La Rosa Holdings Corp. Leases Disclosure

Note 5 — Leases

 

The Company has operating leases for office space in several states. Lease terms are negotiated on an individual basis. Generally, the leases have initial terms ranging from one to five years. Renewal options are typically not recognized as part of the right of use assets and lease liabilities as it is not reasonably certain at the lease commencement date that the Company will exercise these options to extend the leases.

 

The Company elected certain practical expedients under ASC 842 which allows the Company to combine lease and non-lease components of lease payments in determining right-of-use assets and related lease liabilities. The Company also elected the short-term lease exception. Leases with an initial term of twelve-months or less that do not include an option to purchase the underlying asset are not recorded on the consolidated balance sheets and are expensed on a straight-line basis over the lease term.

 

The Company leases its corporate office from an entity controlled by the Company’s CEO. The rent expense for the years ending December 31, 2024 and December 31, 2023 was $139,200 and $134,505, respectively. On July 1, 2023, the Company began leasing office space for its subsidiary, La Rosa Realty, from an entity owned by Joseph La Rosa, the Company’s CEO, and Michael La Rosa, the Company’s member of the Board. There is a written lease, which includes minimum monthly rent of $4,593, with a term ending in June 2025. In addition, the Company rents various office spaces and has acquired leases as part of it’s acquisition strategy.

 

Lease costs for the years ended December 31, 2024 and 2023 was $905,825 and $311,722, respectively, and included in general and administrative expenses in the consolidated statements of operations.

 

Supplemental cash flow information related to leases is as follows:

 

		December 31,
		2024				2023
Cash paid for amounts included in the measurement of lease liabilities		$	665,416			$	94,655
Right-of-use assets obtained in exchange for lease liabilities		$	883,652			$	267,914

 

During the year ended December 31, 2024, the Company acquired seven franchisees and affiliates, of which five had remaining lease terms beyond twelve months, resulting in an increase of $417,228 in right-of-use assets and an increase in lease liabilities of $425,494. During the year ended December 31, 2023, the Company acquired six franchisees, of which four had remaining lease terms beyond twelve months, resulting in an increase of $644,498 in right-of-use assets and an increase in lease liabilities of $661,165.

Supplemental balance sheet information related to leases is as follows:

 

		December 31,				December 31,
		2024				2023
Assets:
Right-of-use assets		$	997,715			$	687,570
Liabilities:
Lease liability, current			473,733				340,566
Lease liability, noncurrent			545,759				363,029
		$	1,019,492			$	703,595

 

The Company’s leases do not provide a readily determinable implicit discount rate. The Company estimates its incremental borrowing rate as the discount rate based on the information available at lease commencement. The weighted average discount rate is 10%.

 

Future maturities on lease liabilities as of December 31, 2024, are as follows:

 

		December 31,
		2024
2025		$	551,173
2026			380,954
2027			193,972
2028			18,450
2029			—
Total minimum lease payments			1,144,549
Less: imputed interest			(125,058	)
Present value of lease obligations			1,019,492
Less: current portion			(473,733	)
Long-term portion of lease obligations		$	545,759

 

There were no leases with residual value guarantees.