      
Level 1
     
  Total
 
Financial Assets Measured at
Fair Value (FV)
                             
Short Term Investments   -     -     -     4,429     4,429  
Total Financial Assets Measured at Fair Value (FV)   -     -     -     4,429     4,429  
Financial Assets Not Measured at
Fair Value (FV)
                             
Cash   32,520     -     32,520     -     -  
Trade Receivables   240     -     240     -     -  
Other Receivables   66     -     66     -     -  
Total Financial Assets Not
Measured at Fair Value (FV)
  32,826     -     32,826     -     -  
Financial Liabilities Not Measured at Fair Value (FV)                              
Accounts Payable   -     12,124     12,124     -     -  
Other Payables   -     15,103     15,103     -     -  
Total Financial Liabilities Not
Measured at Fair Value (FV)
  -     27,227     27,227     -     -  


THE REAL BROKERAGE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE PERIOD ENDED JUNE 30, 2022 AND 2021

(in thousands of U.S. dollars and in thousands per unit amounts)

UNAUDITED

SUMMARY OF QUARTERLY INFORMATION

The following table provides selected quarterly financial information for the eight most recently completed financial quarters ended June 30, 2022. This information reflects all adjustments of a recurring nature that are, in the opinion of management, necessary to present a fair statement of the results of operations for the periods presented. Quarter-to-quarter comparisons of financial results are not necessarily meaningful and should not be relied upon as an indication of future performance. The general increase in revenue and expense quarter over quarter is due to growth and expansion of the Company.

    2022   2021   2020  
    Q2     Q1     Q4     Q3     Q2     Q1     Q4     Q3  
Revenue   112,356     61,649     50,479     38,798     23,095     9,309     7,090     3,939  
Cost of Sales   103,064     55,787     46,371     35,477     20,667     8,072     6,342     3,198  
Gross Profit   9,292     5,862     4,108     3,321     2,428     1,237     748     741  
Administrative Expenses   6,116     5,374     3,378     2,043     2,847     2,305     1,737     886  
Marketing Expenses   5,700     3,716     3,790     2,154     1,214     650     305     124  
Research and Development Expenses   1,680     1,039     682     145     1,157     1,995     76     141  
Other Income (Loss)   (257 )   (179 )   (249 )   -     -     -     (167 )   -  
Operating Income (Loss)   (3,947 )   (4,088 )   (3,493 )   (1,021 )   (2,790 )   (3,713 )   (1,203 )   (410 )
Listing Expenses   -     -     -     -     -     -     32     -  
Finance expenses, net   208     164     352     44     201     65     111     12  
Income (Loss) Before Tax   (4,155 )   (4,252 )   (3,845 )   (1,065 )   (2,991 )   (3,778 )   (1,346 )   (422 )
Non-controlling interest   (53 )   (61 )   -     -     -     -     -     -  
Income (Loss) Attributable to the Owners of the Parent   (4,208 )   (4,313 )   (3,845 )   (1,065 )   (2,991 )   (3,778 )   (1,346 )   (422 )
Other Comprehensive Incomes (loss):                                                
Unrealized Gains (Losses) on Available for Sale Investment Portfolio   (116 )   (277 )   (352 )   -     -     -     -     -  
Foreign Currency Translation Adjustment   190     204     4     (1 )   (43 )   45     -     -  
Comprehensive income (loss)   (4,134 )   (4,386 )   (4,193 )   (1,064 )   (2,948 )   (3,823 )   (1,346 )   (422 )
Non-Operating Expenses:                                                
Finance Costs   377     502     699     43     158     110     111     12  
Depreciation   135     3     83     44     44     42     32     10  
Stock-Based Compensation   1,446     1,785     494     (80 )   2,045     2,748     802     139  
Listing Expenses   -     -     -     -     -     -     -     -  
NASDAQ Listing Expenses   -     -     (99 )   310     145     -     -     -  
Restructuring Expense   -     -     54     3     60     -     -     -  
Extraordinary Expenses   155     126     -     -     -     -     -     -  
Adjusted EBITDA   (2,021 )