Note 7 — 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, 2025 and 2024 was $181,929 and $139,200, 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, a former Company’s Board member. There is a written lease, which includes minimum monthly rent of $5,300, with a term ending in June 2025. The parties have agreed to continue on a month-to-month basis. In addition, the Company rents various office spaces and has acquired leases as part of its acquisition strategy.

Lease costs for the years ended December 31, 2025 and 2024 were $935,587 and $905,825 respectively, and included in general and administrative expenses in the consolidated statements of operations.

Supplemental cash flow information related to leases is as follows:

During January 2025, the Company entered into a new lease for office space in Orlando, FL. The Orlando lease requires monthly payments of $5,170. The Orlando lease is initially for a five-year term, with no written option for renewal.

During July 2025, the Company renewed its lease of the corporate office space in Celebration, FL, which is owned by an entity controlled by our CEO. The Celebration lease requires monthly payments of $12,000. The Celebration lease is initially for a one-year term, with option for renewal.

During August 2025, the Company entered into a new lease for office space in Puerto Rico. The Puerto Rico lease requires monthly payments of $1,250. The Puerto Rico lease is initially for a five-year term, with no written option for renewal.

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.

Supplemental balance sheet information related to leases is as follows:

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 11%. 

Future maturities on lease liabilities as of December 31, 2025 are as follows:

There were no leases with residual value guarantees.