ITEM 1. OFFERING CIRCULAR

Explanatory Note: This Post-Qualification Offering Circular (‘Offering Circular”) amends the offering circular of Andrew Arroyo Real Estate, Inc. (the “Company”) qualified on October 12, 2021, in order to update certain matters including the extension of the Offering period.

This Offering originally commenced upon qualification of this Offering by the Commission on October 12, 2021. This Second Post-Qualification Amendment to the Offering Circular will take the place of the Offering Circular qualified by the Commission on October 12, 2021 and will terminate: (i) at 11:59 PM Pacific Time on October 12, 2023; (ii) upon the sale of the Maximum amount of securities offer hereunder; or (iii) until terminated earlier by the Company.

Form 1-A: Tier 2

Post-Qualification Amendment No. 2

INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING STATEMENT TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS QUALIFIED. THIS PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTEAN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF ANY SUCH STATE. WE MAY ELECT TO SATISFY OUR OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO BUSINESS DAYSAFTER THE COMPLETION OF OUR SALE TO YOU THAT CONTAINS THE URL WHERE THE FINAL OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.

PRELIMINARY OFFERING CIRCULAR, DATED OCTOBER 20, 2022

OFFERING CIRCULAR

ANDREW ARROYO REAL ESTATE INC. d/b/a AARE

12636 High Bluff Drive, Suite 400

San Diego, CA 92130

888-32-AGENT

www.aare.com

Minimum Offering (USD)1	$1,000,000
Minimum Offering (Shares2)1	200,000 Shares
Maximum Offering (USD)1	$5,000,000
Maximum Offering (Shares2)1	1,000,000 Shares
Offering Price per Share2,1	$5.00 per Share
Minimum Investment (USD)1	$10,000
Minimum Investment (Shares2)1	2,000 Shares

_________________ 

¹ Our primary shareholder, Andrew Michael Arroyo, is participating as a selling shareholder in this Offering at a rate of 30%, meaning 30% of any invested funds will go to Mr. Arroyo to acquire shares owned by him and we will not receive that portion of the funds or issue that portion of the Shares.

² “Shares” or “Share” refers to the Company’s Common Stock, Par Value $0.001 per Share. See Item 14, “Securities Being Offered” for a complete description of the Common Stock.

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Andrew Arroyo Real Estate Inc., a Delaware corporation d/b/a AARE (the “Company”, “AARE”, we or our) is offering a maximum of 1,000,000 shares and a minimum of 200,000 shares of Common Stock, Par Value $0.001 per Share, at an offering price of $5.00 per Share (the “Offered Shares” or “Securities”) on a “best efforts” basis. The Offering will terminate at the earlier of: (1) the date at which the maximum offering amount has been sold, (2) the date which is one year from this offering being qualified by the Securities and Exchange Commission, or (3) the date at which the offering is earlier terminated by us in our sole discretion.

Minimum Offering Already Met During Initial Term of Regulation A+ Offering

On March 17, 2022 the Company met the minimum offering amount of $1,000,000, and, therefore, any proceeds raised in this offering will be sent to the escrow account and will be distributed to the Company and the associated Offered Shares will be issued to the investors as soon as the investment is accepted by the Company.   North Capital will serve as the escrow agent (in such capacity, the “Escrow Agent”). The minimum purchase requirement per investor is 2,000 of the Offered Shares or a minimum of $10,000; however, we can waive the minimum purchase requirement on a case-by-case basis in our sole discretion.

Subscriptions are irrevocable and the purchase price is non-refundable as expressly stated in this Offering Circular, unless the Company does not accept a subscriber’s investment. All proceeds received by us from subscribers for this Offering will be available for use by us upon acceptance of subscriptions for the Securities by us.

Sale of these shares will commence within two calendar days of the qualification date (the “Qualification Date”) and it will be a continuous Offering pursuant to Rule 251(d)(3)(i)(F).

GENERALLY, NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE YOU TO REFER TO www.investor.gov.

Investing in our Common Stock involves a high degree of risk. See “Risk Factors” beginning on page 9 for a discussion of certain risks that you should carefully consider in connection with an investment in our Common Stock.

THE SEC DOES NOT PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.

	Price to Public(1)		Maximum Number of Shares to be Offered		Underwriting Discount and Commissions(2)		Proceeds to Issuer(2)(3)(4)		Proceeds to Other Persons(5)
Per Share	$	5.00		N/A	$	0	$	3.50	$	1.50
Total (Offering Minimum) (3)	$	5.00		200,000	$	0	$	700,000	$	300,000
Total (Offering Maximum)	$	5.00		1,000,000	$	0	$	3,500,000	$	1,500,000

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¹ We are offering on a continuous basis starting on the Qualification Date.

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² We do not intend to use underwriters or commissioned sales agents.

³ This is a “best efforts” offering. The proceeds of this offering will be placed into an escrow account until the Minimum Offering has been met. The minimum offering was met on March 17, 2022. We will offer the Shares primarily through our management. See “Plan of Distribution” on page 23, hereof.

⁴ Does not include expenses of the offering including, but not limited to, costs of blue-sky compliance or costs of posting offering information on other media, which offering expenses are estimated to be $50,000 if this offering is fully subscribed. See “Plan of Distribution” on page 23, hereof.

⁵ Our primary shareholder, Andrew Michael Arroyo, is participating as a selling shareholder in this Offering at a rate of 30%, meaning 30% of any invested funds will go to Mr. Arroyo to acquire shares owned by him and we will not receive that portion of the funds or issue that portion of the Shares.

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.

We are using the Form 1-A Offering Circular format for the disclosure in this Offering Circular.

There is currently no trading market for our Common Stock.

These are speculative securities. Investing in our Common Stock involves significant risks. You should purchase these securities only if you can afford a complete loss of your investment. See “Risk Factors” beginning on page 6.

We are offering to sell, and seeking offers to buy, our securities only in jurisdictions where such offers and sales are permitted. You should rely only on the information contained in this Offering Circular. We have not authorized anyone to provide you with any information other than the information contained in this Offering Circular. The information contained in this Offering Circular is accurate only as of its date, regardless of the time of its delivery or of any sale or delivery of our securities. Neither the delivery of this Offering Circular nor any sale or delivery of our securities shall, under any circumstances, imply that there has been no change in our affairs since the date of this Offering Circular. This Offering Circular will be updated and made available for delivery to the extent required by federal securities laws.

Unless otherwise indicated, data contained in this Offering Circular concerning the business of the Company, including estimates and other statistical data, are based on information from various public sources. Although we believe that this data is generally reliable, such information is inherently imprecise, and our estimates and expectations based on these data involves a number of assumptions and limitations. As a result, you are cautioned not to give undue weight to such data, estimates or expectations.

In this Offering Circular, unless the context indicates otherwise, references to “we”, the “Company”, “our” and “us” refer to Andrew Arroyo Real Estate Inc., a Delaware corporation d/b/a AARE, the combined entity after the merger described herein that closed on July 31, 2021. References to the “board”, the “board of directors”, the “Board” or the “Board of Directors” means the Board of Directors of Andrew Arroyo Real Estate Inc., a Delaware corporation d/b/a AARE.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under “Summary”, “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Our Business” and elsewhere in this Offering Circular constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar matters that are not historical facts. In some, but not all, cases, you can identify forward-looking statements by terms such as “anticipate”, “assume”, “believe”, “could”, “estimate”, “expect”, “intend”, “goal”, “may”, “might”, “objective”, “plan”, “possible”, “potential”, “project”, “should”, “strategy”, “will” and “would” or the negatives of these terms or other comparable terminology.

Our forward-looking statements may include, without limitation, statements with respect to:

1.	Future services;
2.	Future products;
3.	The availability of, and terms and costs related to, future borrowing and financing;
4.	Estimates of future sale;
5.	Future transactions;
6.	Estimates regarding the amount of funds we will need to fund our operations for specific periods;
7.	Estimates regarding potential cost savings and productivity; and
8.	Our listing, and the commencement of trading of our Common Stock, on the NASDAQ, OTC Markets or other exchanges and the timing thereof.

The cautionary statements set forth in this Offering Circular, including those set forth in the “Risk Factors” section and elsewhere, identify important factors that you should consider in evaluating our forward-looking statements.

Although the forward-looking statements in this Offering Circular are based on our beliefs, assumptions and expectations, taking into account all information currently available to us, we cannot guarantee future transactions, results, performance, achievements or outcomes. No assurance can be made to any investor by anyone that the expectations reflected in our forward-looking statements will be attained or that deviations from them will not be material and adverse. We undertake no obligation, except as required by law, to re-issue this Offering Circular or otherwise make public statements updating our forward-looking statements. For the reasons set forth above, you should not place undue reliance on forward-looking statements in this Offering Circular.

The Offering Circular Summary highlights information contained elsewhere and does not contain all the information that you should consider in making your investment decision. Before investing in our Common Stock, you should carefully read this entire Offering Circular, including our financial statements and related notes. You should consider among other information, the matters described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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TABLE OF CONTENTS

ITEM 2	TABLE OF CONTENTS	5
ITEM 3	SUMMARY	6
ITEM 3	RISK FACTORS	6
ITEM 4	DILUTION	22
ITEM 5	PLAN OF DISTRIBUTION AND SELLING SECURITY HOLDERS	23
ITEM 6	USE OF PROCEEDS TO ISSUER	24
ITEM 7	DESCRIPTION OF BUSINESS	26
ITEM 8	DESCRIPTION OF PROPERTY	30
ITEM 9	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	30
ITEM 10	DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES	40
ITEM 11	COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS	42
ITEM 12	SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS	43
ITEM 13	INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS	45
ITEM 14	SECURITIES BEING OFFERED	46
ITEM 15	FINANCIAL STATEMENTS	48

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ITEM 3 SUMMARY AND RISK FACTORS

This summary highlights selected information contained elsewhere in this Offering Circular. This summary is not complete and does not contain all the information that you should consider before deciding whether to invest in our Common Stock. You should carefully read the entire Offering Circular, including the risks associated with an investment in our Company discussed in the “Risk Factors” section of this Offering Circular, before making an investment decision.

Summary Company Information

We were originally incorporated under the laws of the State of Delaware on June 18, 2020. On July 31, 2021, we completed a merger transaction with Andrew Arroyo Real Estate, Inc., a California corporation (“AARE-CA”), in a transaction in which we were the surviving entity and we assumed the assets, operations and liabilities of AARE-CA. AARE-DE had no operations prior to the close of the merger. As a result of the merger, we now have AARE-CA’s operations and the current and historical references to our business and operations herein relates to the business of AARE-CA. We have a trademark for, use a d/b/a, and are known as “AARE.” AARE-CA was in business for over 17 years and had grown to become a well-respected real estate agency. The primary purpose of the merger was to re-incorporate the company from California to Delaware as part of a plan to prepare for our nationwide expansion, capital fundraising and this offering. We (AARE-DE) are licensed and registered in 24 states to conduct real estate services. AARE-CA was merged out of existence as a result of the merger. Our principal executive office is located at 12636 High Bluff Drive Suite 400, San Diego, CA 92130; our telephone number is 888-322-4368, our fax number is 858-720-1166 and our website address is www.aare.org.

We do not incorporate the information on or accessible through our website into this Offering Circular, and you should not consider any information on, or that can be accessed through, our website as a part of this Offering Circular.

Summary Business Information

We provide a variety of real estate brokerage services including sales, leasing, financing and property management. Our services assist our clients to buy, sell, finance, manage, and invest in residential and commercial properties as well as business opportunities. We were founded by Andrew Michael Arroyo. Mr. Arroyo started his career as a real estate appraiser’s assistant. By 1999, Mr. Arroyo held a California real estate sales license and a California real estate appraisal license and started making the transition from appraisals to sales. Mr. Arroyo upgraded his license to become a managing broker in 2001. Since AARE-CA opened its doors as a one-agent company back in 2004, we’ve been through the boom times and the “bust times,” and just kept right on growing. Currently, we provide real estate brokerage, lending and property management services, including assisting clients to buy, sell, finance, manage, and invest in residential and commercial properties as well as business opportunities.  We have approximately three hundred members (agents, brokers, loan officers, managers, and staff) to help us keep everything running smoothly. We are a mission driven organization with clear values. With a successful track record of thousands of real estate sales (totaling more than $1 billion in the last four years alone), we are passionate about our mission of demonstrating Generous Capitalism^® in the public markets by growing profits and increasing value for our shareholders while giving back to others in need and fulfilling God’s will through the business of real estate. Our vision is to bear fruit which is an investment principle that means to yield positive results. Our objective is to establish a global real estate corporation based on our Generous Capitalism^® business model.

We believe the seven (7) competitive advantages that separate our company from competitors include:

· Culture: Our culture is a reflection of a healthy organization with clear values that include faith, relationships, accountability, integrity, truth, honesty, trust, standards of excellence, clear communication, work-life balance, morals, ethics, loyalty, gratefulness, success and rewards. We are considered a safe harbor by our members for individuals of all walks of life during a period of history that is polarizing on the social, economic and political spectrum.

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· Equity Compensation: In the future, we plan to introduce a unique equity compensation plan that gives us the ability to recruit, retain, motivate and inspire our members. We will be able to grow revenue with less capital investment required by using our stock as a currency. Providing our members with equity compensation is a unique differentiator from our peers. For real estate and loan brokerages firms, equity compensation is extremely rare; nearly non-existent in the real estate and loan origination industry. This gives our members ownership in the company and as stakeholders they have more incentive and motivation to grow the revenue and profits. This also reinforces our internal generosity practices within our Generous Capitalism^® business model.

· Multiple Revenue Streams: Residential, commercial, lending, business opportunities, syndication and property management services all under one umbrella. This provides multiple streams of income for our agents and loan officers as well as a complete “one-stop” real estate shop for our clients.

· Generosity Based Business Model: Our culture is based on generosity and social responsibility during a generational change in workforce. We believe the next generation is demanding a new form of capitalism that illustrates healthy and sustainable business practices externally to the communities it serves in addition to creating jobs, profits and opportunities to its internal stakeholders. We have developed that exact business model and we call it “Generous Capitalism^®”.

· High Growth Potential: We participate in a market that we expect to experience significant growth throughout North America facilitated by a steady increase in new U.S. demand for housing/investments, and the fact we are able to provide real estate and lending services in multiple segments of our market including residential, commercial, property management, business opportunities, and syndication. We have a growing sales network. In the last three years, we have been licensed and expanded into 23 additional states and the District of Columbia in the U.S. and established our sales network throughout North America that is overseen by our team of managers and directors.

· Experienced Executive Team: Our focused and experienced management team is dedicated solely to our operation and to implementing our business strategies. Each member of the executive team has been involved with the Company for several years and has been instrumental in developing our strategy. Our success strategy and execution that was implemented in California over the last 15 years in now being replicated in all major markets throughout the U.S.

· Intellectual Property: Our media properties coupled with use of advanced technology leads to more market penetration and smoother operations as a company while the real estate industry as a whole transitions to the digital age. Our up-to-date media assets designed specifically for the real estate and lending market give us an edge over our competition. We believe the AARE media properties and brand name has a strong legacy dating from the launch of the California corporation in 2004, and we believe it has to this day retained a strong brand loyalty amongst clients, agents and loan officers. We are now operational in 24 states in the U.S. and our media assets have been hand tailored to address our new digital age marketplace. Through our media properties, we have the ability to scale our communication and service offerings across the globe. We hold copyrights and trademarks that protect our intellectual property.

Alongside our competitive advantages, we believe it is our core values and beliefs that make our real estate, lending and property management services extraordinary. In addition, our management steadfastly believes that charitable giving and sharing are a vital component of a successful business. To that end, up to twenty percent (20%) of our gross profit on every transaction goes to charity (our gross income minus our cost of sales). Up to ten percent (10%) of our gross profit is donated in the form of cash contributions to charitable organizations. In addition to our cash contributions, our annual goal is to give up to an additional ten percent (10%) in the form of stock grants, client credits, and in-kind contributions to charitable organizations We believe that with success comes the responsibility to do what we can for those less fortunate. As a result, we give charitable contributions to faith-based and secular non-profit organizations that support a variety of social improvement projects. This includes missions and ministries with significant human impact that improve our local communities, the environment, and our social well-being while demonstrating a positive form of governance. We have no intention of deviating from this policy or reducing the amount we give to charity. The charitable giving policy has been written into our Bylaws. The amount of charitable giving could have a significant impact on our bottom line and affect shareholders’ earnings per share. Investors should not invest if they are not comfortable with our charitable contribution plans.

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Summary Offering Information

Shares offered by Company	Up to 1,000,000 Shares.
Common Shares outstanding before the offering	3,180,460 Common Shares as of the date hereof.
Common Shares outstanding after the offering (if Maximum Offering sold)	4,180,460 Common Shares.
Price per Share	$5.00 per Share.
Use of Proceeds	If we sell all the Shares and complete the Maximum Offering, our proceeds will be $5,000,000. We intend to use these proceeds primarily for: - Nationwide Growth (plan to hire key executives and managers (24 States) - Marketing & Advertising - Retire SBA Debt - 30% Proceeds to Selling Shareholders - Working Capital See “Use of Proceeds” on page 24 of this Offering Circular.
Offering Amount	$1,000,000 - $5,000,000 (We have already met the $1,000,000 Offering minimum)
Risk Factors	The Common Shares offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors”.

We are offering, through this Offering Circular, a limited number of shares of our Common Stock to investors as described herein. We are offering a minimum of 200,000 shares and a maximum of 1,000,000 shares of our Common Stock, par value $0.001 per share. We are authorized to issue 25,000,000 shares of common stock, par value $0.001, and 5,000,000 shares of preferred stock, par value $0.001. We currently have 3,180,460 shares of common stock and 2,000,000 shares of preferred stock outstanding. See “Securities Being Offered”. Our Preferred Stock will not be offered in this Offering.

We are authorized to issue additional classes of Common Stock from time to time pursuant to other offering materials containing financial terms and conditions that may differ from those set forth herein. As of the date set forth hereof, we are offering Common Stock in one (1) class. Our investment objective and strategy with regard to the Common Stock are set forth below, and investors are directed to such materials. We may, from time to time, refine or change our strategy without prior notice to, or approval by, the shareholders.

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Risk Factors

An investment in our Securities involves a high degree of risk and many uncertainties. You should carefully consider the specific factors listed below, together with the cautionary statement that follows this section and the other information included in this Offering Circular before purchasing our Securities in this Offering. If one or more of the possibilities described as risks below actually occur, our operating results and financial condition would likely suffer and the trading price, if any, of our Securities could fall, causing you to lose some or all of your investment. The following is a description of what we consider the key challenges and material risks to our business and an investment in our Securities.

Although some of the risk factors summarized below may apply to many start-up companies, we have included them because an emerging growth company such as our Company is inherently subject to these risks, and other risks, which could cause actual results to differ materially from those projected in this Offering. Additionally, early-stage companies are inherently riskier than more developed companies. You should consider general risks as well as specific risks when deciding whether to invest. Investors should carefully consider the risks and uncertainties described below, together with all the other information in this Offering Circular, before deciding whether to invest in the Securities of our company.

INVESTMENT IN OUR COMMON STOCK IS HIGHLY SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. OUR COMMON STOCK SHOULD NOT BE PURCHASED BY ANY PERSON WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW, AS WELL AS SPECIFIC RISKS IN THE OFFERING MATERIALS, WHEN EVALUATING WHETHER TO MAKE AN INVESTMENT. THE RISKS DESCRIBED BELOW ARE NOT THE ONLY RISKS ASSOCIATED WITH AN INVESTMENT. YOU SHOULD ALSO CONSULT WITH YOUR OWN LEGAL, TAX AND FINANCIAL ADVISORS ABOUT AN INVESTMENT IN THE SECURITIES. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, THE FINANCIAL CONDITION AND RESULTS OF OPERATION COULD BE MATERIALLY AND ADVERSELY AFFECTED AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.

General risk relating to COVID-19 pandemic

The novel coronavirus (COVID-19) pandemic may have an expected effect on our business, financial condition and results of operations.

In March 2020, the World Health Organization declared COVID-19 a global pandemic, and governmental authorities around the world have implemented measures to reduce the spread of COVID-19. These measures adversely affected workforces, customers, supply chains, consumer sentiment, economies, and financial markets, and, along with decreased consumer spending, have led to an economic downturn across many global economies.

The COVID-19 pandemic rapidly escalated in the United States, creating significant uncertainty and economic disruption and leading to record levels of unemployment nationally. Numerous state and local jurisdictions imposed, and subsequently lifted, shelter-in-place orders, quarantines, shut-downs of non-essential businesses, and similar government orders and restrictions on their residents to control the spread of COVID-19. These orders may be imposed again in the future if the COVID-19 pandemic continues to spike in certain locales, partially as a result of COVID variants. Such orders or restrictions have resulted, and will result, in temporary facility closures, work stoppages, slowdowns and travel restrictions, among other effects, thereby adversely impacting our operations. In addition, we expect to be impacted by a downturn in the United States economy in the long run, which could have an adverse impact on discretionary consumer spending and may have a significant impact on our business operations and/or our ability to generate revenues and profits.

In response to the COVID-19 disruptions, we have implemented a number of measures designed to protect the health and safety of our staff and contractors. These measures include restrictions on non-essential business travel, the institution of work-from-home policies wherever feasible and the implementation of strategies for workplace safety at our facilities that remain open. We are following the guidance from public health officials and government agencies, including implementation of enhanced cleaning measures, social distancing guidelines and wearing of masks.

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The extent to which COVID-19 ultimately impacts our business, financial condition and results of operations will depend on future developments, which are highly uncertain and unpredictable, including new information which may emerge concerning the severity and duration of the COVID-19 outbreak and the effectiveness of actions taken to contain the COVID-19 outbreak or treat its impact, among others. Additionally, the extent to which COVID-19 ultimately impacts our operations will depend on a number of factors, many of which will be outside of our control. The COVID-19 outbreak is evolving and new information emerges daily; accordingly, the ultimate consequences of the COVID-19 outbreak cannot be predicted with certainty. In addition to the COVID-19 disruptions possibly adversely impacting our business and financial results, they may also have the effect of heightening many of the other risks described in “Risk Factors,” including risks relating to changes due to our limited operating history; our ability to generate sufficient revenue, to generate positive cash flow; our relationships with third parties, and many other factors. We will endeavor to minimize these impacts, but there can be no assurance relative to the potential impacts that may be incurred.

The COVID-19 pandemic poses specific risks related to our business due to the nature of our business.

The COVID-19 pandemic poses specific risks related to our Company. Specifically, it makes it difficult for us to evaluate specific properties, visit certain areas easily, meet with potential clients or investors and joint venture partners. Some companies may also determine that because we are a growth company, that we will be delayed unreasonably in our ability to provide brokerage services to property owners in a timely manner. This may influence them in a negative manner, and they may make decisions not to work with us based on our limited performance.

Where we manage or sell properties that are tenanted, there may be unforeseen delays and late payments due to COVID-19. This may reduce our ability to sell or manage those properties. This would require the Company to work for an extended period of time without payment, be asked to agree to unreasonable compensation or abandon those property listings altogether. This will increase our cost and create delays in earning commissions, and these listings may turn into short sales or REO (bank-owned) properties. As of July 2021, there are approximately 1.75 million property owners in forbearance. This means they have stopped paying their mortgage.

In either case, the COVID-19 pandemic will cause continued disruption in the property market for an unknown time period. This may delay our future growth plans for its nationwide services.

We have a limited operating history and historical financial information upon which you may evaluate our performance.

We were recently incorporated in Delaware in June 2020. In July 2021, we entered into a merger transaction with AARE-CA under which AARE-CA merged into our company and we assumed AARE-CA’s operations.

Accordingly, the Delaware Corporation has only a limited history upon which an evaluation of its prospects and future performance can be made. Past performance of any Director, Officer or Key Employee or the success of the President in any similar venture is no assurance of future success.

Our proposed operations are subject to all business risks associated with growing enterprises. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the expansion of a business, operation in a competitive industry, and the continued development of advertising, promotions and a corresponding customer base. There is a possibility that we could sustain losses in the future or fail to even operate profitably.

We have a limited operating history nationwide and limited capital.

We have a limited operating history nationwide upon which investors may base an evaluation of its performance; therefore, we are still subject to all of the risks incident to the creation and development of a new business on a nationwide scale.

We have limited assets, limited operating history, and limited operating revenue (outside of California) to date. We are still working on recruiting agents, brokers and staff members, and it will be some time before we are in a position to begin producing significant revenue. Thus, our proposed business is subject to all the risks inherent in new business ventures. The likelihood of success must be considered in light of the expenses, complications, and delays frequently encountered with the start-up of new businesses and the competitive environment in which start-up companies operate.

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Our business is subject to general economic conditions.

Our financial success is sensitive to adverse changes in general economic conditions in the United States, such as recession, inflation, unemployment, and interest rates, and overseas, such as currency fluctuations. Such changing conditions could reduce demand in the marketplace for our services. Management believes that the impending growth of the markets we service will insulate us from excessive reduced demand. Nevertheless, we have no control over these changes.

Adverse changes in global and domestic economic conditions or a worsening of the United States economy could materially adversely affect us. Our sales and performance depend significantly on consumer confidence and discretionary spending, which are still under pressure from United States and global economic conditions. A worsening of the economy and decrease in consumer spending may adversely impact our sales, ability to market our services, build customer loyalty, or otherwise implement our business strategy and further diversify the geographical concentration of our operations.

Although we have generated significant revenues in the past several years, the current nationwide expansion plan will require financial resources. Without significant revenues to match the significant ongoing capital costs of the expansion, we will not realize its plans on the projected timetable in order to reach sustainable or profitable operations. Any material deviation from our timetable could require that we seek additional capital. Additional funding may not be available at reasonable cost and it may materially dilute the investment of investors in this Offering.

Our growth and profitability are dependent on a number of factors.

Our growth and profitability are dependent on a number of factors, and our historical growth may not be indicative of our future growth.

Our historic results since the implementation of our new expansion strategy in 2021 should not be considered as indicative of our future performance. We may not be successful in executing our growth strategy, and even if we achieve our strategic plan, we may not be able to sustain profitability. In future periods, our revenue could continue to decline or grow more slowly than we expect. We also may incur significant losses in the future for a number of reasons, including the following risks and the other risks described in this Offering Circular, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors.

We may fail to manage our growth effectively.

We plan to expand our operations by hiring brokers and real estate agents throughout the United States. The anticipated growth could place a significant strain on our management and operational and financial resources. Effective management of the anticipated growth shall require expanding our management and financial controls, hiring additional qualified personnel as required and developing additional expertise by existing management personnel. However, we may not be able to effectively implement these or other measures designed to increase our capability to manage such anticipated growth or to do so in a timely and cost-effective manner. Moreover, management of growth is especially challenging for a company with a short operating history (outside of California) and limited financial resources, and the failure to effectively manage growth could have a material adverse effect on our operations.

We are highly dependent on key personnel and management.

In its current stage of growth, our business will be significantly dependent on our current management team, particularly our CEO, and the Directors of our various departments. The loss of any one of these individuals could have a material adverse effect on us and our operations. We currently maintain a key-executive life insurance policy insuring the life of two of our key executives, and we intend to apply for greater coverage on the existing life insurance policies as well as additional key-executive life insurance policies upon completion of funding.

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Our business depends on attracting and retaining qualified management personnel and agents.

The unanticipated departure of any key member of our management team or high producing real estate agents could have an adverse effect on our business. Given our relative size and the breadth of our operations, there are a limited number of qualified management personnel to assume the responsibilities of management-level employees should there be management turnover. Our success depends to a significant extent upon a number of key employees, including members of senior management. The loss of the services of one or more of these key employees could have a material adverse effect on our results of operations and prospects. In addition, because of the required licensing and specialized nature of our business, our future performance depends on the continued service of, and our ability to attract and retain, qualified management, producing real estate agents, and commercial and technical personnel. Competition for such personnel is intense, and we may be unable to continue to attract or retain such personnel to support our growth and operational initiatives and replace executives or real estate agents who quit, retire or resign. Failure to retain our leadership team and attract and retain other important management and technical personnel could place a constraint on our growth and operational initiatives, which could have a material adverse effect on our revenues, results of operations and product development efforts, and eventually result in a decrease in profitability.

Our charitable giving policy is unique.

Giving and sharing are more than buzzwords at AARE. To that end, up to twenty percent (20%) of our gross profit on every transaction goes to charity (our gross income minus our cost of sales). Up to ten percent (10%) of our gross profit is donated in the form of cash contributions to charitable organizations. In addition to our cash contributions, our annual goal is to give up to an additional ten percent (10%) in the form of stock grants, client credits, and in-kind contributions to charitable organizations.  We believe that with success comes the responsibility to do what we can for those less fortunate. As a result, we give charitable contributions to faith-based and secular non-profit organizations that support a variety of social improvement projects. This includes missions and ministries with significant human impact that improve our local communities, the environment, and our social well-being while demonstrating a positive form of governance. We have no intention of deviating from this policy or reducing the amount we give to charity. The charitable giving policy has been written into our Bylaws. The amount of charitable giving could have a significant impact on our bottom line and affect shareholders’ earnings per share. Investors should not invest if they are not comfortable with our charitable contribution plans.

We may face scrutiny or disaffiliation/abandonment by our members or clients if there is a change in our faith-based values and culture.

Our core values include relationships, faith, accountability, integrity, natural and spiritual gifts, truth, honesty, trust, standards of excellence, generous giving, education, understanding, clear communication, work-life balance, morals, ethics, loyalty, gratefulness, success, and rewards. Our mission as an organization is to fulfill God’s will through the business of real estate. Our vision is to bear much fruit which means to yield positive results. We honor God within our real estate agency by nurturing a culture where giving and serving others’ needs before our own is a priority. We obey Him by growing our business based on His moral, ethical and biblical principles. While operating within the legal requirements of the law, and including people of all faiths and walks of life, our business model and culture has been developed based on biblical principles. A shift or adherence to a different set of core values within the organization could impact the retention of our current members and could have a material adverse effect on the Company’s operations.

We may face limitations on our ability to integrate acquired businesses.

From time to time, we may engage in acquisitions involving risks, including the possible failure to successfully integrate and realize the expected benefits of these acquisitions. We anticipate making acquisitions in the future, and our ability to realize the anticipated benefits of these transactions, including the expected combination benefits, will depend largely on our ability to integrate acquired businesses.

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The risks associated with future acquisitions may include:

1.	The business culture of the acquired business may not match well with our culture;
2.	Technological and product synergies, economies of scale and cost reductions may not occur as expected;
3.	We may acquire or assume unexpected liabilities;
4.	Faulty assumptions may be made regarding the integration process;
5.	Unforeseen difficulties may arise in integrating operations and systems;
6.	We may fail to retain, motivate and integrate key management and other employees of the acquired business;
7.	Higher than expected finance costs may arise due to unforeseen changes in tax, trade, environmental, labor, safety, payroll or pension policies in any jurisdiction in which the acquired business conducts its operations; and
8.	We may experience problems in retaining customers of the acquired business.

The successful integration of any newly acquired business would also require us to implement effective internal control processes in the acquired business. We cannot ensure newly acquired companies will operate profitably, that the intended beneficial effect from these acquisitions will be realized or that we will not encounter difficulties in implementing effective internal control processes in these acquired businesses, particularly when the acquired business operates in foreign jurisdictions and/or was privately owned.

If we cannot raise sufficient funds, we will not succeed or will require significant additional capital infusions.

We are offering Common Stock in the amount of up to $5,000,000 in this offering, but may sell much less than the maximum offering. Even if the maximum amount is raised, we may need additional funds in the future in order to grow and/or achieve sustainable profitability, and if we cannot raise those funds for any reason, including reasons outside our control, such as another significant downturn in the economy, our business may not survive. If we do not sell all of the Common Stock we are offering, we will have to find other sources of funding in order to develop our business.

Additionally, in order to expand, we are likely to raise funds again in the future, either by offerings of securities or through borrowing from banks or other sources. The terms of future capital infusions may include covenants that give creditors rights over our financial resources or sales of equity securities that will dilute the holders of our Common Stock.

Terms of subsequent financings may adversely impact your investment.

We may need to engage in common equity, debt, or preferred stock financing in the future. We are engaging in this offering under Regulation A to sell a minimum of 200,000 and a maximum of 1,000,000 shares of Common Stock at $5.00 per share. Additionally, interest on any debt securities could increase costs and negatively impact operating results. Preferred Stock could be issued in different series from time to time with such designations, rights, preferences, and limitations as needed to raise capital. The terms of Preferred Stock could be more advantageous to those investors than to the holders of Common Stock. In addition, if we need to raise more equity capital from the sale of Common Stock, institutional or other investors may negotiate terms at least as, and possibly more, favorable than the terms of prior investors. Shares of Common Stock that we sell could be sold into any market that develops, which could adversely affect the market price of our Common Stock.

Risks of borrowing may negatively impact our business.

We may have to seek loans from financial institutions. Typical loan agreements might contain restrictive covenants, which may impair our operating flexibility. A default under any loan agreement could result in a charging order that would have a material adverse effect on our business, results of operations or financial condition.

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Some of our key personnel allocate their time to other interest, which may reduce the time spent on our business and operations.

Our future success depends on the efforts of key personnel and consultants, especially our CEO. The loss of services of any key personnel or consultants may have an adverse effect on us. There can be no assurance that we will be successful in attracting and retaining other personnel or consultants we require to develop and conduct our proposed operations. In addition, our CEO, Andrew Michael Arroyo, does not work exclusively for us and divides his time among us and his other interests. If circumstances arise in which Mr. Arroyo is required to spend substantially more time attending to matters unrelated to our operations, it could adversely affect our business.

We are subject to substantial regulation, which is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business and operating results.

Licensed real estate companies and their associate licensees are subject to substantial regulation under international, federal, state, local and foreign laws. We, and our associate licensees, need to comply with many governmental standards and regulations relating to licensing laws and state administrative codes, among others. In addition, we need to comply with state laws that regulate the buying, selling, investing and managing of real property. Staying compliant with all of these requirements may adversely affect our business and financial condition. Also, we are subject to laws and regulations applicable to real estate services internationally. For example, we will be required to meet country-specific licensing standards that are often materially different from U.S. requirements, thus resulting in the need for additional investment and systems to ensure regulatory compliance. These processes necessitate that foreign regulatory officials review and certify us prior to providing services and market entry. In addition, we must comply with regulations applicable to real estate services after we enter the market, including foreign reporting requirements and foreign management systems. We may incur significant costs in complying with these regulations and may be required to incur additional costs to comply with any changes to such regulations.

We may need to defend ourselves against patent or trademark infringement claims, which may be time-consuming and would cause us to incur substantial costs.

Companies, organizations or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our ability to buy, sell, manage or market real estate properties, which could make it more difficult for us to operate our business. From time to time, we may receive communications from holders of patents or trademarks regarding their proprietary rights. Companies holding patents or other intellectual property rights may bring suits alleging infringement of such rights or otherwise assert their rights and urge us to take licenses. In addition, if we are determined to have infringed upon a third party’s intellectual property rights, we may be required to do one or more of the following:

· Cease selling, incorporating certain components into, or offering goods or services that incorporate or use the challenged intellectual property;

· Pay substantial damages;

· Seek a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms or at all;

· Redesign our service offerings or certain components;

· Establish and maintain alternative branding for our products and services.

We may also need to file lawsuits to protect our intellectual property rights from infringement from third parties, which lawsuits could be expensive and time consuming and distract management’s attention from our core operations.

If we are unable to adequately control the costs associated with operating our business, including our costs of sales, our business, financial condition, operating results and prospects will suffer.

If we are unable to maintain a sufficiently low level of costs for supporting our real estate agents and maintain a sufficiently low level of costs for marketing, selling and managing properties relative to the fees and commissions earned, our operating results, gross margins, business and prospects could be materially and adversely impacted. We have made, and will be required to continue to make, significant investments into the technological systems that allow us to efficiently service our real estate clients and manage properties. There can be no assurances that our costs of producing and delivering efficient real estate services will be less than the revenue we generate from real estate commissions or that we will ever achieve a positive gross margin on sales.

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If we are unable to address the service requirements of our future customers, our business will be materially and adversely affected.

In order to sustain our business we be able to adequately address the service requirements of our customers. If we are unable to do this, our business and prospects will be materially and adversely affected. In addition, we anticipate the level and quality of the service we provide our customers will have a direct impact on the success of our future business and referrals. If we are unable to satisfactorily service our customers, our ability to generate customer loyalty, grow our business, and sell and manage additional properties could be impaired.

We may become subject to liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.

The risk of professional liability claims, product recalls, and associated adverse publicity is inherent in the real estate brokerage business. We may become subject to liability claims, which could harm our business, prospects, operating results and financial condition. The real estate industry experiences significant liability claims, and we face inherent risk of exposure to claims in the event our employees, officers or real estate agents do not perform as expected per our policy manual. A successful liability claim against us could require us to pay a substantial monetary award. In addition, a liability claim could generate substantial negative publicity about our service and business, which would have material adverse effect on our brand, business, prospects and operating results. Any lawsuit, regardless of its merit, may have a material adverse effect on our reputation, business and financial condition. To help mitigate the financial risks, we carry professional Errors & Omissions liability insurance, which offers financial protection up to $1,000,000 per claim.

We may not be able to properly manage our planned expansion.

We plan on expanding our business through the introduction of a sophisticated marketing campaign to recruit agents nationwide. Any expansion of operations we may undertake will entail risks. Such actions may involve specific operational activities, which may negatively impact our profitability. Consequently, shareholders must assume the risk that (i) such expansion may ultimately involve expenditures of funds beyond the resources available to us at that time, and (ii) management of such expanded operations may divert management’s attention and resources away from its existing operations, and all of those factors may have a material adverse effect on our present and prospective business activities.

Developing new products, services and technologies entails significant risks and uncertainties.

We regularly research and develop new technology and communication systems. Delays or cost overruns in the development of these systems and/or failure of the product or service to meet our performance estimates may be caused by, among other things, unanticipated technological hurdles, difficulties in programming, changes to design and regulatory hurdles. Any of these events could materially and adversely affect our operating performance and results of operations.

We may not be successful in developing a larger customer base.

While we believe we can further develop our existing customer base and develop a new customer base through the marketing and promotion of our services, our inability to further develop such a customer base could have a material adversely affect us. Although we believe that our real estate services offer advantages over competitive companies, our services may not attain a degree of market acceptance on a sustained basis or generate revenues sufficient for sustained profitable operations.

Changes in consumer behavior could reduce profitability.

Our customers could change their behavior and purchase patterns in unpredictable ways. Our success therefore depends on its ability to successfully predict and adapt to changing consumer behavior outside, as well as inside, the United States. Moreover, we must often invest substantial amounts in research and development before we learn the extent to which products and services will earn consumer acceptance. If our products and services do not achieve sufficient consumer acceptance, our revenue may decline and adversely affect the profitability of the business.

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Because we face intense competition, we may not be able to operate profitably in our markets.

Competition in the real estate industry is significant. Nationwide, there are more than 1 million real estate agents, more than 300,000 loan officers, and more than 100,000 real estate brokerage firms. While significant competition does exist, our management believes that our products and services are demographically well positioned, top quality and unique in nature, while offering greater value. The expertise of management combined with training, culture and the innovative nature of its marketing approach set us apart from its competitors. However, there is the possibility that new competitors could seize upon our business model and produce competing products or services with similar focus. Likewise, these new competitors could be better capitalized than we are, which could give them a significant advantage over us. There is the possibility that the competitors could capture significant market share of our intended market.

Trends in consumer preferences and spending can change quickly and be sporadic.

Our operating results may fluctuate significantly from period to period as a result of a variety of factors, including purchasing patterns of customers, competitive pricing, debt service and principal reduction payments, and general economic conditions. We may not be successful in marketing any of its services nationwide or the revenues from such services may not be significant. Consequently, our revenues may vary by quarter, and our operating results may experience fluctuations that will impede appreciation and slow our growth.

We may suffer potential fluctuations in quarterly revenue.

Significant annual and quarterly fluctuations in our revenue may be caused by, among other factors, the volume of revenues generated by us, the timing of new product or service announcements and releases by us and our competitors in the marketplace, and general economic conditions. Our level of revenues and profits, in any particular fiscal period, may be significantly higher or lower than in other fiscal periods, including comparable fiscal periods. Our expense levels are based, in part, on its expectations as to future revenues.

As a result, if future revenues are below expectations, net income or loss may be disproportionately affected by a reduction in revenues, as any corresponding reduction in expenses may not be proportionate to the reduction in revenues. As a result, we believe that period-to-period comparisons of its results of operations may not necessarily be meaningful and should not be relied upon as indications of future performance.

We may face unanticipated obstacles to execution of our business plan.

Our business plans may change significantly. Many of our potential business endeavors are capital intensive and may be subject to statutory or regulatory requirements. Management believes that our chosen activities and strategies are achievable in light of current economic and legal conditions with the skills, background, and knowledge of our principals and advisors. Management reserves the right to make significant modifications to our stated strategies depending on future events. We may not be successful in our the execution of our business plan.

Management maintains wide discretion as to the use of proceeds from this Offering.

We plan to use the net proceeds from this Offering for the purposes described under Item 6 “Use of Proceeds.” However, we reserve the right to use the funds obtained from this Offering for other similar purposes not presently contemplated, which our management deems to be in the best interests of our company and its shareholders in order to address changed circumstances or opportunities. As a result of the foregoing, our success will be substantially dependent upon the discretion and judgment of Management with respect to application and allocation of the net proceeds of this Offering. Investors for the Securities offered hereby will be entrusting their funds to our Management, upon whose judgment and discretion the investors must depend.

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We will be subject to the significant influence of one of our current stockholders after this Offering, and their interests may not always coincide with those of our other stockholders.

Andrew Michael Arroyo, currently beneficially owns 89% of our outstanding common stock and 100% of our outstanding preferred stock. If the Maximum Offering is sold to investors, Mr. Arroyo will beneficially own 75% of our outstanding Common Stock and control 90% of the outstanding voting rights. As a result, Mr. Arroyo will be able to significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. Because the interests of Mr. Arroyo may not always coincide with those of our other stockholders, such stockholder may influence or cause us to take actions with which our other stockholders disagree.

We plan to reinvest any profits into the business for the foreseeable future.

We intend to retain any initial future earnings to fund operations and expand our business. A Shareholder will not be entitled to receive profits proportionate to the amount of shares of Common Stock held by that Shareholder. Our Board of Directors is vested with the power to declare a dividend to distribute profits based upon our results of operations, financial condition, capital requirements and other circumstances. However, at this time and for the foreseeable future, our Board of Directors has no intention to distribute profits or declare a dividend.

We may be unable to adequately protect our proprietary rights.

In certain cases, we may rely on trade secrets to protect intellectual property, proprietary technology and processes, which we have acquired, developed or may develop in the future. There is a risk that secrecy obligations may not be honored or that others will not independently develop similar or superior products or technology. The protection of intellectual property and/or proprietary technology through claims of trade secret status has been the subject of increasing claims and litigation by various companies both in order to protect proprietary rights as well as for competitive reasons even where proprietary claims are unsubstantiated. The prosecution of proprietary claims or the defense of such claims is costly and uncertain given the uncertainty and rapid development of the principles of law pertaining to this area. We, in common with other firms, may also be subject to claims by other parties with regard to the use of intellectual property, technology information and data, which may be deemed proprietary to others.

We have certain legal and regulatory compliance related to the sale of securities and related to this Offering that we must follow.

Failure to comply with applicable laws and regulations could harm our business and financial results. We intend to develop and implement policies and procedures designed to comply with all applicable federal and state laws, accounting and reporting requirements, tax rules and other regulations and requirements, including but not limited to those imposed by the SEC.

In addition to potential damage to our reputation and brand, failure to comply with the various laws and regulations, as well as changes in laws and regulations or the manner in which they are interpreted or applied, may result in civil and criminal liability, damages, fines and penalties, increased cost of regulatory compliance, and restatements of our financial statements. Future laws or regulations, or the cost of complying with such laws, regulations or requirements, could also adversely affect our business and results of operations.

This Offering Circular contains forward-looking statements that are based on our current expectations, estimates and projections but are not guarantees of future performance and are subject to risks and uncertainties..

Management has prepared projections regarding our anticipated financial performance. These projections are hypothetical and based upon our presumed financial performance, the addition of a sophisticated and well-funded marketing plan and other factors influencing our business. The projections are based on Management’s best estimate of our probable results of operations, based on present circumstances, and have not been reviewed by our independent accountants or auditors. These projections are based on several assumptions, set forth therein, which Management believes are reasonable. Some assumptions, upon which the projections are based, however, invariably will not materialize because of the inevitable occurrence of unanticipated events and circumstances beyond Management’s control. Therefore, actual results of operations will vary from the projections, and such variances may be material. Assumptions regarding future changes in sales and revenues are necessarily speculative in nature. In addition, projections do not and cannot take into account such factors as general economic conditions, unforeseen regulatory changes, the entry into our market of additional competitors, the terms and conditions of future capitalization, and other risks inherent to our business. While Management believes that the projections accurately reflect possible future results of our operations, those results cannot be guaranteed.

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Technology risks

Rapid technological changes may adversely affect our business.

Our ability to remain competitive may depend in part upon its ability to develop new and enhanced new products, services or distribution, and to introduce these products or services in a timely and cost-effective manner. In addition, product and service introductions or enhancements by our competitors, or the use of other technologies could cause a decline in sales or loss of market acceptance of our existing products and services.

Our success in developing, introducing, selling and supporting new and enhanced products or services depends upon a variety of factors, including timely and efficient completion of service and product design and development, as well as timely and efficient implementation of product and service offerings. Because new product and service commitments may be made well in advance of sales, new product or service decisions must anticipate changes in the industries served. We may not be successful in selecting, developing, and marketing new products and services or in enhancing its existing products or services. Failure to do so successfully may adversely affect our business, financial condition and results of operations.

We are dependent on computer infrastructure.

We rely on Internet and computer technology to maintain its records and to market and sell our products and services. Therefore, an Internet or major computer server failure would adversely affect our performance. We presently have limited redundancy systems, rely on third party backup facilities, and only have a limited disaster recovery plan. Despite the implementation of network security measures by us, our servers may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptive problems, which could lead to interruptions, delays or stoppages in service to users of our services and products, which could cause a material adverse effect on our business, operations and financial condition.

Our website faces inside and outside security risks.

If the security measures we use to protect the personal information of our website users, employees, real estate agents and clients, such as credit card numbers, are ineffective, it could result in a reduction in revenues from decreased customer confidence, an increase in operating expenses, as well as possible liability and compliance costs.

Any breach in our website security, whether intentional or unintentional, could cause our users to lose their confidence in our website and as a result stop using our service and websites. This would result in reduced revenues and increased operating expenses, which would impair us from achieving profitability. Additionally, breaches of our users’ personal information could expose us to possible liability as any involved user or users may choose to sue us. Breaches resulting in disclosure of users’ personal information may also result in regulatory fines for noncompliance with online privacy rules and regulations.

We believe that as a result of advances in computer capabilities, new discoveries in the field of cryptography and other developments, a compromise or breach of our security precautions may occur. A compromise in the proposed security for our computer systems could severely harm our business because a party who is able to circumvent our proposed security measures could misappropriate proprietary information, including customer credit card information, or other sensitive data that would cause interruptions in the operation of our services and websites. We may be required to spend significant funds and other resources to protect against the threat of security breaches or to alleviate problems caused by these breaches. However, protection may not be available at a reasonable price or at all. Concerns regarding the security of e-commerce and the privacy of users may also inhibit the growth of the Internet as a means of conducting commercial transactions in general. Our users may have these concerns as well, and this may result in a reduction in revenues and increase in our operating expenses, which would prevent us from achieving profitability. We rely on encryption and authentication technology licensed from third parties whose area of expertise is to provide secure transmission of confidential information.

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We are dependent on the functionality of our websites.

If the software for our various websites contains undetected errors, we could lose the confidence of users, resulting in loss of customers and a reduction of revenue. Our online systems, including but not limited to its websites, software applications and online sales for services and products, could contain undetected errors or “bugs” that could adversely affect their performance. We regularly update and enhance all sales, websites and other online systems, as well as introduce new versions of our software products and applications. The occurrence of errors in any of these may cause us to lose market share, damage our reputation and brand name, and reduce our revenues.

Risks related to the offering

There is no current market for our shares.

There is no established public trading market for the resale of our Common Stock; however, we have plans to apply for or otherwise seek trading or quotation of our Common Stock on an over-the-counter market. Investors should assume that they may not be able to liquidate their investment for some time or be able to pledge their shares of Common Stock as collateral.

Our securities have limited transferability and liquidity.

To satisfy the requirements of certain exemptions from registration under the Securities Act, and to conform with applicable state securities laws, each Investor must acquire his/her/its Securities for investment purposes only and not with a view toward distribution. Consequently, certain conditions of the Securities Act may need to be satisfied prior to any sale, transfer, or other disposition of the Securities. Some of these conditions may include a minimum holding period; availability of certain reports, including financial statements from us; limitations on the percentage of Securities sold; and the manner in which they are sold. We can prohibit any sale, transfer or disposition unless it receives an opinion of counsel provided at the holder’s expense, in a form satisfactory to us, stating that the proposed sale, transfer or other disposition will not result in a violation of applicable federal or state securities laws and regulations. No public market exists for the securities at the moment, and no market is expected to develop until we list the securities on an exchange. Consequently, owners of the Securities may have to hold their investment indefinitely and may not be able to liquidate their investments in our securities or pledge them as collateral for a loan in the event of an emergency.

As stated above, there is no formal marketplace for the resale of our Securities. Shares of our Securities may be traded to the extent any demand and/or trading platform(s) exists. However, there is no guarantee there will be demand for the Securities, or a trading platform that allows you to sell them. We have plans to apply for and seek trading/quotation of our Securities on an over-the-counter (OTC) market. It is hard to predict if we will ever be able to obtain a quotation over-the-counter, or “up list” to the NASDAQ or similar stock exchange, although that will be the goal. Investors should assume that they may not be able to liquidate their investment for some time, if at all.

Investors in our Securities should view the investment as a long term investment.

An investment in the Securities may be long term and illiquid. As discussed herein, the offer and sale of the Securities will not be registered under the Securities Act or any foreign or state securities laws by reason of exemptions from such registration, which depends in part on the investment intent of the investors. Accordingly, purchasers of our Securities must be willing and able to bear the economic risk of their investment for an indefinite period of time. It is likely that investors will not be able to liquidate their investment in the event of an emergency, unless we are listed on an exchange at that time where shares can be openly traded.

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Our management has arbitrarily determined the offering price for the Securities sold hereunder.

The offering price of the Securities has been arbitrarily established by our management, considering such matters as the state of our business development, the general condition of the industry in which we operate, the amount of funds sought from this Offering, and the number of shares the Board of Directors is willing to issue in order to raise such funds. Accordingly, there is no relationship between the price of the Offering and our assets, earnings or book value, the market value of our Securities, or any other recognized criteria of value. As such, the price does not necessarily indicate the current value of our Securities and should not be regarded as an indication of any future market price of our stock.

There is not a firm underwritten commitment for this Offering.

The Securities are offered on a “best efforts” basis by the Company without compensation. We may, in the future, engage the services of certain Financial Industry Regulatory Authority (FINRA) registered broker-dealers to market the Securities on a “best efforts” basis that enter into Participating Broker-Dealer Agreements with us; however, we have not entered into any agreement with any FINRA registered broker-dealer. Accordingly, there is no assurance that we, or any FINRA broker-dealer, will sell the maximum securities offered or any lesser amount.

Investing in our company is highly speculative; you could lose your entire investment.

Purchasing the offered Securities is highly speculative and involves significant risk. The offered Securities should not be purchased by any person who cannot afford to lose their entire investment. Our business objectives are also speculative, and it is possible that we would be unable to accomplish them. Our shareholders may be unable to realize a substantial or any return on their purchase of the offered Securities and may lose their entire investment. For this reason, each prospective purchaser of the offered Securities should read this Offering Circular and all of its exhibits carefully and consult with their attorney, business and/or investment advisor.

Investing in our company may result in an immediate loss because investors will pay more for our Securities than what the pro rata portion of the assets are worth.

The Offering price and other terms and conditions regarding our Securities have been arbitrarily determined and do not bear any relationship to assets, earnings, book value or any other objective criteria of value. No investment banker, appraiser or other independent third party has been consulted concerning the Offering price for the Securities or the fairness of the Offering price used for the Securities.

The arbitrary Offering price of $5.00 per Share as determined herein is substantially higher than the net tangible book value per share of our Common Stock. Our assets do not substantiate a share price of $5.00 per Share. This premium in share price applies to the terms of this Offering. The Offering price will not change for the duration of the Offering even if we obtain a listing on any exchange or become quoted on the OTC Markets.

Although we have an escrow account with the subscriptions for investors, if we file for or are forced into bankruptcy protection, investors will lose their entire investment.

Invested funds for this Offering, up to $5,000,000, will be placed in an escrow account, and if we file for bankruptcy protection or a petition for involuntary bankruptcy is filed by creditors against us, your funds will become part of the bankruptcy estate and administered according to the bankruptcy laws. As such, you will lose your investment and your funds will be used to pay creditors.

In the event that our Securities are traded, they may trade for less than $5.00 per share and thus will be considered a penny stock. Trading penny stocks has many restrictions, and these restrictions could severely affect the price and liquidity of our shares.

In the event that our Securities are traded, and our stock trades below $5.00 per share, our stock would be known as a “penny stock”, which is subject to various regulations involving disclosures to be given to you prior to the purchase of any penny stock. The U.S. Securities and Exchange Commission has adopted regulations that generally define a “penny stock” to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Depending on market fluctuations, our Common Stock could be considered to be a “penny stock”. A penny stock is subject to rules that impose additional sales practice requirements on broker/dealers who sell these securities to persons other than established customers and Accredited Investors. For transactions covered by these rules, the broker/dealer must make a special suitability determination for the purchase of these securities. In addition, he must receive the purchaser’s written consent to the transaction prior to the purchase. He must also provide certain written disclosures to the purchaser. Consequently, the “penny stock” rules may restrict the ability of broker/dealers to sell our securities and may negatively affect the ability of holders of shares of our Common Stock to resell them. These disclosures require you to acknowledge that you understand the risks associated with buying penny stocks and that you can absorb the loss of your entire investment. Penny stocks are low priced securities that do not have a very high trading volume. Consequently, the price of the stock is often volatile and you may not be able to buy or sell the stock when you want to.

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Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may also limit your ability to buy and sell our Securities, which could depress the price of our shares.

FINRA rules require broker-dealers to have reasonable grounds for believing that an investment is suitable for a customer before recommending that investment to the customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status and investment objectives, among other things. Under interpretations of these rules, FINRA believes that there is a high probability such speculative low-priced securities will not be suitable for at least some customers. Thus, FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Securities, which may limit your ability to buy and sell our Securities or have an adverse effect on the market for our Securities, and thereby depress our Security’s price.

You may face significant restriction on the resale of your shares because of state “Blue Sky” laws.

Each state has its own securities laws, often called “Blue Sky” laws, which (1) limit sales of securities to a state’s residents unless the securities are registered in that state or qualify for an exemption from registration, and (2) govern the reporting requirements for broker-dealers doing business directly or indirectly in the state. Before a security is sold in a state, there must be a registration in place to cover the transaction, or it must be exempt from registration. The applicable broker-dealer must also be registered in that state.

We do not know whether our Securities will be registered or exempt from registration under the laws of any state. A determination regarding registration will be made by those broker-dealers, if any, who agree to serve as market makers for our Securities. We have not yet applied to have our Securities registered in any state and will not do so until we receive expressions of interest from investors resident in specific states after they have viewed this Offering Circular. We will initially focus our Offering in the State of California and will rely on exemptions found under California Law. There may be significant state Blue Sky law restrictions on the ability of investors to sell, and on purchasers to buy, our Securities. You should therefore consider the resale market for our Securities to be limited, as you may be unable to resell your Securities without the significant expense of state registration or qualification.

We may need additional financing in the future, which may be difficult to obtain or be on terms unfavorable to us.

Assuming all Common Shares are sold in this Offering, we believe that the net proceeds from this Offering, together with its projected cash flow from operations, shall be sufficient to fund the operations of the Company as currently conducted for up to twenty four (24) months. Such belief, however, cannot give rise to an assumption that our cost estimates are accurate or that unforeseen events would not occur that would require us to seek additional funding to meet our operational needs. In addition, we may not generate sufficient cash flow from operations to implement our business objectives. As a result, we may require substantial additional financing in order to implement our business objectives.

We may not be able to obtain additional funding when needed. If obtained such funding may only be available on terms not acceptable to us. In the event that our operations do not generate sufficient cash flow, or we cannot acquire additional funds if and when needed, we may be forced to curtail or cease its activities, which would likely result in the loss to investors of all or a substantial portion of their investments.

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We must be able to attract and retain qualified personnel in order for our business to be successful.

Our ability to realize our objectives shall be dependent on our ability to attract and retain additional, qualified personnel. Competition for such personnel can be intense, and our results may adversely affect our ability to attract and/or retain qualified personnel. Our management team has entered into employment agreements that include non-compete and confidentiality requirements. However, such agreements may not fully protect us from competitive injury if any of these individuals leave us.

We are an emerging growth company.

We are an emerging growth company as defined in the JOBS Act. The reduced disclosure requirements applicable to emerging growth companies may make our Securities less attractive to investors. For as long as we continue to be an emerging growth company, we intend to take advantage of some of the exemptions from the reporting requirements applicable to other public companies. It is possible that investors will find our Securities less attractive as a result of our reliance on these exemptions. If so, there may be a less active trading market for our Securities and our stock price may be more volatile.

ITEM 4 DILUTION

An early-stage company typically sells its Securities (or grants options over its shares) to its founder(s) at a very low cash cost because they are, in effect, putting their “sweat equity” into the company. When the company seeks cash from outside investors, the new investors typically pay a much larger sum for their securities than the founders or earlier investors, which means that the cash value of the new investors’ stake is diluted because each security of the same type is worth the same amount, and the new investor has paid more for the security than earlier investors did for theirs.

We are offering for sale to new investors up to 1,000,000 shares of our common stock at $5.00 per share. The following table sets forth on a pro forma basis at June 30, 2022, the differences between existing stockholders and new investors with respect to the number of shares of common stock purchased from us, the total consideration paid to us, and the paid per Share and assuming the Maximum Offering is sold). Dilution represents the difference between the offering price and the net tangible book value per security immediately after completion of the Offering. Net tangible book value is the amount that results from subtracting total liabilities and intangible assets from total assets. Dilution arises mainly as a result of the company’s arbitrary determination of the offering price of the securities being offered. Dilution of the value of the Securities you purchase is also a result of the lower book value of the Securities held by our existing stockholders.

	Shares Purchased					Total Consideration					Average Price
	Number		Percent			Amount		Percent			Per Share
Existing Shareholders		3,180,460		76.08	%	$	1,189,000		19.21	%	$	0.372
New Investors		1,000,000		23.92	%	$	5,000,000		80.79	%	$	5.00
Total		4,180,460		100.00	%	$	6,189,000		100	%	$	1.48

If you purchase Shares in this offering, your ownership interest in our Common Stock will be diluted immediately. The difference between the public offering price per share of common stock and the net tangible book value per share of common stock after this offering constitutes the dilution to investors in this offering. Net tangible book value per share is determined by dividing the net tangible book value (total assets less intangible assets and total liabilities) by the number of outstanding shares of common stock.

As of June 30, 2022, we had a net tangible book value of $269,472 or $0.08 per share of issued and outstanding common stock. After giving effect to the sale of the Shares proposed to be offered in the maximum offering of 1,000,000 Shares, the net tangible book value at that date would have been $5,269,472 or $1.26 per share. This represents an immediate increase in net tangible book value of approximately $1.18 per share to existing shareholders and an immediate dilution of approximately $3.74 per share to new investors.

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The following table illustrates such per share dilution:

Proposed public offering price (per share)	$	5.00
Net tangible book value per share (June 30, 2022)	$	0.08	)
Increase in net tangible book value per share attributable to proceeds from the maximum offering	$	1.18
Pro forma net tangible book value per share after the offering	$	1.26
Dilution to new investors	$	3.74

Future dilution

Another important way of looking at dilution is that dilution can happen due to future actions by the company the investor invested in. This means that an investor’s stake in a company could be diluted due to the company issuing additional securities, whether as part of a capital-raising event or issued as compensation to the company’s members, employees or marketing partners. As a result, when a company issues more securities, the percentage of the company that investors own will go down, even though the value of the company may go up. This means investors will own a smaller piece of a larger company.

This increase in number of securities outstanding could result from a security offering in any form. If the company decides to issue more securities, an investor could experience value dilution with each security being worth less than before, and control dilution with the total percentage an investor owns being less than before. There may also be earnings dilution, with a reduction in the amount earned per security, which typically occurs when a company offers dividends.

It is important that investors realize how the value of those securities can decrease by actions taken by the company. Dilution can make drastic changes to the value of each security, ownership percentage, voting control, and earnings per security.

ITEM 5 PLAN OF DISTRIBUTION AND SELLING SECURITY HOLDERS

We are offering a maximum of 1,000,000 shares of Common Stock on a “best efforts” basis by our management.

We are not selling the shares through an underwriter.

We will use the website, https://aare.com, to provide notification of the offering. Persons who desire information will be directed to https://aare.com.

Our Offering Circular will be furnished to prospective investors in this offering via download 24 hours a day, 7 days a week on the https://aare.com website.

We are offering our securities in all states.

Investors’ Tender of Funds

After the Offering Statement has been qualified by the Securities and Exchange Commission, we will accept tenders of funds to purchase the shares. Investments up to the initial $1,000,000 (Minimum Offering) were met on March 17, 2022 during our first offering period. Since the Minimum Offering was met, any future investments may close on a “rolling” basis (so not all investors will receive their shares on the same date). The funds tendered by potential investors will be held by North Capital, the escrow agent, and will be transferred to us once the investment has been approved. A closing will occur each time we accept funds (after the first closing, directly from the investors). Upon closing, funds tendered by investors will be made available to us for our use.

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Process of Subscribing

Prospective investors who submit non-binding indications of interest during the “test the waters” period will receive an automated message from us indicating that the offering is open for investment once the Form 1-A has been qualified by the SEC. You will be required to complete a Subscription Agreement in order to invest. The Subscription Agreement can be completed on https://aare.com/ipo via an electronic signature service. The Subscription Agreement includes a representation by the investor to the effect that, if you are not an “Accredited Investor” as defined under securities law, you are investing an amount that does not exceed the greater of 10% of your annual income or 10% of your net worth (excluding your principal residence). The Subscription Agreement must be delivered to us, and you may transfer funds for the subscribed amount in accordance with the instructions stated in the Subscription Agreement. We may reject any investments in the Offering in our sole discretion. For any non-qualified investors, or those investments we reject, the investor’s funds will be returned within thirty (30) after we received the initial completed investment funds and documents.

Selling Security Holders

Our founder and CEO, Andrew Michael Arroyo, is a selling security holder. Regulation A+ provides companies with liquidity for their stockholders by allowing issuers to include shares held by “selling security holders” in the offering. This enables investors access to liquidity through secondary sales as a part of a qualified Regulation A+ offering. In an issuer’s first Regulation A+ offering and for the 12-month period after its first offering, sales by security holders are limited to no more than 30 percent (30%) of the aggregate offering price of the security. In this Offering, Mr. Arroyo is participating at the 30% level. As a result, 30% of the funds received in this Offering will be paid to Mr. Arroyo in exchange for the Securities he is selling to investors, which is 30% of the Shares sold in the Offering.

ITEM 6 USE OF PROCEEDS TO ISSUER

We intend to use the net proceeds from the sale of the Common Stock for achieving our mission as described in our Business Plan herein and as outlined in the following table. Our management shall have broad discretion to determine how such proceeds shall be used.

We may use a portion of the net proceeds to acquire complementary products, technologies, or businesses in the event such an opportunity arises; however, at present, we don’t have any commitments or agreements with respect to any acquisitions.

We will use a portion of the proceeds to pay certain creditors such as the loan we received during the COVID-19 crisis for $150,000 in the form of an SBA loan. The SBA loan is a 30-year loan at 3.75% interest. We may elect to pay this loan off in full or retain the loan. We also have fluctuating credit lines for cash flow purposes with Wells Fargo in the amount of approximately $75,000 and with American Express in the amount of approximately $150,000. Investors should be aware that funds utilized for debt retirement will not be available to support our growth.

Although we do not currently plan to change the allocation of the Use of Proceeds as described herein, we reserve the right to change the Use of Proceeds as our management and/or Board of Directors believes warranted.

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If we raise the Maximum Offering hereunder, our net proceeds (after our estimated offering expenses of $50,000) will be $4,950,000. We currently plan to the net proceeds from this Offering as follows:

Shares Offered (% Sold)	Shares Sold (100%)		Shares Sold (75%)		Shares Sold (50%)		Shares Sold (Minimum Offering)(2)
Gross Offering Proceeds(1)	$	5,000,000	$	3,750,000	$	2,500,000	$	1,000,000
Approximate Offering Expenses
Misc. Expenses	$	5,000	$	5,000	$	5,000	$	5,000
Legal and Accounting	$	45,000		45,000		45,000		45,000
Total Offering Expenses	$	50,000	$	50,000	$	50,000	$	50,000
Total Net Offering Proceeds	$	4,950,000	$	3,700,000	$	2,450,000	$	950,000
Principal Uses of Net Proceeds(1)
Retire SBA Debt & Credit Lines	$	0	$	0	$	250,000	$	100,000
Nationwide Growth (plan to hire managers in 24 States)	$	2,450,000	$	1,875,000	$	950,000	$	350,000
Marketing & Advertising	$	750,000	$	562,500	$	375,000	$	150,000
Selling Shareholder (30% of Proceeds)	$	1,500,000	$	1,125,000	$	750,000	$	300,000
Working Capital	$	250,000	$	187,500	$	125,000	$	50,000
Total Principal Uses of Net Proceeds	$	4,950,000	$	3,700,000	$	2,450,000	$	950,000
Amount Unallocated	$	0	$	0	$	0	$	0

__________________ 

(1)

These amounts are estimated. The expected use of net proceeds from this Offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve and change. The amounts and timing of our actual expenditures, specifically with respect to nationwide growth, may vary significantly depending on numerous factors. The precise amounts that we will devote to each of the foregoing items, and the timing of expenditures, will vary depending on numerous factors. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering.

(2)

As of the date of this Offering Circular we have met the Minimum Offering.

The amounts that we actually spend for any specific purpose may vary significantly and will depend on a number of factors including, but not limited to, the pace of progress of our development efforts; actual needs with respect to testing, research and development; market conditions; and changes in or revisions to our marketing strategies, as well as any legal or regulatory changes that may ensue. You will be relying on the judgment of our management regarding the application of the proceeds of any sale of our Common Stock.

The nationwide expansion is unpredictable. Although we will undertake completion of these milestones with commercially reasonable diligence and we believe we will be able to accomplish these milestones if this offering is fully subscribed, unforeseen circumstances could arise or circumstances may currently exist that we do not contemplate. Such circumstances may delay completion of one or more of the milestones described above, and/or require us to raise additional amounts to sustain us until we are able to achieve profitability. If we are unable to raise all of the funds we are seeking to raise in this offering or any additional funds we may require, we may be required to scale back our development plans by reducing expenditures for production, consultants, marketing efforts, and other envisioned expenditures. This could hinder our ability to expand nationwide.

If management is unable to implement our proposed business plan or employ alternative financing strategies, it does not presently have any alternative proposals. In that event, investors should anticipate that their investment may be lost and there may be no ability to profit from this investment.

We cannot assure you that our services will be accepted in every marketplace nationwide, that we will ever earn revenues sufficient to support our operations or that we will ever be profitable. Furthermore, since we have no committed source of financing, we cannot assure you that we will be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail or even to cease our operations.

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ITEM 7 DESCRIPTION OF BUSINESS

This discussion should be read in conjunction with the other sections of this Offering Circular, including “Risk Factors,” “Use of Proceeds” and the Financial Statements attached and the related exhibits. The various sections of this discussion contain a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this Offering Circular.

Company Summary

We provide a variety of real estate brokerage services including sales, leasing, financing and property management. Our services assist our clients to buy, sell, finance, manage, and invest in residential and commercial properties as well as business opportunities.

History

We were originally incorporated under the laws of the State of Delaware on June 18, 2020. On July 31, 2021, we completed a merger transaction with Andrew Arroyo Real Estate, Inc., a California corporation (“AARE-CA”), in a transaction in which we were the surviving entity and we assumed the assets, operations and liabilities of AARE-CA. AARE-DE had no operations prior to the close of the merger. As a result of the merger, we now have AARE-CA’s operations and the current and historical references to our business and operations herein relates to the business of AARE-CA. We have a trademark for, use a d/b/a, and are known as “AARE.” AARE-CA was in business for over 17 years and had grown to become a well-respected real estate agency. The primary purpose of the merger was to re-incorporate the company from California to Delaware as part of a plan to prepare for our nationwide expansion, capital fundraising and this offering. We (AARE-DE) are licensed and registered in 24 states to conduct real estate services. AARE-CA was merged out of existence as a result of the merger. Our principal executive office is located at 12636 High Bluff Drive Suite 400, San Diego, CA 92130; our telephone number is 888-322-4368, our fax number is 858-720-1166 and our website address is www.aare.org.

Business Overview

We were founded by Andrew Michael Arroyo. Mr. Arroyo started his career as a real estate appraiser’s assistant. By 1999, Mr. Arroyo held a California real estate sales license and a California real estate appraisal license and started making the transition from appraisals to sales. Mr. Arroyo upgraded his license to become a managing broker in 2001. Since AARE-CA opened its doors as a one-agent company back in 2004, we’ve been through the boom times and the “bust times,” and just kept right on growing. Currently, we provide real estate brokerage, lending and property management services, including assisting clients to buy, sell, finance, manage, and invest in residential and commercial properties as well as business opportunities.  We have approximately three hundred members (agents, brokers, loan officers, managers, and staff) to help us keep everything running smoothly. We are a mission driven organization with clear values. With a successful track record of thousands of real estate sales (totaling more than $1 billion in the last four years alone), we are passionate about our mission of demonstrating Generous Capitalism^® in the public markets by growing profits and increasing value for our shareholders while giving back to others in need and fulfilling God’s will through the business of real estate. Our vision is to bear fruit which is an investment principle that means to yield positive results. Our objective is to establish a global real estate corporation based on our Generous Capitalism^® business model.

We believe the seven (7) competitive advantages that separate our company from competitors include:

· Culture: Our culture is a reflection of a healthy organization with clear values that include faith, relationships, accountability, integrity, truth, honesty, trust, standards of excellence, clear communication, work-life balance, morals, ethics, loyalty, gratefulness, success and rewards. We are considered a safe harbor by our members for individuals of all walks of life during a period of history that is polarizing on the social, economic and political spectrum.

· Equity Compensation: Our unique equity compensation plan gives us the ability to recruit, retain, motivate and inspire our members. We are able to grow revenue with less capital investment required by using our stock as a currency. Providing our members with equity compensation is a unique differentiator from our peers. For real estate and loan brokerages firms, equity compensation is extremely rare; nearly non-existent in the real estate and loan origination industry. This gives our members ownership in the company and as stakeholders they have more incentive and motivation to grow the revenue and profits. This also reinforces our internal generosity practices within our Generous Capitalism^® business model.

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· Multiple Revenue Streams: Residential, commercial, lending, business opportunities, syndication and property management services all under one umbrella. This provides multiple streams of income for our agents and loan officers as well as a complete “one-stop” real estate shop for our clients.

· Generosity Based Business Model: Our culture is based on generosity and social responsibility during a generational change in workforce. We believe the next generation is demanding a new form of capitalism that illustrates healthy and sustainable business practices externally to the communities it serves in addition to creating jobs, profits and opportunities to its internal stakeholders. We have developed that exact business model and we call it “Generous Capitalism^®”.

· High Growth Potential: We participate in a market that we expect to experience significant growth throughout North America facilitated by a steady increase in new U.S. demand for housing/investments, and the fact we are able to provide real estate and lending services in multiple segments of our market including residential, commercial, property management, business opportunities, and syndication. We have a growing sales network. In the last three years, we have been licensed and expanded into 23 additional states and the District of Columbia in the U.S. and established our sales network throughout North America that is overseen by our team of managers and directors. 

· Experienced Executive Team: Our focused and experienced management team is dedicated solely to our operation and to implementing our business strategies. Each member of the executive team has been involved with the Company for several years and has been instrumental in developing our strategy. Our success strategy and execution that was implemented in California over the last 15 years in now being replicated in all major markets throughout the U.S.

· Intellectual Property: Our media properties coupled with use of advanced technology leads to more market penetration and smoother operations as a company while the real estate industry as a whole transitions to the digital age. Our up-to-date media assets designed specifically for the real estate and lending market give us an edge over our competition. We believe the AARE media properties and brand name has a strong legacy dating from the launch of the California corporation in 2004, and we believe it has to this day retained a strong brand loyalty amongst clients, agents and loan officers. We are now operational in 24 states in the U.S. and our media assets have been hand tailored to address our new digital age marketplace. Through our media properties, we have the ability to scale our communication and service offerings across the globe. We hold copyrights and trademarks that protect our intellectual property.

Management

Derek Barksdale leads the lending department at AARE d/b/a Ensure Lending. Before joining AARE and Ensure, Mr. Barksdale most recently served as Manager Partner for Aligned Mortgage of San Diego, which was a subsidiary branch for the retail lending institution, American Pacific Mortgage. During his three-year tenure with Aligned/American Pacific Mortgage, Mr. Barksdale commissioned and managed the production, operations and support services to fund of over 1,800 loans with a total volume of $917 million. Mr. Barksdale also has an extensive military background in operations as a 21-year retired naval officer, with an additional four years as a senior government executive, distinguished as a federal Chief of Police. Mr. Barksdale’s private-sector experience began in 2011, as the Founder of Military Mutual Inc., a real estate brokerage focused on providing real estate services to veterans and their families. Military Mutual is now affiliated with AARE and doing its real estate business through our company.

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Finance & Operations Department

Clark Anctil is a seasoned executive with a broad range of experience with positions in general management, operations and supply chain management, covering responsibilities of finance, product costing, material and resource planning, procurement and sourcing, HR training and development, information systems, twin plant operations, “Just in Time” manufacturing, “lean systems”, and facility design and engineering. During his career, he has mentored staff and trained teams in achieving results and effective management with a focus on knowledge acquisition, understanding and proactive execution in a lean environment. This approach led him to develop and deploy software to support business growth covering material, labor and resource planning, operational cost tracking, throughput management and production control. In addition to his corporate career, he has been a top producing Realtor since 2010 and licensed loan originator since 2020, and currently holds a Broker’s license. He joined AARE as an agent in 2016 and has worked closely with the founder throughout the years. Clark has a heart to mentor and train other employees how to grow a business with the stakeholder’s interest in mind. His depth of experience and hands-on approach provide a unique skill set and make him a valuable member of the AARE Finance and Operations team.

Michael Luckey is a operations and strategy professional with over 14 years of experience in multiple industries, including CPG, SaaS, and Real Estate. He started his career in operations and distribution for a Top 5 Global CPG company. From there, he moved into the SaaS industry, where he held various management positions in Operations, Product Management, Project Management, and Systems Administration. His experience in the SaaS industry is what led him to AARE, where he got his start designing and implementing our current operational process and systems. His passion for real estate is inspired by his father, who spent his career in multiple aspects of the real estate industry, including residential, commercial, and land development. Michael holds a BS in Political Science from the California State University, Fresno, and an MBA from Saint Mary’s College of California.

Commercial Department

Michael Corbosiero has an impressive history of surpassing ambitious business goals and unveiling high-impact growth strategies and system change initiatives. He has a consistent record of success positioning organizations for growth, kickstarting stagnant projects, and building robust teams that deliver impressive results across multiple industries. Michael brings over 16 years of experience marrying real estate strategy and innovation to create scalable solutions that provide invaluable insight to leadership teams and help steer real estate investment decisions. Michael has worked with Fortune-ranked leaders in the legal, defense, academic, non-profit, and healthcare industries. Prior to this role, Michael served as Executive Vice President of Strategic Initiatives at Hi-Tech Honeycomb, where he was invited to serve on the Board of Directors and serves as a valued member to this day.  During his tenure with Hi-Tech Honeycomb, Michael kickstarted operations and grew revenue from $18 million to an all-time high of $28 million after introducing lean manufacturing principles and spearheading a SWOT analysis for every department. Michael earned his Bachelor of Arts in Business Management and International Finance from Eckerd College. He went on to obtain his real estate license through the California Department of Real Estate. 

Training & Support Department

Andy Parker is a retired NFL football player, entrepreneur, and real estate broker on a mission to help AARE and its agents to move forward in business best practices and build a thriving real estate business. He has been actively involved in real estate for 35 years. Andy completed a B.A. from the University of Utah while on a full football scholarship. After that, he was drafted by the LA Raiders and played for seven years in the NFL. While playing for the Raiders, he was voted team captain by his peers and eventually became a starter at the tight end (TE) position. He has owned and operated many businesses, such as a health club and a real estate tech company. He also works with an affordable housing non-profit charitable 501(c)(3) that manages many larger affordable multi-family housing projects across the state of California.

Branding Department

Craig J. Yuill is a Corporate Brand Specialist, and UX/UI Designer For over two decades Yuill has led the teams that have designed and managed high-quality print and web-based advertising and marketing communication projects for mid-sized and Fortune 500 companies, foundations, and non-profits. He has consulted start-ups, small businesses, and established companies, designed dozens of brand strategies, and planned, designed, and managed web-based projects to help businesses succeed in today’s fast-moving environment.

Information about our key executives can be found in “Directors, Executive Officers and Significant Employees.”

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Employees

We currently have twelve (12) full time employees and approximately three hundred (300) real estate agents and loan officers we contract with as independent contractors and who, under the direction of our CEO and Department Directors, are assisting clients with buying, selling, financing and managing real estate properties throughout 24 states and the District of Columbia in the U.S. We also currently have a team of approximately eighteen (18) independent contractors who are performing admin, support, marketing, public relations and advertising services.

As we expand our operations, we anticipate our needs will change, at which time we intend to add additional full-time employees, contractors and agencies in the areas of marketing, sales, technology, media and design.

Government & State Regulation

We are required to comply with state licensing laws and rules. The majority of these laws and rules relate to how we may broker real estate, market and/or sell properties. Real estate is regulated by each state’s Real Estate Commission, which is usually appointed by the governor. The regulator’s disciplinary authority is based upon violations of the state Real Estate Law and the Department or Commissioner’s Regulations. Violations of real estate law can result in a suspension or revocation of the license necessary to conduct business in that state. These violations statutorily have their basis in each State’s licensing and administrative laws, business and professions code, statute or chapters. There are laws in other jurisdictions worldwide in which we may broker real estate, market and/or sell properties and with which we will need to comply.

Competition

Competition in the real estate and lending industry is significant. Nationwide, there are more than 1 million real estate agents, more than 300,000 loan officers, and more than 100,000 real estate and lending brokerage firms. While significant competition does exist, our management believes that our products and services are demographically well positioned, top quality and unique in nature, while offering greater value. The expertise of our management combined with training, culture and the innovative nature of our marketing approach set us apart from competitors. However, there is the possibility that new competitors could seize upon our business model and produce competing products or services with similar focus. Likewise, these new competitors could be better capitalized than we are, which could give them a significant advantage over us. There is the possibility that the competitors could capture significant market share of our intended market.

Intellectual Property

We rely on a combination of trademarks and trade secrets to establish and protect our intellectual proprietary rights and may, in the future, file patents. Our intellectual property currently includes various U.S. trademarks and copyrights in the name of “Andrew Arroyo Real Estate Inc.” Our trademarks relate to our company logo, as well as the following names we use in broadcasting: “Top Dollar TV^®”, “Real Cash Flow^®”, “Real Estate Insight^® and “Generous Capitalism^®”.

Litigation

The real estate business is known as a litigious industry, especially in certain states like California, which is one of the primary states where we conduct business. Buyers and sellers often bring claims against one another and usually attempt to name the real estate agents and brokers as parties in the claim or the suit seeking financial damages. As a result, we are regularly named in claims and litigation between buyers and sellers. We do not believe most of these claims will amount to any material damages being paid by us. In determining whether liabilities should be recorded for pending litigation claims, we must assess the allegations and the likelihood that we will successfully defend the claim. When we believe it is probable that we will not prevail in a particular matter, we will then record an estimate of the amount of liability based, in part, on advice of outside legal counsel.

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We maintain a $1 million Errors and Omission policy (“E&O Insurance”) that covers us all the way back to June 9th, 2009. In the event, we incur any financial liability from these types of claim, it will likely be covered under our E&O Insurance up to $1 million, per occurrence.

Currently, we have the following three (3) outstanding claims covered by our E&O insurance: (i) a claim where a buyer desires compensation from the seller for alleged foundation issues, (b) a claim where a buyer purchased a property under the impression the property was on public sewer when it was on a septic tank, and (c) a claim where a tenant moved in and did not pay rent and the seller is pursuing collection from the tenant.

We are not involved in any other arbitration or litigation outside our ordinary course of business, and our management is not aware of any material pending or threatened legal actions relating to our intellectual property, conduct of our business activities, or otherwise.

ITEM 8 DESCRIPTION OF PROPERTY

We do not own any real property. We lease all current office spaces. Under our three (3) current leases, we lease two (2) office spaces that are approximately 2,100 total square feet in Escondido, California, and one (1) office space that is 1,800 square feet in Temecula, California and pay $9,400 per month, collectively, in rent. Our current leases expire February 2023, April 2024, and March 2023, respectively. We own a significant amount of broadcast-quality communication video equipment. We own one corporate vehicle, which is a standard utility vehicle.

ITEM 9 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Offering Circular. Some of the information contained in this discussion and analysis or set forth elsewhere in this Offering Circular, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that reflect our current views with respect to future events and financial performance, which involve risks and uncertainties. Forward-looking statements are often identified by words like: “believe”, “expect”, “estimate”, “anticipate”, “intend”, “project” and similar expressions or words that, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this Offering Circular. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. You should review the “Risk Factors” section of this Offering Circular for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Our financial statements are stated in United States Dollars (USD or US$) and are prepared in accordance with United States Generally Accepted Accounting Principles (GAAP). All references to “Common Shares” refer to the Common Shares of our authorized capital stock.

There is limited historical financial information about us upon which to base an evaluation of our performance. We have only generated revenues from our operations in California. We cannot guarantee we will be successful in our business operations nationwide or our expansion through California. Our business is subject to risks inherent in the establishment of a new business enterprise including the financial risks associated with the limited capital resources currently available to us for the implementation of our business strategies. To become profitable and competitive, we must develop the business plan and execute the plan. Our management will attempt to secure financing through the issuance of our Common Stock, as described in our Regulation A Offering Circular filed with the Securities and Exchange Commission and qualified on October 12, 2021.  Our management reserves the right to consider various other means of financing including convertible debt and debt financing and investment from institutions and private individuals.

Since inception, the majority of our time has been spent refining our business plan and preparing for a primary financial offering.

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Company Overview & Background

Andrew Arroyo Real Estate Inc. d/b/a AARE is an American real estate company committed to servicing clients with residential, commercial and property management services. AARE is an early growth stage company incorporated in the State of Delaware on June 18, 2020, as a for-profit corporation with a fiscal year end of December 31^st. On July 31, 2021, we completed a merger transaction with Andrew Arroyo Real Estate, Inc., a California corporation (“AARE-CA”), in a transaction in which we were the surviving entity and we assumed the assets, operations and liabilities of AARE-CA. We have a trademark for, use a d/b/a, and are known as “AARE.” AARE-CA was in business for over 17 years and had grown to become a well-respected real estate agency. As a result of the merger, we now have AARE-CA’s operations. As a result, the current and historical references to our business and operations herein relates to the combined business of AARE-CA and AARE-DE. The primary purpose of the merger was to re-incorporate the company from California to Delaware as part of a plan to prepare for our nationwide expansion, capital fundraising and a public offering. We (AARE-DE) are licensed and registered in 24 states to conduct real estate services. AARE-CA was merged out of existence as a result of the merger. Our principal executive office is located at 12636 High Bluff Drive Suite 400, San Diego, CA 92130; our telephone number is 888-322-4368, our fax number is 858-720-1166 and our website address is www.aare.com.

Since AARE-DE was non-operational prior to closing the merger, except for some set-up expenses, the below disclosure is from AARE-CA’s historical operations since we assumed those operations at the close of the merger transaction.

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date of this filing. Management is actively monitoring the global situation on our financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the effects of the COVID-19 outbreak on our results of operations, financial condition, or liquidity for fiscal year 2021. However, if the pandemic continues, it could have an adverse effect on our results of future operations, financial position, and liquidity in year 2022.

Results of Operations for the Period Ended June 30, 2022 Compared to the Period Ended June 30, 2021

Summary of Results of Operations

	Period Ended June 30,
	2022			2021
Revenue	$	4,830,523		$	4,194,549
Cost of Sales		4,109,949			3,499,273
Gross Profit	$	720,574		$	695,275
Operating expenses:
General and administrative		848,790			601,131
Total operating expenses		848,790			601,131
Operating profit (loss)		(128,217	)		94,145
Other income (expense)
Total other expense, net		29,390			(11,320	)
Net profit (loss)	$	(98,827	)	$	82,825

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Gross Profit

Our gross profit increased by $25,299 from $695,275 to $720,574, from the period ended June 30, 2021 compared to the period ended June 30, 2021. Our increase in gross profit was largely due to contracting with additional real estate agents and loan officers in our expansion efforts and a general increase in the property market as a result of limited inventory and rising prices. We expect our gross profit will grow in periods when there is property price expansion and decrease in periods of recession.

Operating Profit; Net Profit

Our net profit decreased by $181,652 from $82,825 to ($98,827), from the period ended June 30, 2021 compared to the period ended June 30, 2022. Our operating profit decreased by ($222,362) from $94,145 to ($128,217) for the same periods. Our decrease in net profit was largely due the one-time initial public offering expenses and ongoing costs to be a public reporting company. Although we had an increase in revenue of approximately $636,000 in the six months ending June 30, 2022 compared to the six months ending June 30, 2021, such increase was offset by an almost equal increase in our total cost of sales, as well as higher general and administrative expenses. The changes are detailed below.

Revenue

Our revenue increased by $635,974 from $4,194,549 to $4,830,523, from the year period ended June 30, 2021 compared to the period ended June 30, 2022. Our increase in revenue was largely due to contracting with additional real estate agents and a general increase in the housing market as a result of limited inventory and rising prices. We expect our revenues will grow in periods when there is property price expansion and decrease in periods of recession.

Cost of Sales

Our cost of sales increased by $610,676 from $3,499,273 to $4,109,949, from the period ended June 30, 2021 compared to the period ended June 30, 2022. The increase in cost of sales was largely due to increases in payments to real estate agents, transaction coordinators, referral fees, property management fees paid, and charitable contributions. We expect our cost of sales will grow in periods when there is property price expansion and decrease in periods of recession.

General and Administrative Expenses

General and administrative expenses increased by $247,659, from $601,131 for the period ended June 30, 2021 to $848,790 for the period ended June 30, 2022, primarily due to costs and fees associated with our nationwide expansion, the hiring of additional staff, managers and directors to operate nationwide,  and support for the additional real estate agents and loan officers. We expect to have costs related to expansion and additional real estate agents at times of expansion. We do not expect to have costs related to securities offerings except in periods we conduct an offering of our securities.

Net Other Income (Expense)

We had net other income of $29,390 for the six-month period ended June 30, 2022 and net other expense of ($11,320) for the six-month period ended June 30, 2021. For the period in 2022 our net other income primarily related to the gain on sale of our moving truck. For the period in 2021, our net other expense related to depreciation and State of California taxes.

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During the period ended June 30, 2022 and 2021, we generated positive cash flows. Our cash on hand as of June 30, 2022 was $624,948 and our cash flow used in operations was ($109,042). As a result, we do not have short term cash needs, but need to raise additional funds to finance our long term business plans. Our cash needs are being satisfied through our operations, but we will need additional money to fund our planned nationwide expansion. Although we are licensed 24 states, the majority of our current operations are in California.

Our cash, current assets, total assets, current liabilities, and total liabilities as of June 30, 2022 and as of December 31, 2021, respectively, are as follows:

	June 30, 2022		December 31, 2021		Change
Cash	$	624,948	$	3,655	$	621,293
Total Current Assets	$	916,826	$	317,833	$	598.993
Total Assets	$	1,277,936	$	676,784	$	601,152
Total Current Liabilities	$	449,600	$	572,211	$	(122,611	)
Total Liabilities	$	700,122	$	810,198	$	(110,076	)

Our current assets increased as of June 30, 2022, as compared to December 31, 2021, primarily due to our capital raise through our Regulation A offering which resulted in substantial more cash and cash equivalents, as well as more other assets, consisting primarily of property management deposits. The increase in our total assets between the two periods is primarily related to an increase in cash and cash equivalents from our capital raise through our Regulation A offering, us acquiring goodwill and increases in property management deposits, as well as slightly less property and equipment, net at June 30, 2022 compared to December 31, 2021.

 Our current liabilities decreased as of June 30, 2022, as compared to December 31, 2021. This decrease was primarily due to us retiring credit card debt and retiring outstanding lines of credit. 

Sources and Uses of Cash

Operations

We had net cash used in operating activities of ($109,042) for the period ended June 30, 2022, as compared to net cash provided by operating activities of $96,188 for the period ended June 30, 2021. For the period in 2022, the net cash used in operating activities consisted primarily of our net income of ($98,827), adjusted by depreciation and amortization of $16,037, and changes in our assets and liabilities of prepaid expenses and other of 73,141, other payables of ($109,535), and accrued expenses of 684. For the period in 2021, the net cash provided by operating activities consisted primarily of our net income of $82,825, adjusted by depreciation and amortization of $9,472, and changes in our assets and liabilities of prepaid expenses and other of $24,095, other payables of ($30,805), and accrued expenses of $2,773.

Investments

Our cash used for investing activities during the period ended June 30, 2021 was ($18,196), compared to ($6,746) during the period ended June 30, 2021. For the period in 2022, the cash used for investment activities related to acquisition of intangible assets was ($18,196) and the cash used for purchases of property and equipment was ($0). For the period in 2021, the cash used for acquisition of instable assets was $0 and the cash used for purchases of property and equipment was ($6,746). 

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Financing

Our net cash provided by (used in) financing activities for the period ended June 30, 2022 was $748,531, compared to ($11,266) for the period ended June 30, 2021. For the period ended June 30, 2022, our net cash provided by financing activities consisted of net proceeds (repayments) on borrowings of $12,535, partially offset by dividend distribution of $999 and changes in line of credit of ($74,058). For the period ended June 30, 2021, our net cash used in financing activities consisted of dividend distribution of ($10,827) and changes in line of credit of ($7,020), partially offset by net proceeds (repayments) on borrowings of $6,581.

Results of Operations for Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Summary of Results of Operations

	Year Ended December 31,
	2021 (restated)			2020
Revenue	$	9,119,970		$	7,354,474
Cost of Sales		7,740,814			6,404,027
Gross Profit	$	1,379,155		$	950,447
Operating expenses:
General and administrative		1,394,193			904,133
Total operating expenses		1,394,193			975,603
Operating profit (loss)		(15,038	)		46,314
Other income (expense)
Total other expense, net		(50,310	)		(24,515	)
Net profit (loss)	$	(67,195	)	$	20,999

Gross Profit

Our gross profit increased by $428,708 from $950,447 to $1,379,155, from the year ended December 31, 2020 compared to the year ended December 31, 2021. Our increase in gross profit was largely due to contracting with additional real estate agents and a general increase in the housing market as a result of limited inventory and rising prices. We expect our gross profit will grow in periods when there is property price expansion and decrease in periods of recession.

Operating Profit; Net Profit

Our net profit decreased by $88,194 (restated) from $20,999 to ($67,195) (restated), from the year ended December 31, 2020 compared to the year ended December 31, 2021. Our operating profit decreased by $61,352 from $46,314 to ($15,038) for the same periods. Although we had an increase in revenue of approximately $1,800,000 in 2021 compared to 2020, such increase was offset by an almost equal increase in our total cost of sales, as well as higher general and administrative expenses. The changes are detailed below.

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Revenue

Our revenue increased by $1,765,496 from $7,354,474 to $9,119,970, from the year period ended December 31, 2020 compared to the year ended December 31, 2021. Our increase in revenue was largely due to contracting with additional real estate agents and a general increase in the housing market as a result of limited inventory and rising prices. We expect our revenues will grow in periods when there is property price expansion and decrease in periods of recession.

Cost of Sales

Our cost of sales increased by $1,336,787 from $6,404,027 to $7,740,814, from the year ended December 31, 2020 compared to the year ended December 31, 2021. The increase in cost of sales was largely due to increases in payments to real estate agents, transaction coordinators, referral fees, property management fees paid, and charitable contributions. We expect our cost of sales will grow in periods when there is property price expansion and decrease in periods of recession.

General and Administrative Expenses

General and administrative expenses increased by $490,060, from $904,133 for the year ended December 31, 2020 to $1,394,193for the year ended December 31, 2021, primarily due to costs and fees associated with our nationwide expansion, the one-time costs related to our Regulation A offering of approximately $200,000, and support for the additional real estate agents contracts.  We expect to have costs related to expansion and additional real estate agents at times of expansion. We do not expect to have costs related to securities offerings except in periods we conduct an offering of our securities.

Net Other Income (Expense)

We had a net other expense of ($50,310) (restated) for the year ended December 31, 2021, and net other expense of ($24,515) for the year ended December 31, 2020. For the period in 2021 our net other expense related to amortization and depreciation of $42,719 (restated), interest expense of $6,732 (restated), and non-deductible expenses of $859. For the period in 2020 our net other expense related to amortization and depreciation of $3,539 (restated), interest expense of $27,670, and non-deductible expenses of $4,112, partially offset by a gain of sale of $806 and non-taxable income of $10,000.

Liquidity and Capital Resources for Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Introduction

We have limited liquidity. The capital resources required by us to manage our operations nationwide are significant. Therefore, we are offering, through our ongoing Regulation A offering, a limited number of shares of Common Stock to investors in order to raise capital and increase our liquidity and capital resources. We currently have $349,725 in long term debt as outlined in the financial audit section. We have no current commitments for capital expenditures and has no commitments for capital expenditures as of the end of the latest fiscal year and any subsequent interim period. As of the date of this Annual Report on Form 1-K, while we have generated revenues from our business operations, those revenues alone are not sufficient to fund our operations.

We use our capital resources to:

· Fund operating costs;

· Fund capital requirements, including capital expenditures;

· Make debt and interest payments;

· Invest in new technologies, products, services and ventures; and.

· Making charitable contributions to support charities worldwide.  

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We need cash to meet our working capital needs as the business grows, to hire managing brokers, and to fund acquisitions and debt repayment. We intend to use cash flows from operations and existing availability under the current revolving credit facilities to fund anticipated levels of operations for the next twelve months. As our availability under our credit lines is limited, it is important that we manage our working capital. We may need to raise additional capital through debt or equity financings to support our growth strategy, which may include additional acquisitions. There is no assurance that such financing will be available or, if available, on acceptable terms. Our current cash on hand is limited. Our CEO, Andrew Michael Arroyo, is currently paying all costs associated with our ongoing Regulation A offering and shall pay any additional funds that may be required. Accordingly, we anticipate that our current cash on hand is not sufficient to meet the new obligations associated with being a company that is fully reporting with the SEC. However, to the extent that we do not expend the entire cash on hand on our ongoing Regulation A offering, the remaining cash will be allocated to cover these new reporting company obligations. Through 12/31/21, we spent approximately $200,000 on the costs related to our ongoing Regulation A offering, which was loaned to the Company by our CEO, and any additional funds that we are required to spend shall also be paid by our CEO and reimbursed from the proceeds of our ongoing Regulation A offering. To date, we have managed to keep our monthly cash flow requirement low for two reasons: first, our CEO draws a minimal salary at this time and, second, we have been able to keep our operating expenses to a minimum by operating with the minimum services necessary to sustain. We currently has no external sources of liquidity such as arrangements with credit institutions or off-balance sheet arrangements that will have or are reasonably likely to have a current or future effect on our financial condition or immediate access to capital. Our CEO has made no commitments, written or oral, with respect to providing a source of liquidity in the form of cash advances, loans and/or financial guarantees.

If we are unable to raise the funds partially through our ongoing Regulation A offering, we will seek alternative financing through means such as borrowings from institutions or private individuals. There can be no assurance that we will be able to keep costs from being more than these estimated amounts or that we will be able to raise such funds. Even if we sell all shares offered through our ongoing Regulation A offering, we expect that we will seek additional financing in the future. However, we may not be able to obtain additional capital or generate sufficient revenues to fund our operations. If we are unsuccessful at raising sufficient funds, for whatever reason, to fund our operations, we may be forced to seek a buyer for our business or another entity with which we could create a joint venture. If all of these alternatives fail, we could be required to seek protection from creditors under applicable bankruptcy laws.

Recent Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address Board of Directors’ independence, Audit Committee oversight and the adoption of a code of ethics. Our Board of Directors is comprised of one individual. Our CEO makes decisions on all significant corporate matters such as the approval of terms of the compensation of our CEO and the oversight of the accounting functions.

We have not yet adopted any corporate governance policies and, since our securities are not yet listed on a national securities exchange, we are not required to do so. We have not adopted corporate governance measures such as an Audit Committee or other independent committees outside of our Board of Directors as we presently do not have any independent directors. If we expand our Board membership in future periods to include additional independent Directors, we may seek to establish an Audit Committee and other committees of our Board of Directors. It is possible that if our Board of Directors included independent Directors and if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested Directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent Directors, decisions concerning matters such as compensation packages to our senior officer and recommendations for Director nominees may be made by a majority of Directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.  

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During the year ended December 31, 2021 and 2020, we generated positive cash flows. Our cash on hand as of December 31, 2021 was $3,655 and our cash flow provided by operations is approximately $116,319. As a result, we do not have short term cash needs, but need to raise additional funds to finance our long term business plans. Our cash needs are being satisfied through our operations, but we will need additional money to fund our planned nationwide expansion. Although we are licensed 24 states, almost all of our current operations are in California.

Our cash, current assets, total assets, current liabilities, and total liabilities as of December 31, 2021 and as of December 31, 2020, respectively, are as follows:

	December 31, 2021		December 31, 2020		Change
Cash	$	3,655	$	38,701	$	(35,055	)
Total Current Assets	$	317,833	$	323,852	$	(6,019	)
Total Assets	$	676,784	$	393,274	$	283,510
Total Current Liabilities	$	572,211	$	401,164	$	171,047
Total Liabilities	$	810,198	$	645,454	$	164,744

Our current assets decreased as of December 31, 2021, as compared to December 31, 2020, primarily due to us having slightly less cash and cash equivalents, as well as more other assets, consisting primarily of property management deposits. The increase in our total assets between the two periods is primarily related to us acquiring goodwill and increases in property management deposits, partially offset by slightly less cash and cash equivalents, as well as slightly less property and equipment, net at December 31, 2021 compared to December 31, 2020.

Our current liabilities increased as of December 31, 2021, as compared to December 31, 2020. This increase was primarily due to increases in other current liabilities, which was property management deposits, partially offset by us having slightly more credit card debt and slightly more outstanding on our lines of credit.

Sources and Uses of Cash

Operations

We had net cash provided by operating activities of $116,319 (restated) for the year ended December 31, 2021, as compared to net cash used in operating activities of ($49,634) for the year ended December 31, 2020. For the period in 2021, the net cash used in operating activities consisted primarily of our net income of ($67,195) (restated), adjusted by depreciation and amortization of $42,719 (restated), and changes in our assets and liabilities of prepaid expenses and other of ($29,028), other payables of $21,733 (restated), and accrued expenses of $1,848 (restated). For the period in 2020, the net cash used in operating activities consisted primarily of our net income of $20,999, adjusted by depreciation and amortization of $3,539, and changes in our assets and liabilities of prepaid expenses and other of ($175,893), other payables of $98,904, and accrued expenses of $2,817.

Investments

Our cash used for investing activities during the year ended December 31, 2020 was $332,248 (restated), compared to $47,014 during the year ended December 31, 2020. For the period in 2021, the cash used for investment activities related to acquisition of goodwill was $310,808 (restated) and the cash used for purchases of property and equipment was $25,022.  For the period in 2020, the cash used for acquisition of goodwill was $0 and the cash used for purchases of property and equipment was $47,014. 

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Financing

Our net cash provided by financing activities for the year ended December 31, 2021 was $180,883 (restated) , compared to $113,937 for the year ended December 31, 2020. For the year ended December 31, 2021, our net cash provided by financing activities consisted of net proceeds (repayments) on borrowings of $95,428 (restated), partially offset by dividend distribution of $66,597 (restated) and changes in line of credit of $18,858 (restated). For the year ended December 31, 2020, our net cash provided by financing activities consisted of net proceeds (repayments) on borrowings of $238,641, partially offset by dividend distribution of ($119,364) and changes in line of credit of ($5,340).

Off Balance Sheet Arrangements

We have no off balance sheet arrangements as of December 31, 2021 and December 31, 2020.

Seasonal Cash Flow

The real estate brokerage business is seasonal. Our property management and membership cash flow stays fixed year-round as long as we maintain our current management contracts. The majority of property sales occur between March and September each year. Cash flow is normally strong during these months and typically offers a surplus. During the season between October and December, sales traditionally slow down but the cash flow is adequate to cover fixed expenses and overhead. The low season is January to February and usually runs a deficit, which requires the use of credit lines or capital reserves to sustain payroll and fixed overhead costs during these months before the spring selling season begins. In 2020, because of the Covid-19 crisis, the cash flow figures were abnormal and we witnessed a late spring that did not start until June and carried well through the end of the year.

Capital Expenditures

We have not made any major capital expenditures in 2021 and do not anticipate any near-term capital expenditures in 2022. In 2017-2019, we purchased more than $1 million (original retail value) of broadcast-quality video/audio communication equipment for an average of 28 cents on the dollar to prepare for our nationwide communications in the digital age.

Contractual Obligations

We have very few contractual obligations. We have two long-term leases (2 year terms) and one joint venture agreement with Smart Real Estate Tools, LLC that we are a 50% shareholder in. The majority of our vendors, utilities and service providers are on month-to-month agreements; however, there are a few utilities and service providers that are on an annual contract that renews each year.

Debt

We received $121,102 of Payment Protection Plan (PPP) funds during the Covid-19 crisis and $150,000 in the form of an SBA loan. The PPP funds are 100% forgivable if certain conditions are met. The Company applied for forgiveness in 2020-2021. All $121,102 has been forgiven. The SBA loan is a 30-year loan at 3.75% interest. We may elect to pay this loan off in full or retain the loan. We also have fluctuating lines of credit for cash flow purposes with Wells Fargo Bank in the amount of approximately $75,000 and with American Express in the amount of approximately $100,000. Investors should be aware that funds utilized from our current ongoing Regulation A offering for debt retirement will not be available to support our growth.

Inflation

Although inflation has been rising, the effect of inflation on our revenues and operating results has not been significant. If there was a significant rise in inflation, this could affect long term interest rates, which directly affect borrowing costs for mortgages, and in turn may affect property sales and our ability to earn commission. The current interest rate environment is historically low.

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Plan of Operations

We anticipate that the funds we intend to raise in our ongoing Regulation A offering will be sufficient to enable us to grow our company nationwide and execute our business plan, including, but not limited to, securing our base of operations and any updates and/or modifications; acquiring equipment and infrastructure; hiring a strong management team and key personnel; and achieving growth by way of licensing and strategic partnerships. It is the opinion of our management that the proceeds from our ongoing Regulation A offering will satisfy our need for liquidity and cash requirements for the foreseeable future and put us in a position to grow our business in accordance with our business plan, outlined below:

1.	Milestone 1: Hiring Management and Key Personnel Nationwide
	Our plan of operation in this stage is to hire managing brokers nationwide to supervise and oversee the real estate agents we recruit, as required by law.
2.	Milestone 2: Growth of Acquisitions & Training Agents
	Implement our “7 Steps to Powerful Paychecks” training nationwide in all markets, which led to our success in California, and acquire smaller brokerages and/or large teams to join our Company.
3.	Milestone 3: Ongoing Growth through Recruit, Retain, Nurture, Production of Content
	Continue to grow our agency. Recruit, retain, supervise and nurture the relationships with our agents, loan officers and staff while producing quality content to keep them engaged, trained, inspired and focused on top performance.

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ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

The following table lists the current Directors and Executive Officers of the Company. Our plan is to add a full time Chief Financial Officer and other top-level positions that will help the company grow.

Directors, Executive Officers and Significant Employees

Name1	Position	Age		Term of Office2	Approximate Hours Per Week
Andrew Arroyo	Chairman of the Board, CEO, Director		44	1/1/2004		40
Tiffany Mohler	Treasurer, V.P. Administration		39	6/1/2017		30
John Windscheffel	Secretary, V.P. Communications		53	8/1/2017		40
David Malme	V.P.Humanitarian Growth		72	1/1/2017		40

__________ 

¹ All addresses shall be considered 12636 High Bluff Dr. Suite 400, San Diego, CA 92130.

² Includes time worked with AARE-CA prior to the merger with AARE-DE.

Directors

Our Board of Directors is currently composed of one director, Andrew Michael Arroyo. Upon completion of our ongoing Regulation A offering, our plan is that we will expand our Board of Directors to three to seven members.

Executive Officers

Chairman of the Board, Director and Chief Executive Officer

Andrew Michael Arroyo is our Chairman of the Board of Directors and Chief Executive Officer. He is personally licensed as a managing broker in 24 states and the District of Columbia and has been a part of more than a billion dollars in real estate transactions in his 23-year career in the real estate industry. As CEO, Mr. Arroyo is responsible for representing the best interests of the Company and its shareholders. He is responsible for creating and implementing strategies to grow the business and brand by developing business relationships and alliances, pursuing corporate opportunities, as well as assisting with oversight and management of the day-to-day operations.

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Treasurer, V.P. Administration

Tiffany Mohler is AARE’s designated broker in California and V.P. of Administration. Her duties include the direct oversight of the company compliance and risk management development.  She is also responsible for the management and training of all brokers and agents nationwide. Tiffany holds a degree in Business Administration from San Diego State University and is a third generation Realtor. She began her real estate career in 2002 as part of a top producing real estate team, learning all aspects of the business. Her well-rounded education serves her well as she juggles a myriad of job responsibilities. Tiffany's leadership, experience and calm demeanor are a tremendous asset to the AARE team.  Her “peacemaking” nature makes her a natural for dealing with diverse personalities and situations. Her strengths include teaching, training, and strengthening others.

Secretary, V.P. Communications

John Windscheffel brings a wealth of experience and expertise to this position, having been the top salesperson at three different corporations since beginning his sales career in 1992. Over this time, he has created award-winning sales teams, done corporate sales training and recruiting, and been charged with overseeing multiple sales offices. He and two brothers-in-law founded Real Estate Village in late 1997. Theirs was one of the first online companies to develop websites for real estate professionals. Because of their success, Homes.com purchased the company in the spring of 2000. He stayed with Homes.com until 2003, when he moved on to another corporation. There he become an International Corporate Sales trainer and built the largest sales team in the company’s history. When AARE agents want guidance from an experienced trainer and communicator, they turn to John. John’s relationship with AARE founder Andrew Arroyo dates back to 1999 when Andrew sold him and his wife, Nancy, their first home in San Diego.

V.P. Humanitarian Growth

David Malme is our V.P. of Humanitarian Growth overseeing our nationwide expansion. He was the CEO and owner of a publishing and distribution company for 18 years. His prior experience includes book publishing, direct mail marketing consulting, field and telephone sales management, sales and marketing management, purchasing/inventory management, distribution, and retail store management. He is an accomplished leader committed to teaching, mentoring and building highly effective teams and business relationships that deliver profitable growth. He has a proven track record of developing and growing brands through innovative product marketing and creative selling strategies that capture market share, acquire and grow customer relationships, and drive profits.

There are no arrangements or understandings between our executive officers and directors and any other persons pursuant to which the executive officer or director was selected to act as such. There are no family relationships between our executive officers.

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ITEM 11 COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

The following is a discussion and analysis of compensation arrangements of our named Directors and Executive Officers. This discussion contains forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized in this discussion. As an “emerging growth company” as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled disclosure requirements applicable to emerging growth companies.

Our Compensation Committee, who will be appointed by our Board, will be responsible for establishing, implementing and monitoring our compensation philosophy and objectives. We seek to ensure that the total compensation paid to our Executive Officers is reasonable and competitive. Compensation of our executives is structured around the achievement of individual performance and near-term corporate targets as well as long-term business objectives.

The following tables set forth certain information about compensation paid, earned or accrued for services by (i) the Company’s Chief Executive Officer and (ii) all other executive officers who earned in excess of $100,000 in the years ended December 31, 2021 and 2020 (“Named Executive Officers”):

SUMMARY COMPENSATION TABLE(1)
Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensa- tion ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Compensa -tion ($)	Total ($)
Andrew Michael Arroyo, CEO	2021 2020	123,481 25,769	-0- -0-	-0- -0-	-0- -0-	-0- -0-	-0- -0-	5,606 58,576	129,087 84,345
Tiffany Mohler, Treasurer, V.P. Administration	2021 2020	48,303 51,987	-0- 1,000	-0- -0-	-0- -0-	-0- -0-	-0- -0-	15,350 1,607	63,653 54,594
John Windscheffel, Secretary, V.P.Communications	2021 2020	71,500 70,631	-0- 1,000	-0- -0-	-0- -0-	-0- -0-	-0- -0-	-0- 3,483	71,500 75,114
David Malme, V.P. Humanitarian  Growth	2021 2020	53,205 44,110	-0- 1,000	-0- -0-	-0- -0-	-0- -0-	-0- -0-	-0- 1,260	53,205 46,370

____________ 

(1) Includes amounts paid by AARE-CA.

The following table sets forth director compensation for 2021⁽¹⁾:

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
Andrew Michael Arroyo		-0-	-0-	-0-	-0-	-0-	-0-		-0-

____________ 

(1) Includes amounts paid by AARE-CA.

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Anticipated Executive Compensation Following this Offering

Following this Offering, Board of Directors will determine the appropriate compensation plans and programs for our executives. Our Board of Directors will review and evaluate our executive compensation plans and programs to ensure they are aligned with our compensation philosophy. In addition, our Board of Directors may retain its own compensation consultant to advise it in its compensation planning decisions.

We expect revised compensation plans and arrangements for our named Executive Officers that will generally become effective upon completion of this Offering to consist generally of an annual base salary, a short-term annual incentive component, a long-term incentive (equity awards) component, and health and retirement benefits component.

We plan to establish an equity compensation plan for its management, real estate agents, loan officers and other employees in the future.

Agreements with our Named Executive Officers

Our current employment agreements provide for an annual salary, potential bonus based on performance, participation in a 401(k) plan through Safe Harbor, and 14 days (or two weeks) paid vacation time after the vesting period is complete.

After the consummation of this Offering, we will revise our employment agreements to provide for an annual salary, potential bonus based on performance, equity grant (based on grant date fair market value) in stock options, restricted stock or other form of equity award as determined by the Board of Directors. We expect these awards will be granted under the 2021 Plan. Each executive will also receive employee benefits made available to our other employees, including, without limitation, participation in any 401(k) plan, 14 days (or two weeks) paid vacation time and a monthly contribution towards a health plan.

All related party transactions described in this section occurred prior to adoption of this policy and, as such, these transactions were not subject to the approval and review procedures set forth in the policy.

ITEM 12 SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS

The following table sets forth, as of September 30, 2022, certain information with respect to our equity securities owned of record or beneficially by (i) each of our Officers and Directors; (ii) each person who owns beneficially more than 5% of each class of our outstanding equity securities; and (iii) all Directors and Executive Officers as a group.

Common Stock⁽¹⁾

Name and Address of Beneficial Owner(2)	Nature of Beneficial Ownership	No. of Shares			Percent of Class			Percent of Total Voting Rights(5)
Andrew Michael Arroyo (2)(3)	CEO, Chairman and a Board Director		2,822,660	(4)		88.75	%		30.75	%
Tiffany Mohler (2)(3)	Treasurer, V.P. of Administration		2,000			1	%		1	%
John Windscheffel (2)(3)	Secretary, V.P of Communications	-0-				0	%		0	%
David Malme (2)(3)	V.P. of Humanitarian Growth		1,000			1	%		1	%
All Officers and Directors as Group (4 persons)			2,825,660	(4)		88.84	%		30.77	%

___________

(1) As of June 30, 2022, there were 3,180,460 shares of common stock outstanding (post 3,000-for-1 forward stock split effective July 29, 2021). Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for the purposes of computing the percentage of any other person.

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(2)	Indicates an officer and/or director of the Company.
(3)	Unless indicated otherwise, the address of the shareholder is Andrew Arroyo Real Estate Inc., 12636 High Bluff Drive, Suite 400, San Diego, CA 92130.
(4)	After giving effect to 3,000-for-1 forward stock split effective July 29, 2021.
(5)	Calculated based on the total votes currently outstanding (does not include votes from shares underlying promissory notes, options or warrants). As of June 30, 2022, there was a total of 9,180,460 votes outstanding, consisting of 3,180,460 votes from common stockholders and 6,000,000 votes from Series A Preferred Stock holders.

Series A Preferred Stock⁽¹⁾

Name and Address of Beneficial Owner	Nature of Beneficial Ownership	No. of Shares		Percent of Class			Percent of Total Voting Rights(4)
Andrew Michael Arroyo (2)(3)	CEO, Chairman and a Director		2,000,000		100.0	%		65.35	%
Tiffany Mohler (2)(3)	Treasurer and VP Administration	-0-			0	%		0	%
John Windscheffel (2)(3)	Secretary and VP Communication	-0-			0	%		0	%
David Malme (2)(3)	VP Humanitarian	-0-			0	%		0	%
All Officers and Directors as a Group (4 persons)			2,000,000		100.0	%		65.35	%

________________ 

(1)	As of June 30, 2022, there were 2,000,000 shares of Series A Preferred Stock outstanding (each share has three (3) votes on all matters presented to the common stockholders for a vote, and converts into one (1) share of common stock). Shares of preferred stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for the purposes of computing the percentage of any other person.
(2)	Indicates an officer and/or director of the Company.
(3)	Unless indicated otherwise, the address of the shareholder is Andrew Arroyo Real Estate Inc., 12636 High Bluff Drive, Suite 400, San Diego, CA 92130.
(4)	Calculated based on the total votes currently outstanding (does not include votes from shares underlying promissory notes, options or warrants). As of June 30, 2022, there was a total of 9,180,460 votes outstanding, consisting of 3,180,460 votes from common stockholders and 6,000,000 votes from Series A Preferred Stock holders.

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Transactions with Related Persons, Promoters and Certain Control Persons; Corporate Governance

Through December 31, 2021, we spent approximately $200,000 on the costs related to our ongoing Regulation A offering, which was loaned to the Company by our CEO, and any additional funds that we are required to spend shall also be paid by our CEO and reimbursed from the proceeds of our ongoing Regulation A offering. The terms of the promissory note are interest payable on the unpaid principal at the interest rate of 4% per annum. Principal and interest will be paid beginning February 1st, 2022 until the end of the repayment period which is June 29th, 2023.

Our Board will adopt a written related person transaction policy, to be effective upon the closing of our ongoing Regulation A offering setting forth the policies and procedures for the review and approval or ratification of related person transactions, which will generally include transactions involving the Company and our Directors, Executive Officers, nominees for director, beneficial owners of more than five percent of our Common Stock and members of the immediate families of the foregoing. This policy will provide that transactions involving related persons are approved, or ratified if pre-approval is not feasible, by our Audit Committee, which approves or ratifies the transaction only if our Audit Committee determines that it is in the best interests of our stockholders. In considering the transaction, our Audit Committee considers all relevant factors, including, as applicable (i) the business rationale for entering into the transaction; (ii) available alternatives to the transaction; (iii) whether the transaction is on terms no less favorable than terms generally available to an unrelated third party under the same or similar circumstances; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction. Our Audit Committee will also periodically monitor ongoing transactions involving related persons to ensure that there are no changed circumstances that would render it advisable to amend or terminate the transaction.

All related party transactions described in this section occurred prior to adoption of this policy and, as such, these transactions were not subject to the approval and review procedures set forth in the policy.

ITEM 13 INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

Our Board will adopt a written related person transaction policy, to be effective upon the closing of this Offering, setting forth the policies and procedures for the review and approval or ratification of related person transactions, which will generally include transactions involving the Company and our Directors, Executive Officers, nominees for director, beneficial owners of more than five percent of our Common Stock and members of the immediate families of the foregoing. This policy will provide that transactions involving related persons are approved, or ratified if pre-approval is not feasible, by our Audit Committee, which approves or ratifies the transaction only if our Audit Committee determines that it is in the best interests of our stockholders. In considering the transaction, our Audit Committee considers all relevant factors, including, as applicable (i) the business rationale for entering into the transaction; (ii) available alternatives to the transaction; (iii) whether the transaction is on terms no less favorable than terms generally available to an unrelated third party under the same or similar circumstances; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction. Our Audit Committee will also periodically monitor ongoing transactions involving related persons to ensure that there are no changed circumstances that would render it advisable to amend or terminate the transaction.

Currently, we do not have any independent members of our Board of Directors, as our sole Board members is our CEO, Andrew Arroyo.

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Relaxed Ongoing Reporting Requirements

Once this Form 1-A is qualified by the SEC we will be required to publicly report on an ongoing basis under the reporting rules set forth in Regulation A issuers. The ongoing reporting requirements under Regulation A are more relaxed than for emerging growth companies under the Exchange Act. The differences include, but are not limited to, being required to file only annual and semi-annual reports, rather than annual and quarterly reports. Annual reports are due within 120 calendar days after the end of the issuer’s fiscal year, and semi-annual reports are due within 90 calendar days after the end of the first six months of the issuer’s fiscal year.

In either case, we will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies, and our stockholders could receive less information than they might expect to receive from more mature public companies.

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Section A of Article VI of our Articles of Incorporation provides that, to the fullest extent permitted by law, no director or officer shall be personally liable to the corporation or its shareholders for damages for breach of any duty owed to the corporation or its shareholders.

Section B of Article VI of our Articles of Incorporation provides that, to the fullest extent permitted by the General Corporation Law of the State of Delaware we will indemnify our officers and directors from and against any and all expenses, liabilities, or other matters.

Article IX of our Amended and Restated Bylaws further addresses indemnification of our directors and officers and allows us to indemnify our directors and officers in the event they meet certain criteria in terms of acting in good faith and in an official capacity within the scope of their duties, when such conduct leads them to be involved in a legal action.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

ITEM 14 SECURITIES BEING OFFERED

Our Articles of Incorporation authorize us to issue up to 5,000,000 shares of Preferred Stock, par value $0.001 per share, and 25,000,000 shares of Common Stock, par value $0.001 per share. As of the date of this Offering Circular, there were 2,000,000 shares of Preferred Stock issued and outstanding and 3,180,460 shares of Common Stock issued and outstanding. The 3,180,460 shares of Common Stock issued and outstanding are held by ninety seven (97) stockholders. The 2,000,000 shares of Preferred Stock issued and outstanding are held by one (1) stockholder.

The following description of our capital stock is subject to and qualified in its entirety by our Articles of Incorporation and Corporate Bylaws and by the provisions of applicable Delaware Law. Copies of these documents are filed as exhibits to this Offering Circular. The Company is not offering any shares of Preferred Stock in this Offering.

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Preferred Stock

Our Articles of Incorporation authorize our Board of Directors, without action by the stockholders, to designate and issue up to 5,000,000 shares of the Company’s Preferred Stock, par value $0.001, in one or more series. Our Board of Directors is authorized to designate the rights, preferences and privileges of the shares of each series and any of its qualifications, limitations or restrictions. Our Board of Directors is able to authorize the issuance of Preferred Stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of Preferred Stock. The issuance of Preferred Stock, while providing flexibility in connection with possible future financings and acquisitions and other corporate purposes, could, under certain circumstances, have the effect of restricting dividends on our Preferred Stock; diluting the voting power of our Preferred Stock; impairing the liquidation rights of our Preferred Stock; or delaying, deferring or preventing a change in control of the Company, which might harm the market price of our Preferred Stock. Currently, we have one series of preferred stock designated, which is our Series A Convertible Preferred Stock. This series of preferred stock converts at 1-to-1 into common stock and has three (3) votes per share on all matters properly brought to our shareholders for a vote.

Common Stock

Our Articles of Incorporation authorize our Board of Directors, without action by the stockholders, to designate and issue up to 25,000,000 shares of the Company’s Common Stock, par value $0.001 per share, in one or more series. Our Board of Directors is authorized to designate the rights, preferences and privileges of the shares of each series and any of its qualifications, limitations or restrictions. Our Board of Directors is able to authorize the issuance of Common Stock with voting or conversion rights that could adversely affect the voting power or other rights of the other holders of our Common Stock. The issuance of Common Stock, while providing flexibility in connection with corporate purposes, could, under certain circumstances, have the effect of restricting dividends on our Common Stock; diluting the voting power of our Common Stock; impairing the liquidation rights of our Common Stock; or delaying, deferring or preventing a change in control of the Company, which might harm the market price of our Common Stock.

The following is a summary of the material provisions governing the issuance of the Company’s Shares in this Offering:

· We are offering a maximum of 1,000,000 Shares of Common Stock, par value $0.001 per share at an offering price of $5.00 per share through this Offering Circular. We have established a minimum of 200,000 shares for this Offering, which has been met.

· The stated or par value of each share of Common Stock being offered is $0.001.

· The offering price per each Share is $5.00.

· Investors holding shares of Common Stock will have the ability to vote on the Company’s Board of Directors but will not have the ability to vote to appoint any of the Company’s Officers.

· The Shares of Common Stock being offered are equal in all respects

Voting Rights

Each holder of Common Stock is entitled to one (1) vote for each share on all matters submitted to a vote of the Stockholders. Each holder of Preferred Stock is entitled to three (3) votes for each share on all matters submitted to a vote of the Stockholders.

Dividend Policy

We do not plan to pay cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business and do not intend to declare or pay any cash dividends in the foreseeable future. As a result, you will likely need to sell your Common Stock to realize a return on your investment, and you may not be able to sell your shares at or above the price you paid for them. Payment of cash dividends, if any, in the future will be at the discretion of our Board of Directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our Board may deem relevant.

Dividend Rights

Shareholders are only entitled to distributions or dividends proportionate to their shares of Common Stock when and if declared by our Board of Directors out of funds legally available and after payment of dividends to any holders of our Preferred Shares. To date we have not given any such distributions or dividends. Future distribution policies are subject to the discretion of our Board of Directors and will depend upon a number of factors, including among other things, our capital requirements and financial condition.

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Liquidation Rights

In the event of the dissolution, liquidation or winding up of the Company, the assets legally available for distribution to the holders of Common Stock will be distributed ratably among the shareholders in proportion to their holdings of Common Stock and after giving preference to holders of our Preferred Stock and liquidation of any and all liabilities.

Liability to Further Calls or Assessment

The Common Stock has no liability to further calls or assessments by the Company.

Fully Paid and Non-assessable

All outstanding shares of our Common Stock are fully paid and non-assessable, and the shares of Common Stock to be issued upon completion of this Offering will be fully paid and non-assessable.

Registration Rights

Upon the completion of this Offering, we may register for sale under the Securities Act shares of our Common Stock, but we are under no obligation to do so under the terms of the Offering. Subject to certain conditions and limitations, we may provide customary demand, piggyback and shelf registration rights to holders of purchasers Common Stock in future offerings.

ITEM 15 FINANCIAL STATEMENTS

Index to Financial Statements	49
Independent Auditor’s Report	50
Consolidated Balance Sheets of Andrew Arroyo Real Estate Inc. as of December 31, 2021 and 2020	51
Consolidated Statements of Operations of Andrew Arroyo Real Estate Inc. for the Years Ended December 31, 2021 and 2020	52
Consolidated Statements of Changes in Stockholders’ Equity of Andrew Arroyo Real Estate Inc. for the Years Ended December 31, 2021 and 2020	53
Consolidated Statements of Cash Flows of Andrew Arroyo Real Estate Inc. for the Years Ended December 31, 2021 and 2020	54
Notes to Financial Statements	55

Consolidated Balance Sheets of Andrew Arroyo Real Estate Inc. as of June 30, 2022 and 2021	69
Consolidated Statements of Operations of Andrew Arroyo Real Estate Inc. for the Three and Six Months Ended June 30, 2022 and 2021	70
Consolidated Statements of Changes in Stockholders’ Equity of Andrew Arroyo Real Estate Inc. for the Three and Six Months Ended June 30, 2022 and 2021	71
Consolidated Statements of Cash Flows of Andrew Arroyo Real Estate Inc. for the Six Months Ended June 30, 2022 and 2021	72
Notes to Financial Statements	73

48

Financial Statements

ANDREW ARROYO REAL ESTATE, INC.

DECEMBER 31, 2021 AND 2020

ANDREW ARROYO REAL ESTATE, INC.

DECEMBER 31, 2021 AND 2020

INDEX

Independent Auditor’s Report	50
Balance Sheets	51
Statement of Operations	52
Statement of Stockholder’s Equity	53
Statement of Cash Flows	54
Notes to Financial Statements	55
Supplemental Information
Schedule I – General and Administrative Expenses	66
Schedule 2 – Other Income / (Expense	67
Schedule 3 – Schedule of Generous Capitalism	68

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INDEPENDENT AUDITOR’S REPORT

To the Board of Directors

ANDREW ARROYO REAL ESTATE, INC.

San Diego, CA 92130

We have audited the accompanying financial statements of ANDREW ARROYO REAL ESTATE, INC. a Delaware corporation which comprise the balance sheets as of December 31, 2020 and 2021 respectively and the related statements of income, retained earnings, and cash flows for the years then ended and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ANDREW ARROYO REAL ESTATE, INC. as of December 31, 2020 and 2021 respectively, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Scott W. Smith, CPA’s, Inc.

Murrieta, CA 92563

September 8, 2022 

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ANDREW ARROYO REAL ESTATE, INC.
BALANCE SHEETS
December 31, 2021 and 2020
	2021			2020
	(restated)
ASSETS
Current Assets
Cash and Cash Equivalents (Note 1)	$	3,655		$	38,701
Other Current Assets
Other Current Assets	$	314,179		$	285,151
Total Current Assets	$	317,833		$	323,852
Property and equipment, net (Note 1)	$	56,777		$	69,422
Other Assets
Total Other Assets	$	302,174		$	-
TOTAL ASSETS	$	676,784		$	393,274
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts Payable	$	19,050			-
Credit Cards	$	84,793		$	83,415
Line of Credit (Note 6)	$	74,058		$	55,200
Current Portion of Long Term Debt	$	111,737		$	10,007
Other Current Liabilities	$	282,572		$	252,542
Total Current Liabilities	$	572,211		$	401,164
Long Term Liabilities
Notes Payable (Note 6)	$	237,988		$	244,290
Total Liabilities	$	810,198		$	645,454
Equity
Common Stock, $.001 par value 25,000,000 shares authorized, 3,000,000 issued and outstanding;	$	1,000		$	1,000
Preferred Stock, ($.001 par value; 3,000,000 shares authorized, no shares issued and outstanding as of December 31, 2021 and December 31, 2020).
Series A Convertible Preferred Stock, ($.001 par value; 2,000,000 shares authorized, and outstanding as of December 31, 2021 and December 31, 2020) (Note 9)
Additional paid-In capital	$	583,514		$	482,590
Shareholder Contribution/(Distribution)	$	(66,220	)	$	(119,364	)
Retained Earnings/(Deficit)	$	(651,708	)	$	(616,406	)
Total stockholders’ equity	$	(133,414	)	$	(252,180	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	676,784		$	393,274

See accompanying notes to the financial statements.

51

ANDREW ARROYO REAL ESTATE, INC.

STATEMENT OF OPERATIONS

Years Ended December 31, 2021 and 2020

	2021			2020
	(restated)
Income from Operations	$	9,119,970		$	7,354,474
Cost of Sales:
Charitable Contributions	$	60,847		$	218,193
Coaching Fees	$	8,569		$	11,238
Salaries & Wages	$	60,983		$	43,800
Cost of Sales - Agents	$	6,896,003		$	5,448,399
Cost of Sales - TC	$	208,175		$	201,369
Cost of Sales- Material/Supply	$	54,306		$	74,310
Property Management Fees Paid	$	144,142		$	100,412
Recruiting Bonuses	$	-		$	1,500
Referral Fees	$	281,767		$	238,425
Staging & Moving Operations	$	26,023		$	66,381
Total Cost of Sales	$	7,740,814		$	6,404,027
Gross Profit	$	1,379,155		$	950,447
General and administrative expenses (Schedule 1)	$	1,394,193		$	904,133
Profit from Operations	$	(15,038	)	$	46,314
Other Income/(Expense) -(Schedule 2)	$	(50,310	)	$	(24,515	)
Profit /(Loss) before income tax benefit	$	(65,347	)	$	21,799
Income Tax Provision (Note 7)	$	1,847		$	800
Net Profit	$	(67,195	)	$	20,999

See accompanying notes to the financial statements.

52

ANDREW ARROYO REAL ESTATE, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY

Years Ended December 31, 2021 and 2020 (restated)

	COMMON STOCK		PAID IN CAPITAL			RETAINED EARNINGS			TOTAL
Balance - December 31, 2019	$	1,000	$	482,590		$	(637,405	)	$	(153,815	)
Net Income / (Loss)	$	-	$	-		$	20,999		$	20,999
Stockholder Contributions / (Distributions)	$	-	$	-		$	(119,364	)	$	(119,364
Balance - December 31, 2020	$	1,000	$	482,590		$	(735,770	)	$	(252,180	)
Net Income / (Loss)	$	-	$	-		$	(67,195	)	$	(67,195	)
Stockholder Contributions / (Distributions)	$	-	$	(482,500	)	$	668.551		$	185,961
Balance – December 31, 2021	$	1,000	$	0		$	(134,414	)	$	(133,414	)

See accompanying notes to the financial statements.

53

ANDREW ARROYO REAL ESTATE, INC.

 Statement of Cash Flows

Years Ended December 31, 2021 and 2020

	2021			2020
	(restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)		(67,195	)		20,999
Adjustments to reconcile net Income to net cash flows
provided by operating activities:
Deferred Income Taxes		-
Depreciation  & Amortization		42,719			3,539
Changes in assets and liabilities
Changes in Other Receivables		127,192			-
Changes in prepaid expenses & other		(29,028	)		(175,893	)
Changes in accounts payable		19,050			-
Changes in Other Payables		21,733			98,904
Income Taxes Payable		-			-
Changes in accrued expenses		1,848			2,817
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		116,319			(49,634	)
CASH FLOWS PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Net Purchases of property and equipment		(25,022	)		(47,014	)
Net Inflows – Disposal of Equipment		3,582			-
Net Purchases of goodwill		(310,808	)		-
Net cash flows provided by (used in) Investing activities:		(332,248	)		(47,014	)
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Net proceeds (repayments) on borrowings		95,428			238,641
Changes in Line of Credit		18,858			(5,340	)
Dividend Distribution		66,597			(119,364	)
Loan from Shareholder		-			-
Proceeds (re-purchase) for Equity Investment		-			-
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:		180,883			113,937
Net Increase (Decrease) in cash and cash equivalents		(35,046	)		17,289
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		38,701			21,412
CASH AND CASH EQUIVALENTS END OF YEAR	$	3,655		$	38,701

See accompanying notes to the financial statements.

54

ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

(See Independent Auditor’s Report)

NOTE 1 - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Andrew Arroyo Real Estate Inc. (the “Company”) was incorporated on June 18, 2020, under the laws of the State of Delaware. A predecessor company that was merged with and into the Company effective July 31, 2021 was originally incorporated under the laws of the State of California on January 20, 2004, as Andrew Michael Arroyo Inc. and updated its name to Andrew Arroyo Real Estate Inc. on April 30, 2007. The trademark and d/b/a that is known in the marketplace is “AARE”. The Company was formed to conduct real estate brokerage services. These services include assisting clients buy, sell, manage, and invest in residential and commercial properties as well as business opportunities. The Company’s year-end is December 31. As a result of the above-referenced merger, all operations of the California corporation were assumed into the Company. As a result, the historical financial statements of the California corporation are the ones presented herein.

On July 29, 2021, the Company filed an amended and restated Certificate of Incorporation with the State of Delaware, which (i) increased the Company’s authorized common stock from 1,000 shares of common stock to 25,000,000 shares of common stock, par value $0.001, and 5,000,000 shares of preferred stock, par value $0.001; and (ii) effected a 1-for-3,000 forward stock split of the Company’s issued and outstanding common stock. The authorized preferred stock created, provides that the Board of Directors of the Company may fix the terms of any series of preferred stock created, including any dividend rights, dividend rates, conversion rights, voting rights, rights and terms of any redemption, redemption, redemption price or prices, and liquidation preferences, if any.

On July 29, 2021, after filing the amended and restated Certificate of Incorporation, the Company filed a Certificate of Designation with the State of Delaware to create a series of preferred stock entitled “Series A Convertible Preferred Stock. The Series A Convertible Preferred Stock (i) has dividend rights on an equal basis with the Company’s common stock, (ii) has preference in the event of a liquidation event, (iii) is convertible after 12 months into shares of the Company’s common on a 1-for-1 basis, (iv) has three votes per share for any matter properly brought before the Company’s shareholders for a vote, and (v) contains certain protective provisions.

On July 31, 2021, the Company “Andrew Arroyo Real Estate, Inc.” a Delaware “C” Corporation merged with “Andrew Arroyo Real Estate, Inc.” a California “S” Corporation. After the merger the California “S” Corporation was merged with and into the Company, which effectively ceased all operations of the California corporation and those operations were assumed by the Company (the surviving Delaware “C” Corporation). Effective with the merger, the Certificate of Incorporation of the Company stayed as the Company’s Certificate of Incorporation, and the 1,000 shares owed by the sole shareholder of the California corporation, Mr. Andrew Arroyo, the Company’s sole director and one of its executive officers, were exchanged for 2,000,000 shares of the Company’s Series A Convertible Preferred Stock.

Basis of Presentation

The audited financial statements include the accounts of the Company under the accrual basis of accounting. The financial statements, included herein, have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission. Pursuant to these rules and regulations, the financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and have been consistently applied.

Management’s Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes,” which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.

The Company has adopted the provisions of FASB ASC 740-10-05 Accounting for Uncertainty in Income Taxes. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The company prior to merging operated as an S-Corporation which is a “Pass-through” entity for taxation purposes. In lieu of Federal company income taxes, the shareholders, are taxed on their proportionate share of the Company’s taxable income.

55

ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

(See Independent Auditor’s Report)

NOTE 1 - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Shareholders were liable for their pro-rata share of the net income for payment of the tax liability incurred as a result of the pass-through income through the merger date of 7/30/2021. Therefore, no provision or liability for Federal income taxes has been included in the financial statements. For California Franchise tax a purpose, a flat tax of $800 or 1.5% is incurred for the benefit of operating a California based S-Corporation. Upon the merger the company was reorganized as a “C” Corp.   As a C Corp. under current tax law the company is responsible for Federal Taxes equal to 21% of the Net Income of the company as well as various tax rates for the states they have operations in.  For the year Ending 12/31/21 the company had a Net Operating Loss (NOL) of  $119,647 (restated) as well as a Charitable Contribution Carryover the combination of which created a Deferred tax asset of as listed below.

The Company operates in 24 states throughout the U.S. Each State has an income tax and/or a franchise/commerce tax on the gross receipts of businesses based on total revenues in each state. The provision for income taxes includes state income taxes currently payable and deferred income taxes. Deferred income taxes represent the effects of items reported for tax purposes in periods different from those used for financial statement purposes. For the year’s ended 12/31/21 and 12/31/20 there was a deferred tax asset of $31,138 (restated) with a ($29,291) valuation allowance for 2021 and no provision for Deferred income taxes for 2020 respectively.

Charitable giving policy is unique.

Giving and sharing are more than buzzwords at AARE. Up to twenty percent of the company’s gross profit on every transaction goes to charity (after sales agent’s commissions are paid). The Company believes that with success comes the responsibility to do what they can for those less fortunate. Toward that end, the Company funds non-profit organizations dedicated to helping those in need. They support numerous religious and secular charities worldwide. The Company has no intention of deviating from this policy or reducing the amount it gives to charity. The charitable giving policy has been written into the bylaws and certificate of incorporation. For the year’s ending December 31, 2021 and 2020 the company donated $60,847 and $218,193 respectively. See the additional “Statement of Generous Capitalism” at the end of these notes to the financial statements. In addition, for the year ending 12/31/2021 Andrew Arroyo personally donated an additional $57,315 personally from his (at the time) S-Corporation pass through income.

Cash and Cash Equivalents

The Company considers all short-term securities purchased with maturity dates of three months or less to be cash. The Company from time to time during the years covered by these financial statements may have bank balances in excess of its insured limits. Management has deemed this as a normal business risk. Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. During the years ended 12/31/21 and 12/31/20, the Company had approximately $3,655 and $38,700 respectively deposited in two financial institutions. Of this amount, $3,655 and $38,700 respectively was insured by the Federal Deposit Insurance Corporation.

Concentration and Credit Risk

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents. The Company places its cash and temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit.

56

ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

(See Independent Auditor’s Report)

NOTE 1 - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Continued)

Restricted Cash

Certain of the Company’s cash positions are property management trust funds, which include security deposits and rents that belong to property owners. These cash amounts are reported as current assets on the balance sheets and liabilities based on when the cash will be contractually released to the owners or tenants of the properties. Total restricted cash was approximately $270,019 on 12/31/21 and $256,000 on 12/31/20, respectively.

Inventory

The Company does not currently carry any inventory. In the event in the future, the Company carries inventory, it will be conducted under the following method. Inventory will be stated at the lower of cost or market (“LCM”) value. Cost is determined principally by the first-in, first-out (“FIFO”) method. In valuing inventory, management is required to make assumptions regarding the level of reserves required to value potentially obsolete or over-valued

Items at the lower of cost or market. These assumptions require the Company to analyze the aging of and forecasted demand for its inventory, forecast future products sales prices, pricing trends and margins, and to make judgments and estimates regarding obsolete or excess inventory. Future product sales prices, pricing trends and margins are based on the best available information at that time including actual orders received; negotiations with the Company’s customers for future orders, including their plans for expenditures; and market trends for similar products. The valuation of inventory taken in trade from customers requires the Company to use the best information available to determine the value of the inventory to potential customers. This value is subject to change based on numerous conditions. Inventory reserves are established taking into account age, frequency of use, or sale, and, in the case of repair parts, the installed base. While calculations are made involving these factors, significant management judgment regarding expectations of future events is involved. Future events that could significantly influence the Company’s judgment and related estimates include general economic conditions in markets where the Company’s products are sold; new price fluctuations; actions of the Company’s competitors, including the introduction of new products and technological advances; as well as new products and design changes the Company introduces. The Company makes adjustments to its inventory reserve based on the identification of specific situations and increases its inventory reserves accordingly. As further changes in future economic or industry conditions occur, the Company will revise the estimates that were used to calculate its inventory reserves.

Intangible Assets

Intangible assets include patented and unpatented technology, trade names, customer relationships and other specifically identifiable assets and are amortized on a straight-line basis over their respective estimated useful lives, which range from ten to twenty-five years. Intangible assets are reviewed for impairment when facts and circumstances indicate a potential impairment has occurred. As of December 31, 2021 the company merged with the predecessor S-Corporation which created the intangible asset of Goodwill in the amount of $310,808.  For the year ending 2020 the company did not have any intangible assets.

57

ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

(See Independent Auditor’s Report)

NOTE 1 - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property, Plant and Equipment

Property and equipment are carried at cost. Expenditures for property and equipment are capitalized and depreciated over five to 31.5 years using the declining balance method. When assets are retired or sold, the related cost and accumulated depreciation are removed from the account and any gain or loss arising from such disposition is included as income or expense. Expenditures for repairs and maintenance are charged to expense as incurred. For the year ending 12/31/21 and 12/31/20 depreciation expense was $34,085 and $3,539 respectfully. Fixed assets consisted of:

	2021			2020
	(restated)
Fixed Assets:
Auto & Transportation	$	146,435		$	94,697
Leasehold Improvements	$	25,035		$	25,035
Machinery & Equipment	$	-0-		$	99,363
Advertising Equipment	$	226,195		$	172,448
Furniture & Fixtures	$	41,841		$	22,941
	$	439,506		$	414,484
Accumulated Depreciation	$	(382,729	)	$	(345,062	)
Net Fixed Assets	$	56,777		$	69,422

Intangible Assets

Intangible assets consist of Goodwill created upon the merger of the S-Corp into the C-Corp as follows:

	2021			2020
	(restated)
Intangible Assets:
Goodwill	$	310,808		$	0
Accumulated Amortization	$	(8,633	)	$	0
Net Fixed Assets	$	302,174		$	0

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company determines the allowance based on individual customer review and current economic conditions. The Company reviews its allowance for doubtful accounts at least quarterly. Individual balances exceeding a threshold amount that are more than 90 days past due are reviewed individually for collectability. All other balances are reviewed on a pooled basis by type of receivable. Account balances are charged off against the allowance when the Company determines it is probable the receivable will not be recovered. The balance of the allowance for doubtful accounts was $0 and $0 at December 31, 2021, and December 31, 2020, respectively.

Revenue Recognition

The Company has generated significant revenues in California. The Company has not, to date, generated significant revenues outside California. The Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company’s financial position and results of operations was not significant.

58

ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

(See Independent Auditor’s Report)

NOTE 1 - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Continued)

Impact of New Accounting Standards

Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”). ASU 2014-09 provides guidance for the recognition, measurement and disclosure of revenue resulting from contracts with customers and will supersede virtually all of the current revenue recognition guidance under GAAP. In March 2016, the FASB issued Accounting Standards Update No. 2016-08, “Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” (“ASU 2016-08”), which clarifies how an entity should identify the unit of accounting for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. In April 2016, the FASB issued Accounting Standards Update No. 2016-10, “Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing” (“ASU 2016-10”), which clarifies guidance related to identifying the performance obligations and licensing implementation guidance contained in the new revenue recognition standard. In May 2016, the FASB issued Accounting Standards Update No. 2016-12, “Revenue from Contracts with Customers (Topic 606), Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”), which addresses narrow-scope improvements to the guidance on collectability, noncash consideration and completed contracts at transition as well as providing a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. In December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” ASU 2016-20 is intended to clarify and suggest improvements to the application of current standards under Topic 606 and other Topics amended by ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 016-20 are effective for reporting periods beginning after December 15, 2017, with early adoption permitted for reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact of the provisions of this standard on the Company’s financial statements.

In April 2015, the FASB issued ASU 2015-03, “Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs,” (“ASU 2015-03”). ASU 2015-03 requires debt issuance costs related to borrowings be presented in the balance sheet as a direct deduction from the carrying amount of the borrowing, consistent with debt discounts. The ASU does not affect the amount or timing of expenses for debt issuance costs. In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements,” which amends, ASC 835-30, “Interest – Imputation of Interest.” The ASU clarifies the presentation and subsequent measurement of debt issuance costs associated with lines of credit. These costs may be presented as an asset and amortized ratably over the term of the line of credit arrangement, regardless of whether there are outstanding borrowings on the arrangement. The Company adopted ASU 2015-03 and ASU 2015-15 as of January 1, 2016, on a retrospective basis, by recasting all prior periods shown to reflect the effect of adoption.

59

ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

(See Independent Auditor’s Report)

NOTE 1 - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Continued)

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory,” (“ASU 2015-11”). ASU 2015-11 simplifies the subsequent measurement of inventory by using only the lower of cost or net realizable value.

The ASU defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The effective date will be the first quarter of fiscal year 2017 with early adoption permitted and is not expected to have a material impact on the Company’s financial statements. ASU 2015-11 should be applied prospectively.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” (“ASU 2016-01”). The amendments in ASU 2016-01, among other things, require equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; require public business entities to use the exit price notion when measuring fair value of financial instruments for disclosure purposes; require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables); and eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost. The effective date will be the first quarter of fiscal year 2018.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize on the balance sheet the assets and liabilities associated with the rights and obligations created by those leases. The guidance for lessors is largely unchanged from current U.S. GAAP. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current U.S. GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. The effective date will be the first quarter of fiscal year 2019, with early adoption permitted. The Company is evaluating the impact that adoption of this new standard will have on its financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), which includes multiple amendments intended to simplify aspects of share-based payment accounting. Amendments to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, and forfeitures will be applied using a modified retrospective transition method through a cumulative-effect adjustment to equity as of the beginning of the period of adoption. Amendments to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement will be applied retrospectively, and amendments requiring the recognition of excess tax benefits and tax deficiencies in the income statement are to be applied prospectively. ASU 2016-09 will be effective for annual reporting periods beginning after December 15, 2016, with early adoption permitted and is not expected to have a material impact on the Company’s financial statements.

In August 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments (Topic 230): Statement of Cash Flows” (“ASU 2016-15”), which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. ASU 2016-15 also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. ASU 2016-15 is effective for fiscal years and interim periods beginning after December 15, 2017. The Company is currently evaluating the impact that this standard will have on its financial statements.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326), which modifies the measurement of credit losses on financial instruments. This standard requires the use of an expected loss impairment model for instruments measured at amortized cost based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. This guidance is effective for public companies with fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The Company adopted this standard as of January 1, 2021 on a modified retrospective basis, which resulted in a $0 in the Company’s overall allowance for credit losses related to the Company’s receivables, with a corresponding no impact to the Company’s accumulated deficit.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement. The guidance eliminates, amends and adds certain disclosure requirements for fair value measurements. The new standard is effective for all public entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019.

60

ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

(See Independent Auditor’s Report) 

The Company adopted this standard as of January 1, 2021, and the adoption did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force). The guidance on the accounting for implementation, setup and other upfront costs (collectively referred to as implementation costs) applies to entities that are a customer in a hosting arrangement that is a service contract. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The new standard is effective for public companies with fiscal years beginning after December 15, 2019, including interim periods within that fiscal year and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption and early adoption is permitted.

The Company adopted this standard prospectively as of January 1, 2021, and the adoption did not have a material impact on the Company’s consolidated financial statements.

In November 2019, the FASB issued ASU No. 2019-08, Compensation — Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements — Share-Based Consideration Payable to a Customer. The ASU simplifies and increases comparability of accounting for nonemployee stock-based payments, specifically those made to customers. Under the new guidance, such awards will be accounted for as a reduction of the transaction price in revenue, but should be measured and classified following the stock compensation guidance in ASC 718, Compensation — Stock Compensation. The new standard is effective for public companies with fiscal years beginning after December 15, 2019, including interim periods within those fiscal years and can be applied retrospectively or on a modified retrospective basis through a cumulative-effect adjustment to retained earnings upon adoption.

The Company adopted this standard on a modified retrospective basis as of January 1, 2021, and the adoption did not have an impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU is part of the FASB’s simplification initiative; and it is expected to reduce cost and complexity related to accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740, Income Taxes related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The new standard will become effective for public companies with fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted.

The Company adopted this guidance on January 1, 2021 and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

New Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. An update was also issued expanding the scope of this guidance. The guidance provides optional expedients and exceptions for applying GAAP to contracts or other transactions affected by reference rate reform if certain criteria are met. The guidance was issued on March 12, 2020 and may be applied prospectively through December 31, 2022. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The guidance amends ASC 805 to require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The amendment is effective for public companies with fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendment should be applied prospectively to business combinations occurring on or after the effective date. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

61

ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

(See Independent Auditor’s Report)

NOTE 1 - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Continued)

In December 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force),” which requires that amounts described as restricted cash or cash equivalents must be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 will be effective in fiscal year 2019 and must be applied retrospectively to all periods presented. The Company is evaluating the impact that adoption of this new standard will have on its financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the measurement of goodwill impairment by eliminating the requirement of performing a hypothetical purchase price allocation. Instead, impairment will be measured using the difference between the carrying amount and fair value of the reporting unit. The amended guidance also eliminates the requirement for any reporting unit with a zero or a negative carrying amount to perform a qualitative assessment and will require disclosure of the amount of goodwill allocated to each reporting unit with a zero or a negative carrying amount of net assets. This standard will be effective beginning in the first quarter of fiscal year 2021. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The standard is to be applied prospectively. The Company is evaluating the impact that adoption of this new standard will have on its financial statements.

NOTE 2 – SECURITIES: Net Gain/Loss Per Share, basic and diluted

The Company’s financial instruments include short-term investments in commodities, currencies, futures, stocks and bonds. Basic gain/loss per share has been computed by dividing net gain/loss available to common shareholders by the weighted average number of common shares outstanding for the period. Shares issuable upon the exercise of any warrants or stock options, have been excluded as a Common Stock equivalent in the diluted loss per share because their effect is anti-dilutive.

NOTE 3 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments, as defined by Accounting Standard Codification subtopic 825-10, Financial Instrument (“ASC 825-10”), include cash, accounts payable and convertible note payable. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at December 31, 2020 and 2019 respectively.

FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

• Level 1: Observable inputs such as quoted prices in active markets;

• Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

• Level 3: Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

The Company’s derivative is valued at Level 3.

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ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

(See Independent Auditor’s Report) 

NOTE 4 – STOCK BASED COMPENSATION

The Company follows Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”), which requires that all share-based payments to both employees and non-employees be recognized in the income statement based on their fair values.

As of 12/31/21, the Company does not have any issued or outstanding stock-based compensation through any qualified or non-qualified stock-based compensation plan. After the registration of these shares with the SEC, the Company will establish a broad-based employee stock purchase plan and an omnibus stock compensation plan to issue and award restricted stock units, restricted stock, options or a combination of these award types based on service and performance. These awards will be offered to both employees and non-employees. Investors will be provided a copy of this plan once the plan becomes effective, and Form S-8 will be filed with the SEC.

The issuance of Common Stock for other than cash is recorded by the Company at market values.

NOTE 5 - RELATED PARTY TRANSACTIONS

Related entities:

1.)	The Company Formed “Smart Real estate tools, LLC” in May 2021 as a joint venture. It is a membership software program for Real Estate Agents. It provides tools to Real Estate agents in a proprietary manner. The company owns 50% along with the software developer.
2.)	The Company president, Andrew Arroyo is the 100% owner of “Andrew Arroyo Investments, LLC.” The company performs Investment management services.
3.)	Andrew and Megan Arroyo have a minority interest in “Neighborhood Investment Network, LLC.” The company uses retirement Funds for investing in Real estate. Andrew and Megan own 24% via one of their retirement accounts.

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ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

(See Independent Auditor’s Report)

NOTE 6 - DEBT

The Company has a $75,000 business Line of Credit (LOC) through Wells Fargo Bank that renews annually. The LOC carries an interest rate of 9.25% and 10.75% as of 12/31/21 and 12/31/20 respectfully. The company obtained two Covid -19 related loans: One a Paycheck Protection Program (PPP) loan at zero interest rate for $50,555. This is a forgivable loan if the company met the criteria for forgiveness. This loan was forgiven in March of 2021. The company also took out an “Economic Injury Disaster Loan (EIDL) in the amount of $149,900. This loan carries a 3.75% interest rate payable over 30 years with a deferred start date until April 29, 2021. On December 26, 2020 the company also took out a vehicle loan for a Lexus RX in the amount of $46,014. The loan is for a period of 5 years at 1.99% interest rate. The Debt schedule for the years ending December 31, 2021 and December 31, 2020 were as follows:  

	2021		2020
	(restated)
Other Current Liabilities
Accounts Payable	$	19,050		-
Credit Cards Payable	$	84,793	$	83,415
PPP Loan	$	-0-	$	50,555
Short-term Loan	$	-	$	-
Wells Fargo Credit Line	$	74,058	$	55,200
Other Current Liabilities	$	282,572	$	252,542
Current Portion of Long Term Debt	$	111,737	$	10,007
	$	572,211	$	451,719
Long Term Debt:
EIDL Loan (net of current portion)	$	144,905	$	149,900
Lexus Payable (Net of current portion)	$	28,034	$	43,835
Note Payable to Andrew Arroyo	$	65,000		-
Total Long Term Debt	$	237,988	$	193,735

NOTE 7 - INCOME TAXES

Income taxes for the year ended 12/31/21 and 12/31/20 consists of the following:

	12/31/2021			12/31/2020
State income tax provision:	(restated)
Deferred Tax Asset	$	31,138		$	-
Valuation Allowance		(29,291	)
State Income Tax Provision
Current	$	1,847		$	800
Deferred	(-0-		)	(-0-		)
Net deferred tax asset/liability	$	1,847		$	(800	)

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ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

(See Independent Auditor’s Report)

NOTE 8 – CONTENGENCIES

The real estate business is known as a litigious industry, especially in certain states like California, which is one of the primary states where the Company conducts business. Buyers and sellers often bring claims against one another and usually attempt to name the real estate agents and brokers as parties in the claim or the suit seeking financial damages. As a result, the Company is regularly named in claims and litigation between buyers and sellers. The Company does not believe most of these claims will amount to any material damages being paid by the Company. In determining whether liabilities should be recorded for pending litigation claims, the Company must assess the allegations and the likelihood that it will successfully defend the claim. When the Company believes it is probable that it will not prevail in a particular matter, itOctober 20 will then record an estimate of the amount of liability based, in part, on advice of outside legal counsel.

The Company maintains a $1 million Errors and Omission policy (“E&O Insurance”) that covers it all the way back to June 9th, 2009. In the event, the Company incurs any financial liability from these types of claims, it will likely be covered under its E&O Insurance up to $1 million, per occurrence.

Currently, the Company the following three (3) outstanding claims covered by its E&O insurance: (i) a claim where a buyer desires compensation from the seller for alleged foundation issues, (b) a claim where a buyer purchased a property under the impression the property was on public sewer when it was on a septic tank, and (c) a claim where a tenant moved in and did not pay rent and the seller is pursuing collection from the tenant.

Outside of these claims, the Company is not involved in any proceedings, including product or service liability, general liability, workers' compensation liability, employment, or commercial and intellectual property litigation, which have arisen in the normal course of operations. The Company is insured for professional liability insurance, general liability, workers' compensation, employer's liability, property damage and other insurable risk required by law or contract, with retained liability or deductibles. The Company has recorded and maintains an estimated liability in the amount of management's estimate of the Company's aggregate exposure for such retained liabilities and deductibles. For such retained liabilities and deductibles, the Company determines its exposure based on probable loss estimations, which requires such losses to be both probable and the amount or range of probable loss to be estimable. The Company believes it has made appropriate and adequate reserves and accruals for its current contingencies. 

NOTE 9 – SUBSEQUENT EVENTS

During the fourth quarter of 2021, the Company ceased its staging and moving operations. As a result, the Company sold its moving truck for $54,000, As of March 22, 2022, the Company has paid off its credit card debt and Wells Fargo credit line. During the first quarter of 2022, the Company dissolved its joint venture partnership with Smart Real Estate Tools, LLC.  This was a mutual decision of the partners. As of March 17, 2022, the Company surpassed the initial minimum raise of its Regulation A offering of $1,000,000. As a result, the Company accepted subscriptions from 94 investors who became new shareholders as of March 17, 2022.  As of April 20, 2022, the Company has raised a total of $1,088,500 in their Regulation A offering from 94 investors.

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ANDREW ARROYO REAL ESTATE, INC.

SCHEDULE 1

GENERAL AND ADMINISTRATIVE EXPENSES

FOR THE YEARS ENDED DECEMBER 31, 2021 and 2020

	2021		2020
	(restated)
General and administrative expenses (Schedule 1)
Advertising	$	85,480	$	63,709
Automobile Expense	$	16,215	$	14,373
Bank and Credit Card Fees	$	26,525	$	23,978
Benefit Plan Expenses	$	2,855	$	-
Business Gifts	$	163	$	1,427
Business Licenses and Permits	$	24,194	$	23,948
Company Events/Training	$	-0-	$	11,612
Computer and Internet Expenses	$	-0-	$	10,459
Consulting Fees	$	26,250	$	-
Continuing Education	$	312	$	60
Dues and Subscriptions	$	73,788	$	11,460
Insurance Expense	$	54,277	$	54,263
Laundry & Dry Cleaning	$	-0-	$	868
Legal & Professional Fees	$	94,063	$	28,924
Marketing	$	167,526	$	139,049
Meals and Entertainment	$	4,195	$	6,056
Medical Benefits	$	-0-	$	13,983
Office Expenses	$	61,331	$	67,133
Other Employee Benefits	$	29,419	$	13,825
Officer Wages	$	194,981	$	25,769
Payroll Expenses	$	-0-	$	33,143
Payroll Taxes	$	42,804	$	25,956
Photography Expenses	$	-0-	$	636
Postage and Delivery	$	2,309	$	1,118
Profit Sharing – 401k Safe Harbor	$	12,291	$	10,903
Reconciliation Discrepancies	$	-0-	$	10
Registered Agent Fees	$	2,183	$	-
Rent Expense	$	158,205	$	219,328
Repairs and Maintenance	$	-0-	$	3,411
Salaries & Wages (Payroll)	$	243,576	$	68,903
Small Tools & Equipment		18,276		-
Technology/Electronics	$	3,448	$	1,881
Telecommunications	$	33,016	$	18,028
Travel	$	14,739	$	8,063
Utilities	$	1,771	$	1,859
Total Expense	$	1,394,193	$	904,133

See accompanying notes to the financial statements.

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ANDREW ARROYO REAL ESTATE, INC.

Schedule 2

OTHER INCOME (EXPENSE)

FOR THE YEARS ENDED DECEMBER 31, 2021 and 2020

	2021			2020
	(restated)
Interest Expense	$	(6,732	)		(27,670	)
Gain on Sale	$	-			806
Non Taxable Income	$	-			10,000
Depreciation & Amortization Expense	$	(42,719	)		(3,539	)
Non-Deductible	$	(859	)		(4,112	)
Total Other Expense	$	(50,310	)	$	(24,515	)

See accompanying notes to the financial statements.

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ANDREW ARROYO REAL ESTATE, INC.

SCHEDULE 3

STATEMENT OF GENEROUS CAPITALISM

Years Ended December 31, 2021 and 2020

	2021			2020
	(restated)
Income from Operations	$	9,119,969		$	7,354,474
Cost of Sales:
Coaching Fees	$	8,569		$	11,238
Cost of Sales – Salaries & Wages	$	60,983		$	43,800
Cost of Sales - Agents	$	6,896,003		$	5,448,399
Cost of Sales - Transaction Coordinators	$	208,175		$	201,369
Cost of Sales- Material/Supply	$	54,305		$	74,310
Property Management Fees Paid	$	144,142		$	100,412
Recruiting Bonuses	$	-0-		$	1,500
Referral Fees	$	281,767		$	238,425
Staging & Moving Operations	$	26,023		$	66,381
Total Cost of Sales	$	7,679,968		$	6,185,834
Gross Profit	$	1,440,002		$	1,168,640
Generous Capitalism - Charitable Contributions	$	60,847		$	218,193
General and administrative expenses (Schedule 1)	$	1,394,193		$	904,133
Profit from Operations	$	(15,038	)	$	46,314
Other Income/(Expense) -(Schedule 2)	$	(50,310	)	$	(24,515	)
Profit /(Loss) before income tax benefit	$	(65,348	)	$	21,799
Income Tax Provision (Note 7)	$	1,847		$	800
Net Profit	$	(67,195	)	$	20,999

See accompanying notes to the financial statements.

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  ANDREW ARROYO REAL ESTATE, INC. 

BALANCE SHEETS 

June 30, 2022 and December 31, 2021 

	June 30, 2022			Dec. 31, 2021
ASSETS
Current Assets
Cash and Cash Equivalents (Note 1)	$	624,948		$	3,655
Accounts Receivable	$	50,840		$	-
Other Current Assets
Other Current Assets	$	241,038		$	314,179
Total Current Assets	$	916,826		$	317,833
Property and equipment, net (Note 1)	$	52,767		$	56,777
Other Assets
Total Other Assets	$	308,342		$	302,174
TOTAL ASSETS	$	1,277,936		$	676,784
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts Payable	$	79,348			19,050
Credit Cards	$	40,216		$	84,793
Line of Credit (Note 6)	$	0		$	74,058
Current Portion of Long Term Debt	$	111,737		$	111,737
Other Current Liabilities	$	218,299		$	282,572
Total Current Liabilities	$	449,600		$	572,211
Long Term Liabilities
Notes Payable (Note 6)	$	250,522		$	237,988
Total Liabilities	$	700,122		$	810,198
Equity
Common Stock, $.001 par value 25,000,000 shares authorized, 3,180,460 issued and outstanding as of June 30, 2022 and 3,000,000 issued and outstanding as of December 31, 2021;	$	810,055		$	1,000
Series A Convertible Preferred Stock, ($.001 par value; 5,000,000 shares authorized, and 2,000,000 outstanding as of June 30, 2022 and December 31, 2021)
Additional paid-In capital	$	0		$	583,514
Shareholder Contribution/(Distribution)	$	0		$	(66,220	)
Retained Earnings/(Deficit)	$	(232,241	)	$	(651,708	)
Total stockholders’ equity	$	577,814		$	(133,414	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,277,936		$	676,784

See accompanying notes to the financial statements.

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  ANDREW ARROYO REAL ESTATE, INC. 

STATEMENT OF OPERATIONS 

Six Months Ended June 30, 2022 and 2021 

	2022			2021
Income from Operations	$	4,830,523		$	4,194,549
Cost of Sales:
Charitable Contributions	$	49,620		$	42,630
Coaching Fees	$	2,988		$	6,932
Salaries & Wages	$	5,286		$	22,157
Cost of Sales - Agents	$	3,737,130		$	3,064,771
Cost of Sales - TC	$	100,322		$	96,704
Cost of Sales- Material/Supply	$	30,524		$	38,635
Property Management Fees Paid	$	76,246		$	67,556
Recruiting Bonuses	$	-		$	-
Referral Fees	$	106,269		$	143,150
Staging & Moving Operations	$	1,565		$	16,737
Total Cost of Sales	$	4,109,950		$	3,499,273
Gross Profit	$	720,573		$	695,275
General and administrative expenses	$	848,790		$	601,131
Profit from Operations	$	(128,217	)	$	94,145
Other Income/(Expense)	$	33,645		$	(11,320	)
Profit /(Loss) before income tax benefit	$	(94,572	)	$	84,672
Income Tax Provision (Note 7)	$	4,255		$	1,847
Net Profit	$	(98,827	)	$	82,825

See accompanying notes to the financial statements.

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ANDREW ARROYO REAL ESTATE, INC. 

STATEMENT OF STOCKHOLDERS’ EQUITY 

Six Months Ended June 30, 2022 and December 31,2021 

	COMMON STOCK		PAID IN CAPITAL		RETAINED EARNINGS			TOTAL
Balance – December 31, 2020	$	1,000	$	482,590	$	(735,770	)	$	(252,180	)
Net Income / (Loss)	$	-	$	-	$	(67,195	)	$	(67,195	)
Stockholder Contributions / (Distributions)	$	-	$	482,590	$	668,551		$	185,961
Balance – December 31, 2021	$	1,000	$	-	$	(134,414	)	$	(133,414	)
Net Income / (Loss)	$	-	$	-	$	(98,827	)	$	(98,827	)
Stockholder Contributions / (Distributions)	$	809,055		-	$	1,000		$	810,055
Balance - June 30, 2022	$	810,055	$	-	$	(232,241	)	$	577,814

See accompanying notes to the financial statements.

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ANDREW ARROYO REAL ESTATE, INC. 

 STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2022 and 2021 

	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)		(98,827	)		82,825
Adjustments to reconcile net Income to net cash flows
provided by operating activities:
Deferred Income Taxes		-			-
Depreciation & Amortization		16,037			9,472
Gain on Disposal of Assets		50,840
Changes in assets and liabilities
Changes in Accounts Receivable		(50,840	)		-
Changes in Other Receivables		-			7,828
Changes in prepaid expenses & other		73,141			24,095
Changes in accounts payable		60,298			-
Changes in Other Payables		(109,535	)		(30,805	)
Income Taxes Payable		-			-
Changes in accrued expenses		684			2,773
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(109,042	)		96,188
CASH FLOWS PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Net Purchases of property and equipment		0			(6,746	)
Net Inflows – Disposal of equipment		0
Net Purchases of intangible assets		(18,196	)		-
Net cash flows provided by (used in) Investing activities:		(18,196	)		(6,746	)
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Net proceeds (repayments) on borrowings		12,535			6,581
Changes in Line of Credit		(74,058	)		(7,020	)
Dividend Distribution		999			(10,827	)
Loan from Shareholder		-			-
Proceeds (re-purchase) for Equity Investment		809,055			-
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:		748,531			(11,266	)
Net Increase (Decrease) in cash and cash equivalents		621,293			78,176
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		3,655			38,701
CASH AND CASH EQUIVALENTS END OF PERIOD	$	624,948		$	116,877

72

ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022 AND JUNE 30, 2021

NOTE 1 – THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Andrew Arroyo Real Estate Inc. (the “Company”) was incorporated on June 18, 2020, under the laws of the State of Delaware. A predecessor company that was merged with and into the Company effective July 31, 2021 was originally incorporated under the laws of the State of California on January 20, 2004, as Andrew Michael Arroyo Inc. and updated its name to Andrew Arroyo Real Estate Inc. on April 30, 2007. The trademark and d/b/a that is known in the marketplace is “AARE”. The Company was formed to conduct real estate brokerage services. These services include assisting clients buy, sell, manage, and invest in residential and commercial properties as well as business opportunities. The Company’s year-end is December 31. As a result of the above-referenced merger, all operations of the California corporation were assumed into the Company. As a result, the historical financial statements of the California corporation are the ones presented herein.

On July 29, 2021, the Company filed an amended and restated Certificate of Incorporation with the State of Delaware, which (i) increased the Company’s authorized common stock from 1,000 shares of common stock to 25,000,000 shares of common stock, par value $0.001, and 5,000,000 shares of preferred stock, par value $0.001; and (ii) effected a 1-for-3,000 forward stock split of the Company’s issued and outstanding common stock. The authorized preferred stock created, provides that the Board of Directors of the Company may fix the terms of any series of preferred stock created, including any dividend rights, dividend rates, conversion rights, voting rights, rights and terms of any redemption, redemption, redemption price or prices, and liquidation preferences, if any.

On July 29, 2021, after filing the amended and restated Certificate of Incorporation, the Company filed a Certificate of Designation with the State of Delaware to create a series of preferred stock entitled “Series A Convertible Preferred Stock. The Series A Convertible Preferred Stock (i) has dividend rights on an equal basis with the Company’s common stock, (ii) has preference in the event of a liquidation event, (iii) is convertible after 12 months into shares of the Company’s common on a 1-for-1 basis, (iv) has three votes per share for any matter properly brought before the Company’s shareholders for a vote, and (v) contains certain protective provisions.

On July 31, 2021, the Company “Andrew Arroyo Real Estate, Inc.” a Delaware “C” Corporation merged with “Andrew Arroyo Real Estate, Inc.” a California “S” Corporation. After the merger the California “S” Corporation was merged with and into the Company, which effectively ceased all operations of the California corporation and those operations were assumed by the Company (the surviving Delaware “C” Corporation). Effective with the merger, the Certificate of Incorporation of the Company stayed as the Company’s Certificate of Incorporation, and the 1,000 shares owed by the sole shareholder of the California corporation, Mr. Andrew Arroyo, the Company’s sole director and one of its executive officers, were exchanged for 2,000,000 shares of the Company’s Series A Convertible Preferred Stock.

During the fourth quarter of 2021, the Company ceased its staging and moving operations. As a result, the Company sold its moving truck for $54,000.

As of March 22, 2022, the Company has paid off its credit card debt and Wells Fargo credit line. During the first quarter of 2022, the Company dissolved its joint venture partnership with Smart Real Estate Tools, LLC. This was a mutual decision of the partners.

As of March 17, 2022, the Company surpassed the initial minimum raise of its Regulation A offering of $1,000,000. As a result, the Company accepted subscriptions from 94 investors who became new shareholders as of March 17, 2022.

As of April 20, 2022, the Company has raised a total of $1,088,500 in their Regulation A offering from 94 investors.

Basis of Presentation

The audited financial statements include the accounts of the Company under the accrual basis of accounting. The financial statements, included herein, have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission. Pursuant to these rules and regulations, the financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and have been consistently applied.

Management’s Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.

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ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022 AND JUNE 30, 2021

NOTE 1 – THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes,” which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.

The Company has adopted the provisions of FASB ASC 740-10-05 Accounting for Uncertainty in Income Taxes. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The company prior to merging operated as an S-Corporation which is a “Pass-through” entity for taxation purposes. In lieu of Federal company income taxes, the shareholders, are taxed on their proportionate share of the Company’s taxable income.

The Shareholders were liable for their pro-rata share of the net income for payment of the tax liability incurred as a result of the pass-through income through the merger date of 7/30/2021. Therefore, no provision or liability for Federal income taxes has been included in the financial statements. For California Franchise tax a purpose, a flat tax of $800 or 1.5% is incurred for the benefit of operating a California based S-Corporation. Upon the merger the company was reorganized as a “C” Corp.  As a C Corp. under current tax law the company is responsible for Federal Taxes equal to 21% of the Net Income of the company as well as various tax rates for the states they have operations in. For the year Ending 12/31/21 the company had a Net Operating Loss (NOL) of $119,647 as well as a Charitable Contribution Carryover the combination of which created a Deferred tax asset of as listed below.

The Company operates in 24 states throughout the U.S. Each State has an income tax and/or a franchise/commerce tax on the gross receipts of businesses based on total revenues in each state. The provision for income taxes includes state income taxes currently payable and deferred income taxes. Deferred income taxes represent the effects of items reported for tax purposes in periods different from those used for financial statement purposes. For the six months ended 6/30/22 and 6/30/21 there was a deferred tax asset of $28,627 and no provision for Deferred income taxes respectively.

Charitable giving policy is unique.

Giving and sharing are more than buzzwords at AARE. Up to twenty percent of the company’s gross profit on every transaction goes to charity (after sales agent’s commissions are paid). The Company believes that with success comes the responsibility to do what they can for those less fortunate. Toward that end, the Company funds non-profit organizations dedicated to helping those in need. They support numerous religious and secular charities worldwide. The Company has no intention of deviating from this policy or reducing the amount it gives to charity. The charitable giving policy has been written into the bylaws and certificate of incorporation. For the six months ending June 30, 2022 and 2021 the company donated $49,390 and $42,630 respectively.

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ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022 AND JUNE 30, 2021

NOTE 1 – THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash and Cash Equivalents

The Company considers all short-term securities purchased with maturity dates of three months or less to be cash. The Company from time to time during the years covered by these financial statements may have bank balances in excess of its insured limits. Management has deemed this as a normal business risk. Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. During the periods ended 6/30/22 and 6/30/21, the Company had approximately $625,000 and $116,900 respectively deposited in two financial institutions. Of this amount, $625,000 and $116,900 respectively was insured by the Federal Deposit Insurance Corporation.

Concentration and Credit Risk

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents. The Company places its cash and temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit.

Restricted Cash

Certain of the Company’s cash positions are property management trust funds, which include security deposits and rents that belong to property owners. These cash amounts are reported as current assets on the balance sheets and liabilities based on when the cash will be contractually released to the owners or tenants of the properties. Total restricted cash was approximately $197,000 on 6/30/22 and $220,000 on 6/30/21, respectively.

Inventory

The Company does not currently carry any inventory. In the event in the future, the Company carries inventory, it will be conducted under the following method. Inventory will be stated at the lower of cost or market (“LCM”) value. Cost is determined principally by the first-in, first-out (“FIFO”) method. In valuing inventory, management is required to make assumptions regarding the level of reserves required to value potentially obsolete or over-valued

Items at the lower of cost or market. These assumptions require the Company to analyze the aging of and forecasted demand for its inventory, forecast future products sales prices, pricing trends and margins, and to make judgments and estimates regarding obsolete or excess inventory. Future product sales prices, pricing trends and margins are based on the best available information at that time including actual orders received; negotiations with the Company’s customers for future orders, including their plans for expenditures; and market trends for similar products. The valuation of inventory taken in trade from customers requires the Company to use the best information available to determine the value of the inventory to potential customers. This value is subject to change based on numerous conditions. Inventory reserves are established taking into account age, frequency of use, or sale, and, in the case of repair parts, the installed base. While calculations are made involving these factors, significant management judgment regarding expectations of future events is involved. Future events that could significantly influence the Company’s judgment and related estimates include general economic conditions in markets where the Company’s products are sold; new price fluctuations; actions of the Company’s competitors, including the introduction of new products and technological advances; as well as new products and design changes the Company introduces. The Company makes adjustments to its inventory reserve based on the identification of specific situations and increases its inventory reserves accordingly. As further changes in future economic or industry conditions occur, the Company will revise the estimates that were used to calculate its inventory reserves.

75

ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022 AND JUNE 30, 2021

NOTE 1 – THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Continued)

Intangible Assets

Intangible assets include patented and unpatented technology, trade names, customer relationships and other specifically identifiable assets and are amortized on a straight-line basis over their respective estimated useful lives, which range from ten to twenty-five years. Intangible assets are reviewed for impairment when facts and circumstances indicate a potential impairment has occurred. As of December 31, 2021 the company merged with the predecessor S-Corporation which created the intangible asset of Goodwill, as of December 31,2021 in the amount of $310,808. For the period ending June 30, 2022 the company had $308,342 in intangible assets.

Property, Plant and Equipment

Property and equipment are carried at cost. Expenditures for property and equipment are capitalized and depreciated over five to 31.5 years using the declining balance method. When assets are retired or sold, the related cost and accumulated depreciation are removed from the account and any gain or loss arising from such disposition is included as income or expense. Expenditures for repairs and maintenance are charged to expense as incurred. For the period ending 6/30/22 and the year ending 12/31/21 depreciation expense was $4,009 and $34,095 respectfully. Fixed assets consisted of:

	2022			2021
Fixed Assets:
Auto & Transportation	$	47,014		$	146,435
Leasehold Improvements	$	25,035		$	25,035
Machinery & Equipment	$	0		$	0
Advertising Equipment	$	226,195		$	226,195
Furniture & Fixtures	$	41,841		$	41,841
	$	340,085		$	439,506
Accumulated Depreciation	$	(287,317	)	$	(382,729	)
Net Fixed Assets	$	52,768		$	56,777

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ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022 AND JUNE 30, 2021

NOTE 1 – THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Continued)

Intangible Assets

Intangible assets consist of Goodwill created upon the merger of the S-Corp into the C-Corp and the purchase of other intangible assets (domain name). For the period ending 6/30/22 and the year ending 12/31/21 amortization expense was $12,028 and $8,633 respectfully.

	2022			2021
Intangible Assets:
Goodwill	$	310,808		$	310,808
Other Intangible Assets	$	18,196		$	0
Total Intangible Assets:	$	329,004		$	310,808
Accumulated Amortization	$	(20,662	)	$	(8,633	)
Net Intangible Assets	$	308,342		$	302,174

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company determines the allowance based on individual customer review and current economic conditions. The Company reviews its allowance for doubtful accounts at least quarterly. Individual balances exceeding a threshold amount that are more than 90 days past due are reviewed individually for collectability. All other balances are reviewed on a pooled basis by type of receivable. Account balances are charged off against the allowance when the Company determines it is probable the receivable will not be recovered. The balance of the allowance for doubtful accounts was $0 and $0 at June 30, 2022, and December 31, 2021, respectively.

Revenue Recognition

The Company has generated significant revenues in California. The Company has not, to date, generated significant revenues outside California. The Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company’s financial position and results of operations was not significant.

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ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022 AND JUNE 30, 2021

NOTE 1 – THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Continued)

Impact of New Accounting Standards

Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”). ASU 2014-09 provides guidance for the recognition, measurement and disclosure of revenue resulting from contracts with customers and will supersede virtually all of the current revenue recognition guidance under GAAP. In March 2016, the FASB issued Accounting Standards Update No. 2016-08, “Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” (“ASU 2016-08”), which clarifies how an entity should identify the unit of accounting for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. In April 2016, the FASB issued Accounting Standards Update No. 2016-10, “Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing” (“ASU 2016-10”), which clarifies guidance related to identifying the performance obligations and licensing implementation guidance contained in the new revenue recognition standard. In May 2016, the FASB issued Accounting Standards Update No. 2016-12, “Revenue from Contracts with Customers (Topic 606), Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”), which addresses narrow-scope improvements to the guidance on collectability, noncash consideration and completed contracts at transition as well as providing a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. In December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” ASU 2016-20 is intended to clarify and suggest improvements to the application of current standards under Topic 606 and other Topics amended by ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 016-20 are effective for reporting periods beginning after December 15, 2017, with early adoption permitted for reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact of the provisions of this standard on the Company’s financial statements.

In April 2015, the FASB issued ASU 2015-03, “Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs,” (“ASU 2015-03”). ASU 2015-03 requires debt issuance costs related to borrowings be presented in the balance sheet as a direct deduction from the carrying amount of the borrowing, consistent with debt discounts. The ASU does not affect the amount or timing of expenses for debt issuance costs. In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements,” which amends, ASC 835-30, “Interest – Imputation of Interest.” The ASU clarifies the presentation and subsequent measurement of debt issuance costs associated with lines of credit. These costs may be presented as an asset and amortized ratably over the term of the line of credit arrangement, regardless of whether there are outstanding borrowings on the arrangement. The Company adopted ASU 2015-03 and ASU 2015-15 as of January 1, 2016, on a retrospective basis, by recasting all prior periods shown to reflect the effect of adoption.

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ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022 AND JUNE 30, 2021

NOTE 1 – THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Continued)

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory,” (“ASU 2015-11”). ASU 2015-11 simplifies the subsequent measurement of inventory by using only the lower of cost or net realizable value.

The ASU defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The effective date will be the first quarter of fiscal year 2017 with early adoption permitted and is not expected to have a material impact on the Company’s financial statements. ASU 2015-11 should be applied prospectively.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” (“ASU 2016-01”). The amendments in ASU 2016-01, among other things, require equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; require public business entities to use the exit price notion when measuring fair value of financial instruments for disclosure purposes; require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables); and eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost. The effective date will be the first quarter of fiscal year 2018.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize on the balance sheet the assets and liabilities associated with the rights and obligations created by those leases. The guidance for lessors is largely unchanged from current U.S. GAAP. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current U.S. GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. The effective date will be the first quarter of fiscal year 2019, with early adoption permitted. The Company is evaluating the impact that adoption of this new standard will have on its financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), which includes multiple amendments intended to simplify aspects of share-based payment accounting. Amendments to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, and forfeitures will be applied using a modified retrospective transition method through a cumulative-effect adjustment to equity as of the beginning of the period of adoption. Amendments to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement will be applied retrospectively, and amendments requiring the recognition of excess tax benefits and tax deficiencies in the income statement are to be applied prospectively. ASU 2016-09 will be effective for annual reporting periods beginning after December 15, 2016, with early adoption permitted and is not expected to have a material impact on the Company’s financial statements.

In August 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments (Topic 230): Statement of Cash Flows” (“ASU 2016-15”), which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. ASU 2016-15 also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. ASU 2016-15 is effective for fiscal years and interim periods beginning after December 15, 2017. The Company is currently evaluating the impact that this standard will have on its financial statements.

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ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022 AND JUNE 30, 2021

NOTE 1 – THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326), which modifies the measurement of credit losses on financial instruments. This standard requires the use of an expected loss impairment model for instruments measured at amortized cost based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. This guidance is effective for public companies with fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The Company adopted this standard as of January 1, 2021 on a modified retrospective basis, which resulted in a $0 in the Company’s overall allowance for credit losses related to the Company’s receivables, with a corresponding no impact to the Company’s accumulated deficit.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement. The guidance eliminates, amends and adds certain disclosure requirements for fair value measurements. The new standard is effective for all public entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted this standard as of January 1, 2021, and the adoption did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force). The guidance on the accounting for implementation, setup and other upfront costs (collectively referred to as implementation costs) applies to entities that are a customer in a hosting arrangement that is a service contract. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The new standard is effective for public companies with fiscal years beginning after December 15, 2019, including interim periods within that fiscal year and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption and early adoption is permitted. The Company adopted this standard prospectively as of January 1, 2021, and the adoption did not have a material impact on the Company’s consolidated financial statements.

In November 2019, the FASB issued ASU No. 2019-08, Compensation — Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements — Share-Based Consideration Payable to a Customer. The ASU simplifies and increases comparability of accounting for nonemployee stock-based payments, specifically those made to customers. Under the new guidance, such awards will be accounted for as a reduction of the transaction price in revenue, but should be measured and classified following the stock compensation guidance in ASC 718, Compensation — Stock Compensation. The new standard is effective for public companies with fiscal years beginning after December 15, 2019, including interim periods within those fiscal years and can be applied retrospectively or on a modified retrospective basis through a cumulative-effect adjustment to retained earnings upon adoption. The Company adopted this standard on a modified retrospective basis as of January 1, 2021, and the adoption did not have an impact on the Company’s consolidated financial statements.

80

ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022 AND JUNE 30, 2021

NOTE 1 – THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (Continued)

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU is part of the FASB’s simplification initiative; and it is expected to reduce cost and complexity related to accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740, Income Taxes related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The new standard will become effective for public companies with fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted this guidance on January 1, 2021 and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

New Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. An update was also issued expanding the scope of this guidance. The guidance provides optional expedients and exceptions for applying GAAP to contracts or other transactions affected by reference rate reform if certain criteria are met. The guidance was issued on March 12, 2020 and may be applied prospectively through December 31, 2022. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The guidance amends ASC 805 to require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The amendment is effective for public companies with fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendment should be applied prospectively to business combinations occurring on or after the effective date. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In December 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force),” which requires that amounts described as restricted cash or cash equivalents must be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 will be effective in fiscal year 2019 and must be applied retrospectively to all periods presented. The Company is evaluating the impact that adoption of this new standard will have on its financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the measurement of goodwill impairment by eliminating the requirement of performing a hypothetical purchase price allocation. Instead, impairment will be measured using the difference between the carrying amount and fair value of the reporting unit. The amended guidance also eliminates the requirement for any reporting unit with a zero or a negative carrying amount to perform a qualitative assessment and will require disclosure of the amount of goodwill allocated to each reporting unit with a zero or a negative carrying amount of net assets. This standard will be effective beginning in the first quarter of fiscal year 2021. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The standard is to be applied prospectively. The Company is evaluating the impact that adoption of this new standard will have on its financial statements.

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ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022 AND JUNE 30, 2021

NOTE 2 – SECURITIES: Net Gain/Loss Per Share, basic and diluted

The Company’s financial instruments include short-term investments in commodities, currencies, futures, stocks and bonds. Basic gain/loss per share has been computed by dividing net gain/loss available to common shareholders by the weighted average number of common shares outstanding for the period. Shares issuable upon the exercise of any warrants or stock options, have been excluded as a Common Stock equivalent in the diluted loss per share because their effect is anti-dilutive.

NOTE 3 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments, as defined by Accounting Standard Codification subtopic 825-10, Financial Instrument (“ASC 825-10”), include cash, accounts payable and convertible note payable. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at December 31, 2021 and June 30, 2022 respectively.

FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

· Level 1: Observable inputs such as quoted prices in active markets;

· Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

· Level 3: Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

The Company’s derivative is valued at Level 3.

NOTE 4 – STOCK BASED COMPENSATION

The Company follows Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”), which requires that all share-based payments to both employees and non-employees be recognized in the income statement based on their fair values.

As of 6/30/22, the Company does not have any issued or outstanding stock-based compensation through any qualified or non-qualified stock-based compensation plan. After the registration of these shares with the SEC, the Company will establish a broad-based employee stock purchase plan and an omnibus stock compensation plan to issue and award restricted stock units, restricted stock, options or a combination of these award types based on service and performance. These awards will be offered to both employees and non-employees. Investors will be provided a copy of this plan once the plan becomes effective, and Form S-8 will be filed with the SEC.

The issuance of Common Stock for other than cash is recorded by the Company at market values.

82

ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022 AND JUNE 30, 2021

NOTE 5 – RELATED PARTY TRANSACTIONS

Related entities:

1.)	The Company dissolved its partnership with  “Smart Real estate tools, LLC” in June 2022, which was originally formed in May 2021 as a joint venture. It was a membership software program for Real Estate Agents. It provided tools to Real Estate agents in a proprietary manner. The company owned 50% along with the software developer. Operations have ceased as a partnership, however, the software developer continues to offer the product at his own expense and owns 100% of the interest in the product.
2.)	The Company president, Andrew Arroyo is the 100% owner of “Andrew Arroyo Investments, LLC.” The company performs Investment management services.
3.)	Andrew and Megan Arroyo have a minority interest in “Neighborhood Investment Network, LLC.” The company uses retirement Funds for investing in Real estate. Andrew and Megan own 24% via one of their retirement accounts.

NOTE 6 – DEBT

The Company recently retired a $75,000 business Line of Credit (LOC) through Wells Fargo Bank that renews annually. The LOC carries an interest rate of 9.25% and 10.75% as of 6/30/22 and 12/31/21 respectfully. The company obtained two Covid -19 related loans: One a Paycheck Protection Program (PPP) loan at zero interest rate for $50,555. This is a forgivable loan if the company met the criteria for forgiveness. This loan was forgiven in March of 2021. The company also took out an “Economic Injury Disaster Loan (EIDL) in the amount of $149,900. This loan carries a 3.75% interest rate payable over 30 years with a deferred start date until April 29, 2021. On December 26, 2020 the company also took out a vehicle loan for a Lexus RX in the amount of $46,014. The loan is for a period of 5 years at 1.99% interest rate. The Debt schedule for the years ending December 31, 2022 and December 31, 2021 were as follows:

	2022		2021
Other Current Liabilities
Accounts Payable	$	79,348	$	19,050
Charge Cards Payable	$	40,216	$	84,793
PPP Loan	$	-	$	-
Short-term Loan	$	-	$	-
Wells Fargo Credit Line	$	-	$	74,058
Other Current Liabilities	$	-	$	282,572
Current Portion of Long Term Debt	$	111,737	$	111,737
	$	231,301	$	572,210
Long Term Debt:
EIDL Loan (net of current portion)	$	140,569	$	144,955
Note Payable to Andrew Arroyo (Net of current portion)		86,868		65,000
Lexus Payable (Net of current portion)	$	23,087	$	28,034
Total Long Term Debt	$	250,523	$	237,989

83

ANDREW ARROYO REAL ESTATE, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022 AND JUNE 30, 2021

NOTE 7 – INCOME TAXES

Income taxes for the period ending 6/30/21 and 6/30/20 consists of the following:

State income tax provision:	6/30/2022			6/30/2021
Deferred Tax Asset	$	31,138		$	1,847
Valuation Allowance	$	(26,883	)	$	0
State Income Tax Provision
Current	$	4,255		$	1,847
Deferred	(-0-		)	(-0-		)
Net deferred tax asset/liability	$	4,255		$	1,847

NOTE 8 – CONTENGENCIES

The real estate business is known as a litigious industry, especially in certain states like California where the Company conducts business. Buyers and sellers often bring claims against one another and usually attempt to involve the real estate agents and brokers in the claim or the suit seeking financial damages. In determining whether liabilities should be recorded for pending litigation claims, one must assess the allegations and the likelihood that we will successfully defend the claim. When we believe it is probable that we will not prevail in a particular matter, we will then record an estimate of the amount of liability based, in part, on advice of outside legal counsel. Currently, there is one outstanding claim that is being arbitrated in San Diego, California, where a buyer desires for the sale to be rescinded and the seller to reclaim the home. The Company maintains a $1 million dollar Errors and Omission policy that covers the Company all the way back to June 9, 2009. In the event the Company incurs any financial liability from this claim, it will be covered under the Errors and Omissions policy up to $1 million, per occurrence.

Outside of this one claim, the Company is not involved in any proceedings, including product or service liability, general liability, workers’ compensation liability, employment, or commercial and intellectual property litigation, which have arisen in the normal course of operations. The Company is insured for professional liability insurance, general liability, workers’ compensation, employer’s liability, property damage and other insurable risk required by law or contract, with retained liability or deductibles. The Company has recorded and maintains an estimated liability in the amount of management’s estimate of the Company’s aggregate exposure for such retained liabilities and deductibles. For such retained liabilities and deductibles, the Company determines its exposure based on probable loss estimations, which requires such losses to be both probable and the amount or range of probable loss to be estimable. The Company believes it has made appropriate and adequate reserves and accruals for its current contingencies.

NOTE 9 – SUBSEQUENT EVENTS

None.

84

PART III – EXHIBITS

ITEM 16 INDEX TO EXHIBITS

Item No.	Description
2.1(1)	Amended and Restated Articles of Incorporation of Andrew Arroyo Real Estate Inc.
2.2(1)	.Amended and Restated Bylaws of Andrew Arroyo Real Estate Inc.
2.3(1)	Certificate of Merger filed in State of Delaware effective July 31, 2021
2.5(1)	Merger Agreement by and between Andrew Arroyo Real Estate, Inc., a California corporation and Andrew Arroyo Real Estate Inc., a Delaware corporation dated July 28, 2021
4.1(1)	Form of Subscription Agreement for the Offering
10.1*	Escrow Agreement for the Offering
11.1*	Consent of Independent Certified Public Accoutants
12.1*	Legal Opinion of Law Offices of Craig V. Butler

* Filed herewith.

(1) Incorporated by reference from Issuer’s Offering Statement on Form 1-A filed with the Commission on September 15, 2021.

85

SIGNATURES

Pursuant to the requirements of Regulation A, the Issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this Offering Statement to be signed on its behalf by the undersigned thereunto duly authorized, in the City of San Diego, State of California, on October 20, 2022.

	Andrew Arroyo Real Estate Inc.
Dated: October 20, 2022		/s/ Andrew Michael Arroyo
	By:	Andrew Michael Arroyo
	Its:	President and Chief Executive Officer (Principal Executive Officer)
Dated: October 20, 2022		/s/ Tiffany Mohler
	By:	Tiffany Mohler
	Its:	Treasurer (Principal Financial Officer) and VP Administration
This Offering Statement has been signed by the following persons in the capacities and on the dates indicated.
Dated: October 20, 2022		/s/ Andrew Michael Arroyo
	By:	Andrew Michael Arroyo, President, Chief Executive Officer (Principal Executive Officer), and Director

86