Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The information in this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the Company's consolidated financial statements and the related notes set forth in Item 1 of Part I of this Quarterly Report on Form 10-Q, our MD&A set forth in the Form 10-K, and our audited consolidated financial statements and related notes set forth in the Form 10-K. See Part II, Item 1A, "Risk Factors," below, and "Special Note Regarding Forward-Looking Statements," above, and the information referenced therein, for a description of risks that we face and important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. All statements herein regarding potential risks constitute forward-looking statements. When we cross-reference to a "Note," we are referring to our "Notes to Unaudited Condensed Consolidated Financial Statements," unless the context indicates otherwise. All amounts noted within the tables are in thousands except per share amounts or where otherwise noted and percentages are approximate due to rounding.

Overview

Fathom Holdings Inc. (the "Company", "our", "we"), headquartered in Cary, North Carolina, is a national, technology-driven, end-to-end real estate services company integrating residential brokerage, mortgage, title, and software-as-a-service ("SaaS") offerings for brokerages and agents. The Company's brands include Fathom Realty, Encompass Lending, intelliAgent, Real Results, MHG and Verus Title. Our primary operation, Fathom Realty (as defined below), operates as a real estate brokerage company, working with real estate agents to help individuals purchase and sell residential and commercial properties, primarily in the South, Atlantic, Southwest, and Western parts of the United States, with the intention of expanding into all states.

Fathom Realty Holdings, LLC, a Texas limited liability company ("Fathom Realty"), is a wholly-owned subsidiary of Fathom Holdings Inc. Fathom Realty owns 100% of 43 subsidiaries, each an LLC representing the state in which the entity operates (e.g. Fathom Realty NJ, LLC).

Corporate Developments During 2026

During 2026, the Company implemented several leadership and growth initiatives to support agent productivity, expansion, and long-term operational performance.

Effective February 9, 2026, the Company appointed Lori Muller as President of Fathom Realty. Ms. Muller brings more than two decades of leadership experience in residential real estate, most recently serving as President of the U.S. Organization at EXIT Realty Corp. International, where she oversaw brokerage operations, agent growth, and strategic initiatives across a nationwide network of more than 25,000 agents.

On February 17, 2026, the Company appointed Stephanie Verderose as Vice President of Growth, a newly created role. Ms. Verderose reports directly to Ms. Muller and is responsible for leading initiatives focused on agent production, agent attraction and retention, and community development. Ms. Verderose is a seasoned real estate executive, speaker, and trainer, and a Senior Certified Coach with Workman Success Systems, bringing 39 years of industry experience.

On March 5, 2026, EXIT Homestead Realty Professionals joined Fathom Realty, adding more than 50 agents and expanding the Company's presence in the South New Jersey market. This transition enhances the Company's growing national network and provides the incoming agents with access to the Company's proprietary intelliAgent platform, comprehensive training programs, and Fathom Elevate concierge offering.

Rising Interest Rates and Other Risks

Our business is dependent on the economic conditions within the markets in which we operate. Changes in these conditions can have a positive or negative impact on our business. The economic conditions influencing the housing markets primarily include economic growth, interest rates, unemployment, consumer confidence, mortgage availability, and supply and demand.

In periods of economic growth, demand typically increases resulting in increasing home sales transactions and home sales prices. Similarly, a decline in economic growth, uncertainty surrounding interest rates and declining consumer confidence generally decreases demand. These are the trends we have been facing. Additionally, industry litigation, and regulations imposed by local, state, and federal government agencies can also negatively impact the housing markets in which we operate. Finally, national and global events, including geopolitical instability, can impact economic conditions and financial markets, including interest rates, which can adversely impact the housing market.

On October 31, 2023, a federal jury in Missouri found that the National Association of Realtors (the "NAR") and certain companies conspired to artificially inflate brokerage commissions, which violates federal antitrust law. The judgment was appealed on October 31, 2023, while the plaintiffs have now sued a number of other companies, including us. See Part II, Item 1 below. On or about March 15, 2024, NAR agreed to settle these lawsuits, by agreeing to pay $418 million over approximately four years, and changing certain of its rules surrounding agent commissions. In accordance with the terms of the settlement, effective August 17, 2024, NAR put in place a new rule prohibiting offers of compensation on the MLS and adopted new rules requiring written agreements between buyers and buyers' agents. However, the direct and indirect effects, if any, of the litigation upon the real estate industry are not yet entirely clear.

There could also be further changes in real estate industry practices. All of this has prompted discussion of changes to rules established by local or state real estate boards or multiple listing services. All of this may require changes to many brokers' business models, including changes in agent and broker compensation. For example, many of our competitors may need to develop mechanisms and a plan that enable buyers and sellers to negotiate commissions. In contrast, our flat fee per real estate transaction model has always enabled our agents to negotiate their own fees. Our flat fee allows our agents greater ability to negotiate commissions, and we have no direct incentive to interfere with their doing so. Our flat fee per real estate transaction model enables our agents to freely settle their transaction commissions at their own discretion, and our revenue share models enable our agents to freely settle their transaction commissions at their own discretion. The Company will continue to monitor ongoing and similar antitrust litigation against our competitors, however, as our agent compensation model fully supports commission negotiation, we do not expect to have to change our compensation model in a manner that would adversely affect our financial condition and results of operations. However, the litigation and its ramifications could cause unforeseen turmoil in our industry, the impacts of which could have a negative effect on us as an industry participant.

We believe that our strategic recruiting and acquisition strategy supported by our new competitive revenue share program have positioned our businesses for profitable growth in the future.

Real Estate Agents

Due to our low-overhead business model, which leverages our proprietary technology, we can offer our agents the ability to keep significantly more of their commissions compared to traditional real estate brokerage firms. We believe we offer our agents some of the best technology, training, and support available in the industry. We believe our business model and our focus on treating our agents well will attract more agents and higher-producing agents.

As of September 30, 2026 and September 30, 2025, we had approximately 6,801 and 13,931 agents, respectively, representing a decline of approximately 51.2%. The decrease in agent count during the period was primarily driven by a strategic review and rationalization of the Company's agent base, including the removal of inactive and non-producing agents. As a result, the Company recast its agent count as of September 30, 2025 for comparative purposes.

Reportable Segments

The Company's Chief Operating Decision Maker ("CODM") is its Interim Chief Executive Officer (CEO), who is responsible for evaluating the performance of the Company's operating segments and allocating resources. The Company identifies an operating segment as a component: (i) that engages in business activities from which it may earn revenues and incur expenses; (ii) that has available discrete financial information; and (iii) whose operating results are regularly reviewed by the CODM. The Company does not conduct business outside of the United States and no single customer accounts for more than 10% of total revenue in any reporting period.

Our CODM makes operating decisions and assesses performance based on the services of identified operating segments and has identified three operating and reportable segments: Real Estate Brokerage; Mortgage; and Title. Through its Real Estate Brokerage segment, the Company provides real estate brokerage services. Through its Mortgage segment, the Company provides residential loan origination and underwriting services. Through its Title segment, the Company provides title insurance, escrow, and settlement services to facilitate residential real estate transactions. Beginning in the fourth quarter of 2025, the Company determined that its Title operations meet the quantitative thresholds under ASC Topic 280, Segment Reporting, to be presented as a reportable segment. Following the sale of LiveBy in November 2025, the Company no longer presents its Technology operations as a reportable segment, as these activities no longer meet the quantitative thresholds or aggregation criteria for separate disclosure and are now managed and evaluated together with the Company's other operating segments. Prior period segment information has been recast to conform to the current period presentation to reflect this change in reportable segments.

The CODM reviews revenue and Adjusted EBITDA to evaluate financial performance of the reportable segments and to allocate resources. Adjusted EBITDA represents the revenues of the operating segment less operating expenses directly attributable to the respective operating segment. Adjusted EBITDA is defined by us as net income (loss), excluding: (i) other income and expense, (ii) costs related to acquisitions, (iii) income taxes, (iv) depreciation and amortization, and (v) share-based compensation expense. In particular, the Company believes the exclusion of non-cash share-based compensation expense related to restricted stock awards and stock options and transaction-related costs provides a useful supplemental measure in evaluating the performance of our operations and provides better transparency into our results of operations. The Company's presentation of Adjusted EBITDA might not be comparable to similar measures used by other companies.

The Company has determined that the main expenses regularly reviewed by the CODM in assessing segment performance are:

•

Compensation Expense - Includes salaries and wages for personnel across the Real Estate Brokerage, Mortgage, Title, and Corporate and Other Services functions.

•

Commission Expense - Includes commissions and related agent payments incurred in connection with revenue-generating transactions, across the Real Estate Brokerage, Mortgage, Title, and Corporate and Other Services functions.

These expenses are presented within the segment disclosures below as they represent the most significant cost drivers impacting the Company's operating segments and are used by management in evaluating performance, allocating resources, and assessing operating efficiency.

The Company does not allocate assets to its operating segments as they are not included in the review performed by the CODM for purposes of assessing segment performance and allocating resources. The balance sheet is managed on a consolidated basis and is not used in the context of segment reporting.

Components of Our Results of Operations

Revenue

Our revenue primarily consists of commissions generated from real estate brokerage services. We also have other service revenue, including mortgage lending, title insurance, and SaaS revenues.

Gross commission income

We recognize commission-based revenue on the closing of a transaction, less the amount of any closing-cost reductions. Revenue is affected by the number of real estate transactions we close, the mix of transactions, home sale prices, and commission rates.

Other Services Revenue

Mortgage Lending Revenue

We recognize revenue streams for our mortgage lending services business which are primarily comprised of loans sold, origination and other fees.

The gain on sale of mortgage loans represents the difference between the net sales proceeds and the carrying value of the mortgage loans sold and includes the servicing rights release premiums.

Servicing rights release premiums represent one-time fee revenues earned for transferring the risk and rewards of ownership of servicing rights to third parties.

Retail origination fees are principally revenues earned from loan originations and recorded in the statement of operations in other service revenue. Direct loan origination costs and expenses associated with the loans are charged to expenses when the loans are sold. Interest income is interest earned on originated loans prior to the sale of the asset.

Title Service Revenues

Title services revenue includes fees charged for title search and examination, property settlement and title insurance services provided in association with property acquisitions and refinance transactions.

SaaS Revenues

The Company generated revenue from subscription and services related to the use of the LiveBy platform. The SaaS contracts are generally annual contracts paid monthly in advance of service and cancellable upon 30 days' notice after the first year. The Company's subscription arrangements do not provide customers with the right to take possession of the software supporting the platform. Subscription revenue, which includes support, is recognized on a straight-line basis over the non-cancellable contractual term of the arrangement, generally beginning on the date that the Company's service is made available to the customer and is recorded as other service revenue in the statement of operations. The Company sold LiveBy in November 2025.

Operating Expenses

Commission and service costs

Commission and service costs consist primarily of agent commissions, less fees paid by the Company to agents, order fulfillment, share-based compensation for agents, title searches, and direct cost to fulfill the services provided for our brokerage, mortgage lending, title service and other services provided.

Technology and development

Technology and development expenses primarily include personnel costs, related to ongoing development and maintenance of proprietary software for use by our own agents, customers, and support staff. Such personnel costs include base pay, bonuses, benefits, and share based compensation. Technology and development expenses also include amortization of capitalized software and development costs, data licenses, other software, and equipment costs, as well as infrastructure and operational expenses, such as, for data centers, communication, and hosted services.

General and administrative

General and administrative expenses consist primarily of fees for professional services and personnel costs, including base pay, bonuses, benefits, and share based compensation. Professional services principally consist of external legal, audit, and tax services. In the short term, we expect general and administrative expenses to increase in absolute dollars due to the anticipated growth of our business and to meet the increased compliance requirements associated with operation as a public company. However, in the long term, we anticipate general and administrative expenses as a percentage of revenue to decrease over time, if and when revenue increases.

Marketing

Marketing expenses consist primarily of online and traditional advertising, as well as costs for marketing and promotional materials. Advertising costs are expensed as they are incurred. We expect marketing expenses to increase in absolute dollars as we continue to expand our advertising programs, and promote our newly acquired business lines, but we anticipate marketing expenses as a percentage of revenue to decrease over time, if and when revenue increases.

Litigation contingency

Litigation contingency expenses consist primarily of litigation costs related to the settlement related to claims asserted in Burnett v. The National Association of Realtors, et al.

Depreciation and amortization

Depreciation and amortization represent how we expense our fixed and intangible assets other than capitalized software. Depreciation expense is recorded on a straight-line method, based on estimated useful lives of five years for computer hardware, seven years for furniture and equipment and seven years for vehicles. Leasehold improvements are depreciated over the lesser of the life of the lease term or the useful life of the improvements. Amortization expense consists of amortization recorded on acquisition-related intangible assets, excluding purchased software. Customer relationships are amortized on an accelerated basis, which coincides with the period of economic benefit we expect to receive. All other finite-lived intangibles are amortized on a straight-line basis over the term of the expected benefit. Purchased software and capitalized software development costs are amortized on a straight-line basis over the term of the expected benefit and the respective amortization expense is included in technology and development expense. In accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), we do not amortize goodwill.

Impairment

Impairment expenses consist primarily of charges resulting from reductions in the carrying value of goodwill, intangible assets and other long-lived assets when their carrying amounts are not recoverable or exceed their estimated fair values. These charges may fluctuate from period to period depending on changes in business operations, market conditions, and the Company's assessment of the future economic benefits of its assets.

Income Taxes

Income tax expense primarily consists of deferred tax liabilities in excess of the Company's deferred tax assets and also includes current state income tax expense not offset by state net operating loss carryforwards.

Results of Operations

Comparison of the Three Months Ended September 30, 2026 and 2025 (dollar amounts in thousands)

Revenue

		Three Months Ended September 30,								Change
		2026				2025				Dollars				Percentage
Gross commission income		$	82,622			$	109,213			$	(26,591	)			(24.3	)%
Other service revenue			6,006				6,100				(94	)			(1.5	)%
Revenue		$	88,628			$	115,313			$	(26,685	)			(23.1	)%

For the three months ended September 30, 2026, gross commission income decreased by approximately $26.6 million, or 24.3%, as compared with the three months ended September 30, 2025. This decrease was primarily attributable to a 26.0% decrease in transaction volume; specifically, we had 8,499 real estate transactions during the three months ended September 30, 2026, compared to 11,479 transactions during the three months ended September 30, 2025. Our transaction volume decreased primarily due to a reduction in our agent count and continued softness in existing home sales. During the three months ended September 30, 2026, average revenue per transaction was $9,721, a 2.2% increase, as compared to $9,514 during the three months ended September 30, 2025, which is primarily attributable to higher transaction volumes generated through the Fathom Elevate plan, the Company's concierge-level plan.

For the three months ended September 30, 2026, other service revenue decreased by approximately $0.1 million, or 1.5%, as compared with the three months ended September 30, 2025. This decrease was primarily attributable to the sale of our LiveBy business in November 2025.

		Three Months Ended September 30,								Change
		2026				2025				Dollars				Percentage
Commission and service costs		$	81,228			$	105,743			$	(24,515	)			(23.2	)%
General and administrative			7,504				8,261				(757	)			(9.2	)%
Marketing			1,065				979				86				8.8	%
Technology and development			5,401				1,818				3,583				197.1	%
Litigation contingency			10				2,000				(1,990	)			(99.5	)%
Depreciation and amortization			537				550				(13	)			(2.4	)%
Impairment			12,085				-				12,085				100.0	%
Total operating expenses		$	107,830			$	119,351			$	(11,521	)			(9.7	)%

For the three months ended September 30, 2026, commission and service costs decreased by approximately $24.5 million, or 23.2%, as compared with the three months ended September 30, 2025. Commission and service costs primarily includes costs related to agent commissions, net of fees paid to us by our agents. These costs generally correlate with recognized revenues. As such, the decrease in commission and service costs compared to the same period in 2025 was primarily attributable to a decrease in agent commissions.

For the three months ended September 30, 2026, general and administrative expenses decreased by approximately $0.8 million, or 9.2%, as compared with the three months ended September 30, 2025. The decrease was primarily attributable to ongoing cost reduction initiatives, lower personnel-related expenses, and reduced professional fees as the Company continued to streamline its operations and manage its overall cost structure.

For the three months ended September 30, 2026, total marketing expenses increased by approximately $0.1 million, or 8.8%, as compared with the three months ended September 30, 2025. The increase was primarily due to the Company's investment in growth.

For the three months ended September 30, 2026, total technology and development expenses increased by approximately $3.6 million, or 197.1%, as compared with the three months ended September 30, 2025. The increase was primarily attributable to accelerated amortization of capitalized software costs resulting from changes in the Company's technology platforms and the planned discontinuation of certain internally developed software applications.

For the three months ended September 30, 2026, total litigation contingency expenses decreased by approximately $2.0 million, or 99.5%, as compared with the three months ended September 30, 2025. The decrease was primarily attributable to the recognition of litigation settlement expense in the prior-year period associated with the preliminary approval of the settlement of the Fathom Realty lawsuit filed in August 2024 in the United States District Court for the Southern District of Florida. See Part II, Item 1 for a discussion of the lawsuit.

For the three months ended September 30, 2026, depreciation and amortization expenses decreased by approximately $0.01 million, or 2.4%, as compared with the three months ended September 30, 2025. The decrease was due to the absence of amortization related to our LiveBy business that we sold in November 2025.

For the three months ended September 30, 2026, impairment expenses increased by approximately $12.1 million, or 100.0% as compared with the three months ended September 30, 2025. The increase was primarily attributable to goodwill and intangible asset impairment charges recognized, primarily related to Encompass, during the current period as a result of changes in the Company's business operations.

Income Taxes

The Company recorded income tax (benefit) expense of approximately $0.02 million for each of the three months ended September 30, 2026 and 2025. This tax expense is primarily the result of current state income tax liabilities and deferred tax expense related to deferred tax liabilities that cannot be fully offset by deferred tax assets.

Comparison of the Nine Months Ended September 30, 2026 and 2025 (dollar amounts in thousands)

		Nine Months Ended September 30,								Change
		2026				2025				Dollars				Percentage
Gross commission income		$	270,930			$	314,067			$	(43,137	)			(13.7	)%
Other service revenue			18,712				15,804				2,908				18.4	%
Total revenue		$	289,642			$	329,871			$	(40,229	)			(12.2	)%

For the nine months ended September 30, 2026, gross commission income decreased by approximately $43.1 million, or 13.7%, as compared with the nine months ended September 30, 2025. This decrease was primarily attributable to a 17.8% decrease in transaction volume; we had 27,857 real estate transactions during the nine months ended September 30, 2026, compared to 33,904 transactions during the nine months ended September 30, 2025. Our transaction volume decreased primarily due to a reduction in our agent count and continued softness in existing home sales. During the nine months ended September 30, 2026, average revenue per transaction was $9,726, a 5.0% increase compared to $9,263 during the nine months ended September 30, 2025, primarily attributable to higher transaction volumes generated through the Fathom Elevate plan.

For the nine months ended September 30, 2026, other service revenue increased by approximately $2.9 million, or 18.4%, as compared with the nine months ended September 30, 2025. This increase was primarily attributable to growth in title service transaction volume, reflecting organic expansion, increased walkover activity, and continued growth in the Company's mortgage business.

		Nine Months Ended September 30,								Change
		2026				2025				Dollars				Percentage
Commission and service costs		$	265,651			$	302,815			$	(37,164	)			(12.3	)%
General and administrative			27,462				24,881				2,581				10.4	%
Marketing			3,968				3,753				215				5.7	%
Technology and development			9,778				5,594				4,184				74.8	%
Litigation contingency			215				2,011				(1,796	)			(89.3	)%
Depreciation and amortization			1,630				1,658				(28	)			(1.7	)%
Impairment			12,085				-				12,085				100.0	%
Total operating expenses		$	320,789			$	340,712			$	(19,923	)			(5.8	)%

For the nine months ended September 30, 2026, commission and service costs decreased by approximately $37.2 million, or 12.3%, as compared with the nine months ended September 30, 2025. Commission and service costs primarily includes costs related to agent commissions, net of fees paid to us by our agents. These costs generally correlate with recognized revenues. As such, the decrease in commission and service costs compared to the same period in 2025 was primarily attributable to a decrease in agent commissions.

For the nine months ended September 30, 2026, general and administrative expenses increased by approximately $2.6 million, or 10.4%, as compared with the nine months ended September 30, 2025. The increase was primarily attributable to higher bad debt expense associated with agent fees.

For the nine months ended September 30, 2026, total marketing expenses increased by approximately $0.2 million, or 5.7%, as compared with the nine months ended September 30, 2025. The increase was primarily due to the Company's investment in growth.

For the nine months ended September 30, 2026, total technology and development expenses increased by approximately $4.2 million, or 74.8%, as compared with the nine months ended September 30, 2025. The increase was primarily attributable to accelerated amortization of capitalized software costs resulting from changes in the Company's technology platforms and the planned discontinuation of certain internally developed software applications.

For the nine months ended September 30, 2026, total litigation contingency expenses decreased by approximately $1.8 million, or 89.3%, as compared with the nine months ended September 30, 2025. The decrease was primarily attributable to the recognition of litigation settlement expense in the prior-year period associated with the preliminary approval of the settlement of the Fathom Realty lawsuit filed in August 2024 in the United States District Court for the Southern District of Florida. See Part II, Item 1 for a discussion of the lawsuit.

For the nine months ended September 30, 2026, depreciation and amortization expenses decreased by approximately $28 thousand, or 1.7%, as compared with the nine months ended September 30, 2025. The decrease was due to the absence of amortization related to our LiveBy business that we sold in November 2025.

For the nine months ended September 30, 2026, impairment expenses increased by approximately $12.1 million, or 100.0% as compared with the nine months ended September 30, 2025. The increase was primarily attributable to goodwill and intangible asset impairment charges recognized, primarily related to Encompass, during the current period as a result of changes in the Company's business operations.

Income Taxes

The Company recorded income tax expense of approximately $0.1 million for each of the nine months ended September 30, 2026 and 2025. This tax expense is primarily the result of current state income tax liabilities and deferred tax expense related to deferred tax liabilities that cannot be fully offset by deferred tax assets.

Liquidity and Capital Resources (dollar amounts in thousands)

Capital Resources

		September 30,				December 31,				Change
		2026				2025				Dollars				Percentage
Current assets			19,836				35,920				(16,084	)			(44.8	)%
Current liabilities			35,555				33,897				1,658				4.9	%
Net working capital		$	(15,719	)		$	2,023			$	(17,742	)			(877.0	)%

To date, our principal sources of liquidity have been the net proceeds we received through public offerings and private sales of our common stock, the sale of businesses, as well as proceeds from loans. As of September 30, 2026, our cash and cash equivalents (including restricted cash) totaled approximately $3.6 million, which represented a decrease of approximately $2.2 million compared to December 31, 2025. As of September 30, 2026, we had net working capital of approximately negative $15.7 million, which represented a decrease of $17.7 million compared to December 31, 2025. As noted above, in May 2024 we sold our wholly-owned subsidiary, Dagley Insurance Agency for approximately $15.0 million in cash, $7.4 million of which we received at closing. The Company received $4.0 million during 2025. Of the balance the Company is owed related to the sale of its insurance business, the Company received $2.6 million in the first eight months of 2026 and received the outstanding $0.4 million from NXH as part of debt purchase. On April 7, 2025, the Company repaid its $3.5 million convertible note (the "2023 Note") in full. In March 2025, the Company completed a public offering of common stock (the "March 2025 Offering"), which resulted in the issuance and sale by the Company of 3,505,364 shares of common stock at an offering price of $0.68 per share and 832,639 shares of common stock at an offering price of $0.72 per share, generating gross proceeds of $3.0 million, of which the Company received total net proceeds of $2.9 million, after deducting underwriting discounts and other offering costs. In September 2025, the Company completed a public offering of common stock (the "September 2025 Offering"), which resulted in the issuance and sale by the Company of 3,450,000 shares of common stock at an offering price of $2.00 per share, generating gross proceeds of $6.9 million, of which the Company received total net proceeds of $6.5 million, after deducting underwriting discounts and other offering costs. The Company received $3.0 million in November 2025 related to the sale of its LiveBy business. The Company has short-term obligations totaling $8.7 million, consisting of a $5.0 million promissory note due in November 2026 and $3.7 million in liabilities related to legal settlements. In September 2024, the Company completed a private placement of senior secured convertible promissory notes with an aggregate principal amount of $5.0 million (the "2024 Notes"). The 2024 Notes were issued to an existing shareholder who beneficially owned more than 5% of the Company's common stock and to the Chairman of the Company's Board of Directors (the "2024 Offering"). The 2024 Notes mature in November 2026. In March 2026, the Company entered into a subordinated secured promissory note in the original principal amount of $2.0 million (the "Bridge Note"), which was increased to $3.0 million on May 29, 2026 when the Company and the original party agreed to amend and restate the Bridge Note. In response to the identified conditions, NXH has committed to provide financial support to the Company, for a year and one day following December 1, 2026. Based on NXH's commitment and financial capacity, management believes it is probable that these plans will be effectively implemented and will mitigate the conditions that raised substantial doubt about the Company's ability to continue as a going concern for a period of at least one year from the date of the issuance of these condensed consolidated financial statements.

We anticipate that our existing balances of cash and cash equivalents and future expected cash flows generated from our operations and committed financial support will be sufficient to satisfy our operating requirements for at least the next twelve months from the date of the issuance of these unaudited interim condensed consolidated financial statements.

Our future capital requirements depend on many factors, including any future acquisitions, our level of investment in technology, and our rate of growth into new markets. Our capital requirements might also be affected by factors which we cannot control such as the residential real estate market, interest rates, and other monetary and fiscal policy changes, any of which could adversely affect the manner in which we currently operate. Additionally, we will continuously assess our liquidity needs as other world events, such as the ongoing conflict in Ukraine and in the Middle East, may impact the economy and our operations in new ways. In the event of a sustained market deterioration, we may need or seek advantageously to obtain additional funding through equity or debt financing, which might not be available on favorable terms or at all and could hinder our business and dilute our existing shareholders.

Cash Flows

Comparison of the Nine Months Ended September 30, 2026 and 2025 (dollar amounts in thousands)

		Nine Months Ended September 30,								Change
		2026				2025				Dollars				Percentage
Net cash (used in) provided by operating activities			942				(8,633	)			9,575				(110.9	)%
Net cash provided by investing activities			2,084				1,717				367				21.4	%
Net cash (used in) provided by financing activities			(5,283	)			9,444				(14,727	)			(155.9	)%

Cash Flows from Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2026 consisted of a net loss of $36.2 million, non-cash charges of $25.7 million, including $0.9 million of stock-based compensation expense, $8.9 million of depreciation and amortization, $12.1 million of impairment expenses and $2.6 million of provision for credit losses. Changes in assets and liabilities were primarily driven by $263.2 million in mortgage loan originations, partially offset by $277.1 million in proceeds from the sales and principal payments on mortgage loans held for sale.

Net cash used in operating activities for the nine months ended September 30, 2025 consisted of a net loss of $13.6 million, non-cash charges of $8.5 million, including $3.0 million of stock-based compensation expense and $4.4 million of depreciation and amortization, partially offset by $5.4 million in gains on the sales of mortgages. Changes in assets and liabilities were primarily driven by $184.2 million in mortgage loan originations, partially offset by $185.3 million in proceeds from the sales and principal payments on mortgage loans held for sale.

Cash Flows from Investing Activities

Net cash provided by investing activities for the nine months ended September 30, 2026 primarily consisted of proceeds from the sale of Dalgey Insurance Agency completed in May 2024 of $3.0 million, partially offset by the purchase of intangible assets related to technology development of $0.8 million.

Net cash provided by investing activities for the nine months ended September 30, 2025 primarily consisted of proceeds from the sale of Dagley Insurance Agency completed in May 2024 of $4.0 million, partially offset by the purchases of intangible assets related to technology development of $2.1 million.

Cash Flows from Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2026 was driven by a net decrease of approximately $7.6 million in warehouse lines of credit, offset by $3.0 million in proceeds from the Bridge Note.

Net cash provided by financing activities for the nine months ended September 30, 2025 consisted primarily of the $9.5 million in proceeds from the issuance of common stock in connection with a public offering and the change of $4.4 million on our warehouse lines of credit, and the repayment of a $3.5 million convertible note.

NON-GAAP FINANCIAL MEASURE

The Company's Chief Operating Decision Maker ("CODM") is its Interim Chief Executive Officer (CEO), who is responsible for evaluating the performance of the Company's operating segments and allocating resources. The Company identifies an operating segment as a component: (i) that engages in business activities from which it may earn revenues and incur expenses; (ii) that has available discrete financial information; and (iii) whose operating results are regularly reviewed by the CODM. The Company does not conduct business outside of the United States and no single customer accounts for more than 10% of total revenue in any reporting period.

Our CODM makes operating decisions and assesses performance based on the services of identified operating segments and has identified three operating and reportable segments: Real Estate Brokerage; Mortgage; and Title. Through its Real Estate Brokerage segment, the Company provides real estate brokerage services. Through its Mortgage segment, the Company provides residential loan origination and underwriting services. Through its Title segment, the Company provides title insurance, escrow, and settlement services to facilitate residential real estate transactions. Beginning in the fourth quarter of 2025, the Company determined that its Title operations meet the quantitative thresholds under ASC Topic 280, Segment Reporting, to be presented as a reportable segment. Following the sale of LiveBy in November 2025, the Company no longer presents its Technology operations as a reportable segment, as these activities no longer meet the quantitative thresholds or aggregation criteria for separate disclosure and are now managed and evaluated together with the Company's other operating segments. Prior period segment information has been recast to conform to the current period presentation to reflect this change in reportable segments.

The CODM reviews revenue and Adjusted EBITDA to evaluate financial performance of the reportable segments and to allocate resources. Adjusted EBITDA represents the revenues of the operating segment less operating expenses directly attributable to the respective operating segment. Adjusted EBITDA is defined by us as net income (loss), excluding: (i) other income and expense, (ii) costs related to acquisitions, (iii) income taxes, (iv) depreciation and amortization, and (v) share-based compensation expense. In particular, the Company believes the exclusion of non-cash share-based compensation expense related to restricted stock awards and stock options and transaction-related costs provides a useful supplemental measure in evaluating the performance of our operations and provides better transparency into our results of operations. The Company's presentation of Adjusted EBITDA might not be comparable to similar measures used by other companies.

The Company has determined that the main expenses regularly reviewed by the CODM in assessing segment performance are:

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Compensation Expense - Includes salaries and wages for personnel across the Real Estate Brokerage, Mortgage, Title, and Corporate and Other Services functions.

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Commission Expense - Includes commissions and related agent payments incurred in connection with revenue-generating transactions, across the Real Estate Brokerage, Mortgage, Title, and Corporate and Other Services functions.

These expenses are presented within the segment disclosures below as they represent the most significant cost drivers impacting the Company's operating segments and are used by management in evaluating performance, allocating resources, and assessing operating efficiency.

The Company has updated its segment reporting to include compensation and commission expenses as separate line items for each reportable segment beginning in fiscal year 2024. Prior period segment disclosures have been reclassified to conform to the current period presentation.

The Company does not allocate assets to its operating segments as they are not included in the review performed by the CODM for purposes of assessing segment performance and allocating resources. The balance sheet is managed on a consolidated basis and is not used in the context of segment reporting.

The following table presents a reconciliation of Adjusted EBITDA to net income (loss), the most comparable GAAP financial measure, for each of the periods presented (amounts in thousands):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2026				2025				2026				2025
Loss before income tax		$	(21,741	)		$	(4,333	)		$	(36,135	)		$	(13,492	)
Stock based compensation			(161	)			562				852				3,013
Depreciation and amortization			4,990				1,483				8,920				4,380
Litigation contingency			10				2,000				215				2,011
Impairment			12,085				-				12,085				-
Other expense, net			2,539				295				4,988				2,651
Adjusted EBITDA		$	(2,278	)		$	6			$	(9,075	)		$	(1,437	)

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with GAAP and the Company's discussion and analysis of its financial condition and operating results require the Company's management to make judgments, assumptions and estimates that affect the amounts reported. Our Annual Report on Form 10-K for the year ended December 31, 2025 contains a discussion of our critical accounting estimates in the Management's Discussion and Analysis of Financial Condition and Results of Operations section. During the nine months ended September 30, 2026, management performed impairment assessments of goodwill and certain intangible assets and property and equipment, which required significant judgments and estimates in determining their respective fair values. These nonrecurring fair value measurements involved assumptions and valuation methodologies as further described in the applicable footnotes to the consolidated financial statements.

Recent Accounting Standards

For information on recent accounting standards, see Note 3 to our condensed consolidated financial statements above.