Company: LRHC
Filing Date: 2025-08-18
Form Type: 10-Q
Source: 0001213900-25-078012
Chunk: 23

Company: La Rosa Holdings Corp.
Filing Date: 2025-08-18
Form: 10-Q
Item: Item 1
Chunk 23
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 $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) in the Company’s unaudited condensed consolidated statements of operations.

As a result of applying the fair value option,
direct costs and fees related to the Convertible Note were expensed as incurred and were not deferred.

On June 18, 2025, with the prior approval by
the Company’s Board of Directors, the Company and the Investor entered into, and closed the transactions contemplated by, that
certain Amendment and Exchange Agreement (the “Exchange Agreement”) pursuant to which (among other things) the Investor surrendered
and exchanged all of its Incremental Warrants in exchange for (the “Exchange”) 6,000 shares of the Company’s Series
B Convertible Preferred Stock, par value $0.0001 per share (“Series B Preferred Stock”). The Convertible Note remained outstanding
post-Exchange.

Pursuant to the terms of the Exchange Agreement, conversion of the
Series B Preferred Stock into shares of common stock of the Company, par value $0.0001 per share (the “Common Stock”) in excess
of 19.99% of the Company’s outstanding shares of Common Stock is conditional upon obtaining the approval of the Company’s
shareholders in accordance with the rules and regulations of the Nasdaq Capital Market (“Shareholder Approval”). The Company
agreed to convene a meeting of stockholders to obtain Shareholder Approval within 120 days after the date of the  Exchange Agreement.
The Company obtained the Shareholder Approval effective as of August 11, 2025.

The Company determined the Exchange met the criteria for liability
derecognition of the Incremental Warrants as the Exchange represented settlement of the liability through delivery of other financial
assets. As the warrant was an equity contract classified as a liability at issuance, upon settlement, the equity contract was required
to be marked