Company: LRHC
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112656
Chunk: 26

Company: La Rosa Holdings Corp.
Filing Date: 2025-11-19
Form: 10-Q
Item: Item 1
Chunk 26
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    Level
    3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

A
financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the
fair value measurement. The Company has evaluated the estimated fair value of financial instruments using available market information
and valuations as provided by third-party sources. The use of different market assumptions or estimation methodologies could have a significant
effect on the estimated fair value amounts.

The
carrying amounts of financial instruments, including cash, restricted cash, accounts receivable, accounts payable, and accrued expenses
reflected in the condensed consolidated financial statements approximate fair value due to their short-term maturities.

The
Company determined that on December 31, 2024, certain instruments qualified as derivative liabilities and were recorded at fair value
on the date of issuance and re-measured at fair value for each subsequent reporting period with the change reported in earnings. There
were no derivative liabilities recorded as of September 30, 2025. See Note 7 – Equity Shares and Warrants for more information.

Securities
Purchase Agreement

On February
4, 2025, the Company entered into an SPA with an investor (“Investor”) for a Senior Secured Convertible Note (“Convertible
Note”) with a face value of $5,500,000 and 16 Incremental Warrants exercisable for a face amount of $2,500,000 each. See
Note 5 – Borrowings for further discussion.

15

La
Rosa Holdings Corp. and Subsidiaries

Notes
to the Unaudited Condensed Consolidated Financial Statements

The
purchase price paid by the Investor under the SPA for the Convertible Note and Incremental Warrants was $4,963,750 in gross proceeds
of which $910,250, $496,191 and $148,724 were used to assume or extinguish other debt for net proceeds of $3,408,585. It was determined
that the note and warrants within this transaction met the requirements for the Fair Value Option under ASC 825, which the Company elected.
Using the fair value option, the Convertible Note is required to be recorded at initial fair value on the date of issuance,
and each balance sheet date thereafter. Changes in the estimated fair value of the notes are recognized as gain/loss on fair value adjustment
within other income (expenses)