Company: LRHC
Filing Date: 2025-05-29
Form Type: 10-Q
Source: 0001213900-25-048370
Chunk: 97

Company: La Rosa Holdings Corp.
Filing Date: 2025-05-29
Form: 10-Q
Item: Item 8
Chunk 97
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 on the following fair value hierarchy:

●Level
1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets
or liabilities;

●Level
2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities
in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and

●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, accounts receivable, accounts payable, and accrued expenses reflected in the condensed consolidated financial statements
approximate fair value due to their short-term maturities.

10

La Rosa Holdings Corp.
and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements

The Company determined that on March 31, 2025
and 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 each reporting period with the change reported in earnings.

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