Company: LRHC
Filing Date: 2025-05-29
Form Type: 10-Q
Source: 0001213900-25-048370
Chunk: 18

Company: La Rosa Holdings Corp.
Filing Date: 2025-05-29
Form: 10-Q
Item: Item 1
Chunk 18
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Note and Incremental Warrants was $4,963,750. It was determined that the note and warrants within this transaction met the requirements
for the Fair Value Option under ASC 825, in 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.

The following table provides the fair value and contractual
principal balance outstanding on the Convertible Note and the Incremental Warrants accounted for under the fair value option as
of February 4, 2025 and March 31, 2025:

    As of  
    As of 

    February 4, 2025  
    March 31, 2025 
  
    Convertible Note fair value 
    $33,000,000  
    $15,295,000 
  
    Convertible Note, contractual principal outstanding 
    $5,500,000  
    $5,500,000 
  
    Incremental Warrants 
    $100,800,000  
    $81,360,000 

The fair value of the Convertible Note was calculated
using a fair value analysis considering the following factors and assumptions:

    February 4, 2025(1)  
    March 31, 2025(1) 
  
    Stock Price 
    $0.40  
    $0.18 
  
    Conversion Price 
    $0.45  
    $0.45 
  
    Alternate Conversion Price 
    $.07912  
    $.07912 
  
    Alternate Conversion Amount 
     120.00% 
     120.00%
  
    Redemption Premium 
     120.00% 
     120.00%
  
    Interest Rate 
     12.00% 
     12.00%

(1)The fair value analysis of the convertible notes was performed under the assumption of immediate conversion as of the valuation date. The stock price, classified as a Level 1 input under the fair value hierarchy, was