# EDGAR Filing Document

**Accession Number:** 0001588504
**File Stem:** 0001104659-23-023752
**Filing Date:** 2023-2
**Character Count:** 230072
**Document Hash:** 760b5a0f1ca46623aa0c4d7abe67b1bf
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001104659-23-023752.hdr.sgml**: 20230221

**ACCESSION NUMBER**: 0001104659-23-023752

**CONFORMED SUBMISSION TYPE**: 1-A POS

**PUBLIC DOCUMENT COUNT**: 188

**FILED AS OF DATE**: 20230221

**DATE AS OF CHANGE**: 20230221

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** GROUNDFLOOR FINANCE INC.
- **CENTRAL INDEX KEY:** 0001588504
- **STANDARD INDUSTRIAL CLASSIFICATION:** REAL ESTATE [6500]
- **IRS NUMBER:** 463414189
- **STATE OF INCORPORATION:** GA
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 1-A POS
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 024-12013
- **FILM NUMBER:** 23647870

**BUSINESS ADDRESS:**
- **STREET 1:** 600 PEACHTREE STREET NE
- **STREET 2:** SUITE 810
- **CITY:** ATLANTA
- **STATE:** GA
- **ZIP:** 30308
- **BUSINESS PHONE:** 404-850-9225

**MAIL ADDRESS:**
- **STREET 1:** 600 PEACHTREE STREET NW
- **STREET 2:** STE. 810
- **CITY:** ATLANTA
- **STATE:** GA
- **ZIP:** 30308

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** GROUNDFLOOR Inc.
- **DATE OF NAME CHANGE:** 20131004

## Part

**FORM 1-A DISCLOSURE FORMAT**

**PART II**

OFFERING CIRCULAR

**Groundfloor Finance Inc.**

**One Hundred and Eighty-Two Series of Limited Recourse Obligations**

**Totaling $** **29,992,600**

Dated: February 13, 2023

This Post-Qualification Offering Circular Amendment No. 1 (this "PQA"), made on the Form 1-A disclosure format, amends the offering circular of Groundfloor Finance Inc., dated October 4, 2022, as qualified on November 22, 2022, and as may be amended and supplemented from time to time (the "Offering Circular"), to add additional securities to be offered pursuant to the Offering Circular. This PQA relates to the offer and sale of up to an additional $29,992,600 in aggregate amount of Limited Recourse Obligations (the "LROs") to be issued by Groundfloor Finance Inc. (the "Company," "we," "us," or "our"). Unless otherwise defined below, capitalized terms used herein shall have the same meanings as set forth in the Offering Circular. See "Incorporation by Reference of Offering Circular" below.

We make LROs available for investment on our web-based investment platform www.groundfloor.com (the "Groundfloor Platform"). Our principal offices and mailing address are located at 600 Peachtree Street, Suite 810, Atlanta, GA 30308. The phone number for these offices is (404) 850-9225.

We will issue the LROs in distinct series, each corresponding to a real estate development project (each, a "Project") financed by a commercial loan from us (each, a "Loan"). The borrower for each Project is a legal entity (the "Borrower") that owns the underlying property and has been organized by one or more individuals (each, a "Principal") that own and operate the Borrower. This PQA relates to the offer and sale of each separate series of LROs corresponding to the Projects for which we extend Loans, as described below (the "Offering").

The LROs will be unsecured special, limited obligations of the Company. The LROs are not listed on any national securities exchange or on the over-the-counter inter-dealer quotation system. There is no market for the LROs. Our obligation to make payments on a LRO is limited to an amount equal to each holder's pro rata share of amount of payments, if any, actually received on the corresponding Loan, net of certain fees and expenses retained by us. See the sections titled "General Terms of the LROs," "The LROs Covered by this Offering Circular," and "Project Summaries" of the Offering Circular, as amended hereby, for the specific terms of the LROs covered by this PQA.

**We do not guarantee payment of the LROs in the amount or on the time frame expected. The LROs are not obligations of the Borrowers or their Principals, and we do not guarantee payment on the corresponding Loans. We have the authority to modify the terms of the corresponding Loans which could, in certain circumstances, reduce (or eliminate) the expected return on your investment. See the "General Terms of the LROs—Administration, Service, Collection, and Enforcement of Loan Documents" section on page 106 of the Offering Circular.**

**The LROs are speculative securities. Investment in the LROs involves significant risk, and you may be required to hold your investment for an indefinite period of time. You should purchase these securities only if you can afford a complete loss of your investment. See the "Risk Factors" section on page 12 of the Offering Circular.**

**Generally, no sale may be made to you in this offering to the extent that 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 <u>www.investor.gov</u>.**

We will commence the offering of each series of LROs promptly after the date this PQA is qualified by posting on the Groundfloor Platform a separate landing page corresponding to each particular Loan and Project (each, a "Project Summary"). The offering of each series of LROs covered by this PQA will remain open until the earlier of (1) 30 days, unless extended, or (2) the date the offering of a particular series of LROs is fully subscribed with irrevocable funding commitments (the "Offering Period"); however, we may extend the Offering Period for a particular series of LROs in our sole discretion (with notice to potential investors) up to a maximum of 45 days. We will notify investors who have previously committed funds to purchase such series of LROs of any such extension by email and will post a notice of the extension on the corresponding Project Summary on the Groundfloor Platform.

This Offering is being conducted on a "best-efforts" basis, which means that our officers will use their commercially reasonable best efforts in an attempt to sell the LROs. Such officers will not receive any commission or any other remuneration for these sales. In offering the LROs on our behalf, the officers will rely on the safe harbor from broker-dealer registration set out in Rule 3a4-1 under the Securities Exchange Act of 1934, as amended.

**THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION 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 HEREUNDER ARE EXEMPT FROM REGISTRATION.**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Offering price<br> to the public** | **Underwriting<br> discounts and<br> commissions** | **Proceeds to<br> issuer<sup>(1)(2)</sup>** | **Proceeds to<br> other <br> persons** |
| **Per Unit** | $**10.00** | **N/A** | $**10.00** | **N/A** |
| **Total Minimum** | $**0.00** | **N/A** | $**0.00** | **N/A** |
| **Total Maximum** | $**29992600** | **N/A** | $**29992600** | **N/A** |

---

<sup>(1)</sup> We estimate all expenses for this Offering to be approximately $1,000, which will not be financed with the proceeds of the Offering.

<sup>(2)</sup> Assumes no promotions or discounts applied to any offerings covered by this PQA.

**Incorporation by Reference of Offering Circular**

The Offering Circular, including this PQA, is part of an offering statement (File No. 024-10753) that we filed with the Securities and Exchange Commission. We hereby incorporate by reference into this PQA all of the information contained in the following:

&nbsp;&nbsp;&nbsp;&nbsp;1. Part II
 of the <u>[Offering Circular,](http://www.sec.gov/Archives/edgar/data/1588504/000110465922119477/tm2227304d2_partiiandiii.htm)</u> including the form of LRO Agreement beginning on page LRO-1
 thereof to the extent not otherwise modified or replaced by offering circular supplement
 and/or post-qualification amendment.

&nbsp;&nbsp;&nbsp;&nbsp;2. <u>[Form 1-SA](http://www.sec.gov/Archives/edgar/data/1588504/000110465922103453/tm2226667d1_1sa.htm)</u> <u>,</u> for Groundfloor Finance Inc., covering the periods ending June 30, 2022 and June 30,
 2021.

Note that any statement that we make in this PQA (or have made in the Offering Circular) will be modified or superseded by any inconsistent statement made by us in a subsequent offering circular supplement or post-qualification amendment.

**The LROs Covered by the Offering Circular and Use of Proceeds**

The following disclosure is added on pages 109 and 110 of the Offering Circular under the table included under "The LROs Covered by this Offering Circular" and "Use of Proceeds," respectively:

The table below lists the additional Projects covered by this PQA. Each series of LROs is denominated by the corresponding Project's name.

---

| | |
|:---|:---|
| **Series of LROs/Project** | **Aggregate Purchase<br> Amount/Loan Principal** |
| 949 SMITH ST SW, ATLANTA, GA 30310 | $35320 |
| 1006 SMITH ST SW, ATLANTA, GA 30310 | $42660 |
| 2895 WEBSTER STREET #1, JACKSONVILLE, FL 32254 | $52650 |
| 2143 DARTMOUTH AVENUE #1, COLUMBUS, OH 43219 | $58780 |
| 4922 MISSISSIPPI CT #1, JACKSONVILLE, FL 32209 | $66860 |
| 2002 W 15TH STREET, JACKSONVILLE, FL 32209 | $67740 |
| 707 PARKER BLVD #1, WEAVER, AL 36277 | $69080 |
| 235 CLAY DR #1, PITTSBURGH, PA 15235 | $73880 |
| 9048 WASHINGTON AVENUE #1, JACKSONVILLE, FL 32208 | $73920 |
| 105 HILL ST, SAINT MATTHEWS, SC 29135 | $77520 |
| 1023 W RACE ST, POTTSVILLE, PA 17901 | $80680 |
| 805 KENWOOD AVENUE #1, HOPEWELL, VA 23860 | $82510 |
| 3527 W GLENDALE AVE, MILWAUKEE, WI 53209 | $84730 |
| 920 W 42ND ST, ANNISTON, AL 36206 | $85060 |
| 3810 BRICK ROAD, JACKSONVILLE, FL 32209 | $85970 |
| 2043 LEGRAND RD, COLUMBIA, SC 29223 | $86220 |
| 1713 ACADEMY STREET, JACKSONVILLE, FL 32209 | $87630 |
| 2313 BARRINGTON TRACE CIRCLE #4, ATLANTA, GA 30331 | $88170 |
| 2313 BARRINGTON TRACE CIRCLE #5, ATLANTA, GA 30331 | $88170 |
| 2313 BARRINGTON TRACE CIRCLE #2, ATLANTA, GA 30331 | $88170 |
| 2313 BARRINGTON TRACE CIRCLE #3, ATLANTA, GA 30331 | $88170 |
| 2313 BARRINGTON TRACE CIRCLE #1, ATLANTA, GA 30331 | $88170 |
| 3135 LANSDELL DRIVE, JACKSONVILLE, FL 32208 | $88200 |
| 3526 W GLENDALE AVE, MILWAUKEE, WI 53209 | $92120 |
| 756 SARANAC STREET, JACKSONVILLE, FL 32254 | $92580 |
| 4240 OWEN AVENUE, JACKSONVILLE, FL 32209 | $93150 |
| 910 FLEETWOOD CIRCLE SOUTHWEST #1, ATLANTA, GA 30311 | $93370 |
| 910 FLEETWOOD CIRCLE SOUTHWEST #3, ATLANTA, GA 30311 | $93370 |
| 910 FLEETWOOD CIRCLE SOUTHWEST #4, ATLANTA, GA 30311 | $93370 |
| 910 FLEETWOOD CIRCLE SOUTHWEST #2, ATLANTA, GA 30311 | $93370 |

---

---

| | |
|:---|:---|
| 910 FLEETWOOD CIRCLE SOUTHWEST #5, ATLANTA, GA 30311 | $93380 |
| 304 KETTERING TERRACE, ORANGE PARK, FL 32073 | $94640 |
| 2571 SHARONDALE DR NE #10, ATLANTA, GA 30305 | $101150 |
| 2571 SHARONDALE DR NE #11, ATLANTA, GA 30305 | $101150 |
| 2571 SHARONDALE DR NE #9, ATLANTA, GA 30305 | $101150 |
| 2571 SHARONDALE DR NE #1, ATLANTA, GA 30305 | $101160 |
| 2571 SHARONDALE DR NE #3, ATLANTA, GA 30305 | $101160 |
| 2571 SHARONDALE DR NE #2, ATLANTA, GA 30305 | $101160 |
| 2571 SHARONDALE DR NE #7, ATLANTA, GA 30305 | $101160 |
| 2571 SHARONDALE DR NE #4, ATLANTA, GA 30305 | $101160 |
| 2571 SHARONDALE DR NE #5, ATLANTA, GA 30305 | $101160 |
| 2571 SHARONDALE DR NE #8, ATLANTA, GA 30305 | $101160 |
| 2571 SHARONDALE DR NE #6, ATLANTA, GA 30305 | $101160 |
| 1770 KEEVEN LANE #1, FLORISSANT, MO 63031 | $101490 |
| 1028 HOOD AVENUE, JACKSONVILLE, FL 32254 | $102330 |
| 614 COUNTRY MEADOW LN, BELLEVILLE, IL 62221 | $102590 |
| 531 PEACOCK STREET, POTTSVILLE, PA 17901 | $103900 |
| 975 HUDSON RD, SAINT PAUL, MN 55106 | $104590 |
| 5530 GREY DR #1, SYLVANIA, OH 43560 | $104960 |
| 2076 BROOM STREET, JACKSONVILLE, FL 32208 | $105100 |
| 827 DELMAR CT SE #3, ATLANTA, GA 30316 | $105600 |
| 827 DELMAR CT SE #5, ATLANTA, GA 30316 | $105600 |
| 827 DELMAR CT SE #4, ATLANTA, GA 30316 | $105600 |
| 827 DELMAR CT SE #6, ATLANTA, GA 30316 | $105600 |
| 827 DELMAR CT SE #7, ATLANTA, GA 30316 | $105600 |
| 827 DELMAR CT SE #2, ATLANTA, GA 30316 | $105600 |
| 827 DELMAR CT SE #1, ATLANTA, GA 30316 | $105610 |
| 16 STRANGE STREET, SUMTER, SC 29153 | $107380 |
| 400 W 55TH ST, ANNISTON, AL 36206 | $107960 |
| 7114 BLOXHAM AVENUE, JACKSONVILLE, FL 32208 | $111390 |
| 608 IDEAL WAY #5, CHARLOTTE, NC 28203 | $114700 |
| 608 IDEAL WAY #6, CHARLOTTE, NC 28203 | $114710 |
| 608 IDEAL WAY #7, CHARLOTTE, NC 28203 | $114710 |
| 2153 W MARKET ST, POTTSVILLE, PA 17901 | $117490 |
| 6111 LAKE END RD, RIVERDALE, GA 30296 | $117690 |
| 3701 W KILBOURN AVE, MILWAUKEE, WI 53208 | $119950 |
| 2110 FAIRWAY CIR NE #6, BROOKHAVEN, GA 30319 | $126260 |
| 2110 FAIRWAY CIR NE #5, BROOKHAVEN, GA 30319 | $126270 |
| 5223 ARCHERY AVENUE, JACKSONVILLE, FL 32208 | $127980 |
| 30 MAPLEWOOD ST, HAMPTON, VA 23669 | $130390 |
| 99 GRETA ST, WEST HAVEN, CT 06516 | $130570 |
| 3009 OAKVIEW LANE, PLANT CITY, FL 33566 | $130630 |
| 10508 HALLS FERRY RD, SAINT LOUIS, MO 63136 | $131430 |
| 269 W 62ND STREET, JACKSONVILLE, FL 32208 | $141680 |
| 3828 ROSETREE DRIVE, JACKSONVILLE, FL 32207 | $143820 |
| 638 N LATROBE AVE #1, CHICAGO, IL 60644 | $144890 |

---

---

| | |
|:---|:---|
| 4640 LINCREST DR N, JACKSONVILLE, FL 32208 | $146040 |
| 5936 WENDING DRIVE, JACKSONVILLE, FL 32244 | $151020 |
| 3744 EVE DRIVE EAST, JACKSONVILLE, FL 32246 | $152820 |
| 6736 SNOW WHITE DRIVE, JACKSONVILLE, FL 32210 | $159630 |
| 1316 PLEASANT VALLEY RD, WESTMINSTER, MD 21158 | $160390 |
| 4509 ARTHUR DURHAM DR, JACKSONVILLE, FL 32210 | $160540 |
| 6627 LARNE AVE, JACKSONVILLE, FL 32244 | $162090 |
| 383 HAYWARD ST #2, BRIDGEWATER, MA 02324 | $163830 |
| 383 HAYWARD ST #1, BRIDGEWATER, MA 02324 | $163830 |
| 7036 CAMELOT ROAD, JACKSONVILLE, FL 32211 | $163910 |
| 14430 DANTE AVE, DOLTON, IL 60419 | $164240 |
| 3416 LINDEN BERRY LN #1, CHARLOTTE, NC 28269 | $164820 |
| 3416 LINDEN BERRY LN #2, CHARLOTTE, NC 28269 | $164820 |
| 1635 NALDO AVE #2, JACKSONVILLE, FL 32207 | $165890 |
| 1635 NALDO AVE #1, JACKSONVILLE, FL 32207 | $165900 |
| 6386 ROYAL WOODS DR, FORT MYERS, FL 33908 | $166490 |
| 8116 TOMOTLEY RD, MARYVILLE, TN 37801 | $166760 |
| 1064 WESTMOOR DR NW #2, ATLANTA, GA 30314 | $168680 |
| 1064 WESTMOOR DR NW #1, ATLANTA, GA 30314 | $168690 |
| 4313 PLATT ROAD #2, PLANT CITY, FL 33565 | $169300 |
| 4313 PLATT ROAD #1, PLANT CITY, FL 33565 | $169300 |
| 1585 EZRA CHURCH DRIVE NORTHWEST #1, ATLANTA, GA 30314 | $170630 |
| 1570 S TAYLOR RD, CLEVELAND HEIGHTS, OH 44118 | $171620 |
| 540 SILVER COURSE LOOP, OCALA, FL 34472 | $172270 |
| 291 GRIEB RD #2, WALLINGFORD, CT 06492 | $173260 |
| 291 GRIEB RD #1, WALLINGFORD, CT 06492 | $173260 |
| 5070 LAUREL GLEN CT SE #1, SMYRNA, GA 30082 | $175820 |
| 2352 WINTHROP AVE, INDIANAPOLIS, IN 46205 | $176790 |
| 744 WEST GEORGIA STREET, WOODRUFF, SC 29388 | $177040 |
| 1207 MEADOWOOD DR, SHELBY, NC 28150 | $177100 |
| 3446 RIVER GARDENS CIR #1, PENSACOLA, FL 32514 | $177100 |
| 3446 RIVER GARDENS CIR #2, PENSACOLA, FL 32514 | $177100 |
| 111 SUMMER ST #1, ADAIRSVILLE, GA 30103 | $177340 |
| 1813 LEDO AVE, DECATUR, GA 30035 | $179230 |
| 3167 SYCAMORE RD, CLEVELAND HEIGHTS, OH 44118 | $179960 |
| 1109 S PRESTONWOOD DR #2, HENDERSONVILLE, NC 28739 | $181630 |
| 1109 S PRESTONWOOD DR #1, HENDERSONVILLE, NC 28739 | $181630 |
| 126 CLAIRE DR SE #2, ATLANTA, GA 30315 | $182340 |
| 126 CLAIRE DR SE #1, ATLANTA, GA 30315 | $182340 |
| 1816 COLLIER DR, DURHAM, NC 27707 | $182980 |
| 611 MIAMI ST, LEAVENWORTH, KS 66048 | $185220 |
| 290 REDWOOD AVE #1, ORANGE CITY, FL 32763 | $187200 |
| 290 REDWOOD AVE #2, ORANGE CITY, FL 32763 | $187200 |
| 802 SMALLWOOD DR, JACKSONVILLE, NC 28540 | $189000 |
| 602-604 HANFORD STREET, COLUMBUS, OH 43206 | $192250 |
| 1318 ENGLEWOOD AVE, SAINT PAUL, MN 55104 | $196820 |
| 7060 KNOTTS DRIVE, JACKSONVILLE, FL 32210 | $198180 |
| 7906 BATTLEFIELD PARK RD, RICHMOND, VA 23231 | $198240 |
| 931 OVERLOOK DRIVE, JACKSONVILLE, FL 32211 | $198720 |
| 27208 STARRY OAKS DR #2, MAGNOLIA, TX 77354 | $199840 |

---

---

| | |
|:---|:---|
| 27208 STARRY OAKS DR #1, MAGNOLIA, TX 77354 | $199850 |
| 4154 SKYCREST DRIVE, JACKSONVILLE, FL 32246 | $203400 |
| 4200 & 4202 BELL ST #2, KANSAS CITY, MO 64111 | $204710 |
| 4200 & 4202 BELL ST #1, KANSAS CITY, MO 64111 | $204720 |
| 7419 HAZEL AVE #1, SAINT LOUIS, MO 63143 | $204740 |
| 7419 HAZEL AVE #2, SAINT LOUIS, MO 63143 | $204740 |
| 650 N CENTRAL AVE, CHICAGO, IL 60644 | $207430 |
| 105 TRAIL CIR, ALABASTER, AL 35007 | $208570 |
| 1743 MADRONA ST NW #1, ATLANTA, GA 30318 | $209920 |
| 7465 GREENWAY DRIVE, JACKSONVILLE, FL 32244 | $211410 |
| 1122 TOWER DR, SALISBURY, NC 28146 | $211490 |
| 115 PARK AVENUE, DAYTONA BEACH, FL 32118 | $214080 |
| 2878 HEATHER ROW RIDGE #1, LILBURN, GA 30047 | $216680 |
| 2878 HEATHER ROW RIDGE #3, LILBURN, GA 30047 | $216680 |
| 2878 HEATHER ROW RIDGE #2, LILBURN, GA 30047 | $216680 |
| 2421 FAIRVIEW AVE., CINCINNATI, OH 45219 | $223360 |
| 906 SE HIGHLAND AVE, ROME, GA 30161 | $223850 |
| 608 IDEAL WAY #2, CHARLOTTE, NC 28203 | $228630 |
| 608 IDEAL WAY #3, CHARLOTTE, NC 28203 | $228630 |
| 608 IDEAL WAY #1, CHARLOTTE, NC 28203 | $228630 |
| 608 IDEAL WAY #4, CHARLOTTE, NC 28203 | $228640 |
| 835 E DREXEL SQ #2, CHICAGO, IL 60615 | $230790 |
| 835 E DREXEL SQ #3, CHICAGO, IL 60615 | $230790 |
| 835 E DREXEL SQ #4, CHICAGO, IL 60615 | $230790 |
| 835 E DREXEL SQ #1, CHICAGO, IL 60615 | $230800 |
| 14216 MCKENNA RD NW #3, PRIOR LAKE, MN 55372 | $237960 |
| 14216 MCKENNA RD NW #2, PRIOR LAKE, MN 55372 | $237960 |
| 14216 MCKENNA RD NW #1, PRIOR LAKE, MN 55372 | $237960 |
| 5322 DORCHESTER RD, NORTH CHARLESTON, SC 29418 | $247440 |
| 104 LAUREL RIDGE RD, NORTH CHARLESTON, SC 29418 | $250470 |
| 2110 FAIRWAY CIR NE #4, BROOKHAVEN, GA 30319 | $252500 |
| 2110 FAIRWAY CIR NE #3, BROOKHAVEN, GA 30319 | $252500 |
| 2110 FAIRWAY CIR NE #1, BROOKHAVEN, GA 30319 | $252500 |
| 2110 FAIRWAY CIR NE #2, BROOKHAVEN, GA 30319 | $252500 |
| 525 115TH AVE #2, TREASURE ISLAND, FL 33706 | $254310 |
| 525 115TH AVE #3, TREASURE ISLAND, FL 33706 | $254310 |
| 525 115TH AVE #1, TREASURE ISLAND, FL 33706 | $254320 |
| 111 ELIZABETH AVE #1, SOUTH PLAINFIELD, NJ 07080 | $254480 |
| 1707 BIRCH CIR, SAINT CLOUD, FL 34769 | $254820 |
| 3 SCHOONER CT #3, PANACEA, FL 32346 | $260970 |
| 3 SCHOONER CT #2, PANACEA, FL 32346 | $260980 |
| 3 SCHOONER CT #1, PANACEA, FL 32346 | $260980 |
| 277 BARFIELD AVE SW, ATLANTA, GA 30310 | $261700 |
| 21300 ALMAR DR, SHAKER HEIGHTS, OH 44122 | $263980 |
| 9 REIDEL LANE, PALM COAST, FL 32164 | $278550 |
| 8001 CONARROE RD #2, INDIANAPOLIS, IN 46278 | $287000 |
| 8001 CONARROE RD #1, INDIANAPOLIS, IN 46278 | $287010 |
| 5570 NW 96TH LN #1, OCALA, FL 34482 | $292150 |
| 5570 NW 96TH LN #2, OCALA, FL 34482 | $292150 |
| 267 NAGLE ST, BOUND BROOK, NJ 08805 | $292650 |
| 2711 W WILCOX ST, CHICAGO, IL 60612 | $293800 |
| 3110 CARDINAL CREEK CIR, BENTONVILLE, AR 72712 | $299770 |
| 5080 RIVERVIEW RD #3, ATLANTA, GA 30327 | $302340 |
| 5080 RIVERVIEW RD #4, ATLANTA, GA 30327 | $302340 |
| 5080 RIVERVIEW RD #1, ATLANTA, GA 30327 | $302340 |
| 5080 RIVERVIEW RD #2, ATLANTA, GA 30327 | $302340 |
| **Total** | $**29992600** |

---

**Project Summaries**

Each Project Summary attached below is included in the Offering Circular following page PS-101.

![](tm237391d1_apospsimg001.jpg)

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**MANAGEMENT DISCUSSION AND ANALYSIS**

*You should read the following discussion in conjunction with Groundfloor's audited consolidated financial statements and the related notes thereto.*

**Overview**

Groundfloor Finance Inc. ("Groundfloor" or "Groundfloor Finance") maintains and operates the Groundfloor Platform for use by us and Groundfloor subsidiaries to provide real estate development investment opportunities to the public. Groundfloor was originally organized as a North Carolina limited liability company under the name of Fomentum Labs LLC on January 28, 2013. Fomentum Labs LLC changed its name to Groundfloor LLC on April 26, 2013, and converted into a North Carolina corporation on July 26, 2013. In connection with this conversion, all equity interests in Groundfloor LLC were converted into shares of our common stock. In August 2014, Groundfloor converted into a Georgia corporation and changed its name to Groundfloor Finance Inc. The audited consolidated financial statements include Groundfloor's wholly-owned subsidiaries. Groundfloor Holdings GA, LLC is the holder of the Revolver, as defined in Note 7. Groundfloor Properties GA LLC was created for the purpose of financing real estate in Georgia. Groundfloor Real Estate 1 LLC, Groundfloor Real Estate 2 LLC, Groundfloor Real Estate 3 LLC, and Groundfloor Yield LLC were created for the purpose of financing real estate in any state. Groundfloor Real Estate, LLC is currently inactive and management does not have plans to use this entity in the near future.

***Funding Loan Advances***

To date, the Company has entered into the following financial arrangements designed to facilitate Loan advances.

In November 2016, the Company entered into the Revolver credit facility to fund Loan advances (as defined below). The terms of the credit facility are as follows: Interest accrues at the greater of 10.0% per annum or the weighted average annual interest rate of the Loans then held by Holdings which have been originated with proceeds from the credit facility. The revolving credit facility was originally limited to $1.5 million with an option to increase the limit to $15.0 million (under certain circumstances). In March 2020, in connection with the novel coronavirus pandemic and the related tightening of credit markets, GROUNDFLOOR's creditor informed the Company that it would cease funding of draws on the Revolver for an undefined period of time and replace the lost financing by expanding on other existing sources of lending capital, most importantly the GROUNDFLOOR Notes program. In response, the Company developed a plan to repay the outstanding principal and accrued interest on the Revolver. The outstanding principal and accrued interest on the Revolver were repaid in full in June 2020 and no outstanding balance remains as of December 31, 2020.

On January 11, 2017, Groundfloor entered into the ISB Note (as defined below) for a principal sum of $1.0 million, which was subsequently increased to $2.0 million, for the purpose of using the proceeds for our loan advance program, but may use the proceeds for other purposes in our sole discretion. The outstanding principal and accrued interest on the ISB Note were repaid in full in September 2019.

Starting in November 2018 and continuing through 2021, Groundfloor entered into various GROUNDFLOOR Notes, secured promissory notes, with accredited investors. The GROUNDFLOOR Notes are used for the purpose of the Company to originate, buy, and service loans for the purpose of building, buying, or rehabilitating single family and multifamily structures, or buying land for commercial purposes. The principal outstanding as of December 31, 2021, was $46.1 million.

In November and December 2019, Groundfloor entered into various short-term, secured promissory notes with accredited investors. Proceeds from the notes are used by the Company for originating, buying, and servicing loans to developers for the purpose of building, buying, and rehabilitating single family and multifamily structures, or buying land for commercial purposes. The aggregate principal outstanding of these loans as of December 31, 2019, was $1.3 million; those loans were repaid in full at maturity during the twelve months ended December 31, 2020 and no balance remains outstanding as of December 31, 2021.

Starting in January 2021, Groundfloor entered into various Stairs Notes, secured promissory notes, with Investors. Investors in Stairs Notes do not directly invest in Loans held by the Company; rather, the Stairs Notes are general obligations of the Company, and the proceeds thereof are used primarily to continually expand and replenish the portfolio of Loans owned by the Company. The use of the funds generated by the Stairs Notes offering can be adjusted at the discretion of the business as business needs change. The principal outstanding as of December 31, 2021 was $21.0 million.

***Financial Position and Operating History***

In connection with their audit for the year ended December 31, 2021, our auditors expressed substantial doubt about our ability to continue as a going concern due to our losses and cash outflows from operations. To strengthen our financial position, Groundfloor have continued to raise additional funds through convertible debt and equity offerings.

Groundfloor has a limited operating history and have incurred a net loss since our inception. Our net loss was $3.9 million for the twelve months ended December 31, 2021. To date, Groundfloor has earned limited revenues from origination and servicing fees charged to borrowers in connection with the loans made by the Company and its wholly-owned subsidiaries GRE 1 and Groundfloor GA corresponding to the LROs and Georgia Notes. Groundfloor has funded our operations primarily with proceeds from our convertible debt and preferred stock issuances, which are described below under "Liquidity and Capital Resources". Over time, Groundfloor expects that the number of borrowers and lenders, and the volume of loans originated through the Groundfloor Platform, will increase and generate increased revenue from borrower origination and servicing fees.

The proceeds from the sale of LROs described in our consolidated financial statements will not be used to directly finance our operations. Groundfloor will use the proceeds from sales of LROs exclusively to originate the Loans that correspond to the corresponding series of LROs sold to investors. However, Groundfloor collects origination and servicing fees on Loans Groundfloor is able to make to Developers, which Groundfloor recognizes as revenue. The more Loans Groundfloor is able to fund through the proceeds of our offerings, the more fee revenue Groundfloor will make. With increased fee revenue, our financial condition will improve. However, Groundfloor does not anticipate this increased fee revenue to be able to fully support our operations through the next twelve months.

Groundfloor's operating plan calls for a continuation of the current strategy of raising equity and, in limited circumstances, debt financing to finance its operations until Groundfloor reach profitability and become cash-flow positive, which Groundfloor does not expect to occur before 2022. Groundfloor's operating plan calls for significant investments in website development, security, investor sourcing, loan processing and marketing, and for several rounds of equity financing before Groundfloor reaches profitability.

To date, the company has raised funds for operations through multiple common stock, preferred stock, and convertible note fundraising rounds. In 2021, the company raised approximately $3.9 million in new operating capital through a Series B preferred stock offering. See "Liquidity and Capital Resources" below.

**Critical Accounting Policies and Estimates**

This discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which Groundfloor has prepared in accordance with generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Management bases its estimates on historical experience and on various other factors it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates. Our significant accounting policies are more fully described in Note 1 to our audited consolidated financial statements.

***Software and Website Development Costs***

Internal use software and website development costs are capitalized when preliminary development efforts are successfully completed and it is probable that the project will be completed and the software will be used as intended. Internal use software and website development costs are amortized on a straight-line basis over the project's estimated useful life, generally three years. Capitalized internal use software development costs consist of fees paid to third-party consultants who are directly involved in development efforts. Costs related to preliminary project activities and post implementation activities, including training and maintenance, are expensed as incurred. Costs incurred for upgrades and enhancements that are considered to be probable to result in additional functionality are capitalized. Development costs of our website incurred in the preliminary stages of development are expensed as incurred. Once preliminary development efforts are successfully completed, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use.

***Share Based Compensation***

Groundfloor accounts for share-based compensation using the fair value method of accounting which requires all such compensation to employees and nonemployees, including the grant of employee stock options, restricted stock, and performance-based awards, to be recognized in the income statement based on its fair value at the measurement date (generally the grant date). The expense associated with share-based compensation is recognized on a straight-line basis over the service period of each award.

***Allowance for Current Expected Credit Losses***

For the year ended December 31, 2021, the Company adopted the current expected credit loss ("CECL Standard") on January 1, 2021. The CECL Standard replaced the incurred loss model under existing guidance with an expected loss model for instruments measured at amortized cost, including loan receivables and off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments). The Company now records an allowance for credit losses in accordance with the CECL Standard on the loan portfolio on a collective basis by assets with similar risk characteristics. Where assets cannot be classified with other assets due to dissimilar risk characteristics, the Company assessed these assets on an individual basis. With the adoption of CECL, the definition of impaired loans was removed from accounting guidance. Refer to Note 3 "Loans to Developers, Net" in the Consolidated Financial Statements for the year ended December 31, 2020 for disclosure of the Company's impaired loans as of December 31, 2020.

The CECL Standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the economic environment. The Company utilizes a loss-rate approach for estimating current expected credit losses. In accordance with the loss-rate method, an adjusted historical loss rate is applied to the amortized cost of an asset or pool of assets at the balance sheet date.

In determining the CECL allowance, we considered various factors including (i) historical loss experience in our portfolio (ii) current performance of the US residential housing market, (iii) future expectations of the US residential housing market, and (iv) future expectations of short-term macroeconomic environment. Management estimates the allowance for credit losses using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. We utilize a reasonable and supportable forecast period of 12 months. The allowance for credit losses is maintained at a level sufficient to provide for expected credit losses over the life of the loan based on evaluating historical credit loss experience and making adjustments to historical loss information applied to the current loan portfolio. Refer to Note 3 of the accompanying audited consolidated financial statements for further information regarding the CECL allowance.

The Company made an accounting policy election to exclude "Interest receivable on loans to developers" from the amortized cost basis of loans in determining the CECL allowance, as any uncollected accrued interest receivable is written off in a timely manner. Refer to "Nonaccrual and Past Due Loans" section below for a description of the Company's policies established to write-off interest.

Payments to holders of Georgia Notes or LROs, as applicable, depend on the payments received on the corresponding Loans; a reduction or increase of the expected future payments on Loans will decrease or increase the reserve for the associated Georgia Notes or LROs. The allowance calculated for loans is accordingly applied as the reserve for Georgia Notes and LROs. The allowance for expected credit losses on "Loans to developers" is presented separately in the audited Consolidated Balance Sheets as "Allowance for loans to developers", while the allowance for "Limited recourse obligations" is presented separately on the audited Consolidated Balance Sheet as "Allowance for limited recourse obligations".

***Nonaccrual and Past Due Loans***

Accrual of interest on "Loans to developers" and corresponding "Limited recourse obligations" is discontinued when, in management's opinion, the collection of the interest income appears doubtful. "Interest income" and "Interest expense" on the "Loans to developers" and the corresponding "Limited recourse obligations" are discontinued and placed on nonaccrual status at the time the Loan is 90 days delinquent unless the Loan is well secured and in process of collection. A Loan may also be placed on nonaccrual status when, in management's judgment, the collection of the interest income appears doubtful based on the status of the underlying development project, even if the Loan is not yet 90 days delinquent. Loans may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The "Loans to developers" and corresponding "Limited recourse obligations" are charged off to the extent principal or interest is deemed uncollectible. All interest accrued but later charged off for "Loans to developers" and "Limited recourse obligations" is reversed against "Interest income" and the corresponding LROs recorded "Interest expense".

***Impaired Loans***

With the adoption of CECL on January 1, 2021, the definition of impaired loans was removed from accounting guidance.

***Provision for Income Taxes***

Groundfloor accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to be realized.

**Results of Operations**

***Twelve Months Ended December 31, 2021 and 2020***

---

| | | |
|:---|:---|:---|
|  | **Twelve Months Ended December 31,** | **Twelve Months Ended December 31,** |
|  | **2021** | **2020** |
| Non-interest revenue: |  |  |
| &nbsp;&nbsp;&nbsp;Origination fees | $4769504 | $2548305 |
| &nbsp;&nbsp;&nbsp;Loan servicing revenue | 2887096 | 1348332 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-interest revenue | 7656600 | 3896637 |
| Net interest income: |  |  |
| &nbsp;&nbsp;&nbsp;Interest income | 15731444 | 7597436 |
| &nbsp;&nbsp;&nbsp;Interest expense | (12167945) | (6042535) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income | 3563499 | 1554901 |
| Net revenue | 11220099 | 5451538 |
| &nbsp;&nbsp;&nbsp;Cost of revenue | (1363150) | (611436) |
| Gross profit | 9856949 | 4840102 |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 4417525 | 3006854 |
| &nbsp;&nbsp;&nbsp;Sales and customer support | 3404287 | 2457720 |
| &nbsp;&nbsp;&nbsp;Development | 1638327 | 1205399 |
| &nbsp;&nbsp;&nbsp;Regulatory | 378911 | 353103 |
| &nbsp;&nbsp;&nbsp;Marketing and promotions | 4251831 | 1453840 |
| Total operating expenses | 14090881 | 8476916 |
| Loss from operations | (4233932) | (3636814) |
| Other Income (expense): |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense on corporate debt instruments | (543942) | (1149819) |
| &nbsp;&nbsp;&nbsp;Gain on loan extinguishment | 829100 | - |
| Total other income (expense), net | 285158 | (1149819) |
| Net loss | $(3948774) | $(4786633) |

---

*Net Revenue*

Net revenue for the twelve months ended December 31, 2021 and 2020 was $11.2 million and $5.5 million, respectively, an increase of $5.8 million or 106%. The Company facilitated the origination of 1,118 and 380 developer loans during the twelve months ended December 31, 2021 and 2020, respectively. Origination fees and loan servicing revenue were earned related to the origination of these developer loans. Origination fees are determined by the term and credit risk of the developer loan and range from 1.0% to 6.0%. The fees are deducted from the loan proceeds at the time of issuance. Loan servicing revenue are fees incurred in servicing the developer's loan. Additionally, Groundfloor incurred net interest income during the loan advance period. The increase in net interest income is due to the increase in the overall portfolio size. Groundfloor expects operating revenue to continue to increase as its loan application and processing volume increases.

*Gross Profit*

Gross profit for the twelve months ended December 31, 2021 and 2020 was $9.8 million and $4.8 million, respectively, an increase of $5.0 million or 104%. The increase in gross profit was due primarily to an increase in origination and servicing revenues, as the Company originated a greater amount of loans in both units and total loan volume relative to the prior year. The increase in origination volume is attributable to a drastic increase in lending as compared to 2020, attributable to the residential housing market and overall US economy growth emerging from the COVID-19 pandemic. Cost of revenue consists primarily of payment processing and vendor costs associated with facilitating and servicing loans. Groundfloor expects gross profit to increase as its loan application and processing volume increases.

*General and Administrative Expense*

General and administrative expense for the twelve months ended December 31, 2021 and 2020, were $4.4 million and $3.0 million, respectively, an increase of $1.4 million or 47%. General and administrative expenses consists primarily of employee compensation cost, professional fees, consulting fees and rent expense. The increase was driven primarily by an increase in employee compensation costs and salaries as the Company's headcount significantly grew from the prior period. Groundfloor expects general and administrative expense will continue to increase due to the planned investment in business infrastructure required to support its growth.

*Sales and Customer Support*

Sales and customer support expense for the twelve months ended December 31, 2021 and 2020, were $3.4 million and $2.5 million, respectively, an increase of $0.9 million or 39%. Sales and customer support expense consists primarily of employee compensation cost. The increase was primarily due to the increase in compensation related to headcount growth experienced in the lending operations, asset management, and sales departments. Groundfloor expect sales and customer support expense will continue to increase due to the planned investment in customer acquisition and support required to support its growth.

*Development Expense*

Development expense for the twelve months ended December 31, 2021 and 2020, were $1.6 million and $1.2 million, respectively, an increase of $0.4 million or 36%. Development expense consists primarily of employee compensation cost and the cost of subcontractors who work on the development and maintenance of our website and lending platform. The increase was attributable to an increase in compensation cost as a result of new hiring and compensation adjustments, including additions of key personnel. Groundfloor expects development expense will continue to increase due to the planned investments in our website and lending platform required to support our technology infrastructure as Groundfloor grows.

*Regulatory Expense*

Regulatory expense for the twelve months ended December 31, 2021 and 2020, were $0.4 million and $0.4 million, respectively. Regulatory expense primarily consists of legal fees and compensation cost required to maintain SEC and other regulatory compliance. Groundfloor expects regulatory expense may increase due to the additional expense related to qualifying our offerings with the SEC, including our transition to Tier 2 under Regulation A, which will require complying with ongoing reporting requirements with the SEC and certain filing fees with applicable state regulatory authorities.

*Marketing and Promotions Expense*

Marketing and promotions expense for the twelve months ended December 31, 2021 and 2020, were $4.3 million and $1.5 million, respectively, an increase of $2.8 million or 192%. Marketing and promotions expense consists primarily of promotional and advertising expense as well as consulting expense and compensation cost. The increase is primarily attributable to the Company launching an extensive online marketing campaign aimed at both borrower and investor acquisition. The increase in advertising spend in the current year was an initiative executed by management to coincide with the heightened market demand and bolstering US economy, significantly driving the increase in lending activity as discussed above.

*Interest Expense*

Interest expense for the twelve months ended December 31, 2021 and 2020, excluding interest paid on limited recourse obligations and GROUNDFLOOR Notes, was $0.5 million and $1.1 million, respectively, a decrease of $0.6 million or $53%. The company incurred $0 million and $0.5 million in interest expense warehousing loans on the Revolver during the twelve months ended December 31, 2021 and 2020, respectively. Interest expense related to the 2019 Subordinated Convertible Notes of $0.3 million and $0.6 million was recognized during the twelve months ended December 31, 2021 and 2020, respectively. Interest expense related to the 2021 Subordinated Convertibles Notes of $0.18 million and $0 was recognized during the twelve months ended December 31, 2021 and 2020, respectively. Interest expense related to the 2021 Promissory Notes of $0.02 million and $0 was recognized during the twelve months ended December 31, 2021 and 2020, respectively.

*Net Loss*

Net loss for the twelve months ended December 31, 2021 and 2020 was $3.9 million and $4.8 million, respectively, a net loss decrease of $0.8 million or 18%. The decrease in the net loss was primarily attributable to a increase in lending volume leading to increased net revenue from $5.4 million to $11.2 million, with no significant reduction in operating costs.

**Liquidity and Capital Resources**

The audited consolidated financial statements included herein have been prepared assuming that Groundfloor will continue as a going concern; however, the conditions discussed below raise substantial doubt about our ability to continue as a going concern. The audited consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should Groundfloor be unable to continue as a going concern.

Groundfloor incurred a net loss for the twelve months ended December 31, 2021 and 2020, and have an accumulated deficit as of December 31, 2021 of $30.2 million. Since our inception, Groundfloor have financed our operations through debt and equity financing from various sources. Groundfloor are dependent upon raising additional capital or seeking additional equity financing to fund our current operating plans for the foreseeable future. Failure to obtain sufficient equity financing and, ultimately, to achieve profitable operations and positive cash flows from operations could adversely affect our ability to achieve its business objectives and continue as a going concern. Further, there can be no assurance as to the availability or terms upon which the required financing and capital might be available.

---

| | | |
|:---|:---|:---|
|  | **For the twelve<br> months ended<br> December 31,<br> 2021** | **For the twelve<br> months ended<br> December 31,<br> 2020** |
| Operating activities | $(3079871) | $(4889069) |
| Investing activities | (113830996) | 4211763 |
| Financing activities | 118123645 | 407282 |
| &nbsp;&nbsp;&nbsp;**Net increase (decrease) in cash** | $**1212778** | $**(270024)** |

---

Net cash flows from operating activities for the twelve months ended December 31, 2021 and 2020, was $(3.0) million and $(4.9) million, respectively. Net cash used in operating activities funded salaries, expense for contracted marketing, development and other professional service providers and expense related to sales and marketing initiatives.

Net cash flows from investing activities for the twelve months ended December 31, 2021 and 2020 was $(113.8) million and $4.2 million, respectively. Net cash used in investing activities primarily represents loan payments to developers offset by the repayment of loans to developers.

Net cash flows from financing activities for the twelve months ended December 31, 2021 and 2020 was $118.1 million and $0.4 million, respectively. Net cash provided by financing activities primarily represents proceeds from the issuance of GROUNDFLOOR Notes, Stairs Notes, and LROs to investors through the Groundfloor Platform, and proceeds from equity offerings, offset by repayments of GROUNDFLOOR Notes, Stairs Notes, and LROs to investors.

Groundfloor issued and sold 91,259 shares Series Seed Preferred Stock at an initial closing on December 5, 2014 (the "Series Seed Initial Closing"), for total proceeds of $475 thousand, pursuant to the Series Seed Preferred Stock Purchase Agreement (the "Series Seed Purchase Agreement"), dated December 5, 2014 between us and the investors named therein (the "Series Seed Investors"). In addition, at the Series Seed Initial, the entire unpaid principal and interest outstanding under certain previously-issued convertible promissory notes converted into 276,391 additional shares of Series Seed Preferred Stock. Groundfloor issued and sold an aggregate of 201,146 additional shares of Series Seed Preferred Stock, for total proceeds of $1.1 million, at subsequent closings on April 1, 2015, May 12, 2015 and August 31, 2015 (collectively, the "Series Seed Subsequent Closings" and together, with the Series Seed Initial Closing, the "Series Seed Financing"). Pursuant to the Series Seed Purchase Agreement, the Company sold each share of Series Seed Preferred Stock for $5.205 per share. In connection with the Series Seed Financing, Groundfloor also entered into an Investors' Rights Agreement with the Series Seed Investors and certain holders of our common stock, which was subsequently amended and restated in connection with the Series A Financing. The shares of Series Seed Preferred Stock were offered and sold pursuant to the federal exemption from registration set forth in Rule 506 of Regulation D under the Securities Act. The Series Seed Financing terminated following the final Series Seed Subsequent Closing and Groundfloor does not intend to sell any additional shares of Series Seed Preferred Stock.

During November 2015, Groundfloor entered into promissory notes with investors for total proceeds of $250 thousand (the "2015 Bridge Notes"). The notes incur interest at the rate of 12% per annum. The outstanding principal and all accrued but unpaid interest was due and payable on the earlier of May 5, 2016 or the closing of an equity financing with gross proceeds of at least $4.3 million. The 2015 Bridge Notes and all accrued but unpaid interest thereunder were cancelled as consideration for 37,561 shares of Series A Preferred Stock in connection with the Series A Initial Closing. The notes were offered and sold pursuant to the federal exemption from registration set forth in Rule 506 of Regulation D under the Securities Act. The 2015 Bridge Notes Financing terminated with the closing of the Series A Financing.

In addition, Groundfloor issued and sold 709,812 shares of Series A Preferred Stock at an initial closing on November 24, 2015 and subsequent closings through December 2015, for total gross proceeds of approximately $4.7 million, pursuant to the Series A Preferred Stock Purchase Agreement. Pursuant to the Series A Purchase Agreement, the Company sold each share of Series A Preferred Stock for $6.69 per share. The shares of Series A Preferred Stock were offered and sold pursuant to the federal exemption from registration set forth in Rule 506 of Regulation D under the Securities Act. The Series A Financing terminated in December 2015 and Groundfloor does not intend to sell any additional shares of Series A Preferred Stock.

On November 1, 2016, Holdings, the Company's wholly-owned subsidiary, as borrower, entered into a revolving credit facility (the "Revolver") with Revolver Capital. The credit agreement (the "Credit Agreement") provides for revolving loans up to a maximum aggregate principal amount of $1.5 million (the "Revolving Credit Commitments"). The Revolver will be used for bridge funding of underlying loans pending qualification from the SEC. The term of the Revolver was extended in October 2017 and will mature on April 4, 2019.

On November 11, 2016, the Company entered into a First Amendment to the Credit Agreement, which amended the Credit Agreement to increase the Revolving Credit Commitments thereunder from $1.5 million to $2.5 million. On December 21, 2016, the Company entered into a Second Amendment to the Credit Agreement, which amended the Credit Agreement to increase the Revolving Credit Commitments thereunder from $2.5 million to $3.5 million. On April 7, 2017, the Company entered into a Third Amendment to the Credit Agreement, which increased the Revolving Credit Commitments thereunder from $3.5 million to $4.5 million. The other terms of the credit facility remain unchanged.

On April 4, 2018, the Credit Agreement dated as of November 2, 2016, as amended by the First Amendment as of November 14, 2016, the Second Amendment dated as of February 22, 2017 and the Third Amendment dated as of April 7, 2017, was assigned to ACM Alamosa DA LLC. The Company and the lender agreed to amend and restate the Original Credit Agreement in its entirety. The other terms of the credit facility remain unchanged.

On September 18, 2018, the Company increased the Revolving Credit Commitments thereunder from $4,500,000 to $5,500,000. In connection with the increase the Company paid a $10,000 commitment fee, which is capitalized and amortized over a twelve-month period. The other terms of the credit facility remain unchanged.

On August 8, 2019, the Company increased the Revolving Credit Commitments thereunder from $5,500,000 to $8,500,000. In connection with the increase the Company paid a $30,000 commitment fee, which is capitalized and amortized over a twelve-month period. The other terms of the credit facility remain unchanged.

On October 1, 2019, the Company increased the Revolving Credit Commitments thereunder from $8,500,000 to $10,500,000. In connection with the increase the Company paid a $20,000 commitment fee, which is capitalized and amortized over a twelve-month period. The other terms of the credit facility remain unchanged.

In March 2020, in connection with the novel coronavirus pandemic and the related tightening of credit markets, GROUNDFLOOR's creditor informed the Company that it would cease funding of draws on the Revolver for an undefined period of time and replace the lost financing by expanding on other existing sources of lending capital, most importantly the GROUNDFLOOR Notes program. In response, the Company developed a plan to repay the outstanding principal and accrued interest on the Revolver. The outstanding principal and accrued interest on the Revolver were repaid in full in June 2020 and no outstanding balance remains as of December 31, 2020.

On January 11, 2017, Groundfloor entered into the ISB Note in favor of ISB for a principal sum of $1.0 million. Groundfloor paid to ISB an origination fee of $10 thousand concurrently with the funding by ISB of the principal of the ISB Note. Groundfloor subsequently entered into an amendment to the ISB Note extending the repayment schedule in return for a $5 thousand amendment fee, a second amendment increasing the principal amount outstanding to $2.0 million for a $30 thousand amendment fee, a third amendment further extending the repayment schedule among other terms described below in return for a $10 thousand amendment fee, and a fourth amendment further extending the repayment schedule among other terms described below for a $10 thousand amendment fee.

The ISB Note incurs interest at the rate of 8% per annum from January 11, 2017 until September 30, 2017 and 14% per annum from October 1, 2017 until payment in full of the ISB Note, in each case calculated on the basis of a 360-day year for the actual number of days elapsed. The ISB Note must be repaid as follows: (i) $50,000, plus any accrued but unpaid interest thereon, commencing on April 30, 2019, and each month thereafter, (ii) $1,000,000, plus any accrued but unpaid interest thereon, is due and payable on September 30, 2019, and (iii) any remaining outstanding principal amount, plus any remaining accrued but unpaid interest, is due and payable on December 31, 2020. As of the date hereof, the principal sum was paid in full and the note is no longer outstanding.

The ISB Note includes certain financial covenants related to the Company's quarterly financial results and operating capital. The ISB Note is subject to customary event of default provisions. Upon the occurrence of any event of default, the interest rate under the ISB Note shall increase by 7%. As collateral security for the ISB Note, Groundfloor granted to ISB a first priority security interest in all of its assets, subject to certain exceptions. Among other things, the security interest specifically excludes (i) any assets serving as collateral for the Company's credit facility with Revolver Capital; (ii) any Loans for which a series of LROs has been issued, regardless of whether such Loans and corresponding series of LROs have been originated and issued by us or one of our subsidiaries; and (iii) the equity interest in any subsidiary formed by us for the sole purpose of issuing Loans and corresponding series of LROs.

In connection with the third amendment to the ISB Note, the Company agreed to issue to ISB a warrant for the purchase of shares of our common stock on the first day of each quarter commencing on October 1, 2017 until the ISB Note is repaid in full for the purchase of the following number of shares: (i) for each quarter until and including the first quarter of 2019, 4,000 shares of common stock; (ii) for the second quarter of 2019, 3,500 shares of common stock, (iii) for the third quarter of 2019, 2,300 shares of common stock; and (iv) for the fourth quarter of 2019, 1,100 shares of common stock.

On April 1, 2019, the 2017 Note was amended and restated for a fee of $10,000, to be deferred and amortized over the life of the 2017 Note. The stated interest rate under the amended and restated promissory note and security agreement ("Restated Note") was increased to 14%. Under the terms of the Restated Note, $50,000 of the principal amount plus any accrued but unpaid interest thereon was due and payable commencing on April 30, 2019, and each month thereafter; $1.0 million of the principal amount plus any accrued but unpaid interest was due and payable on September 30, 2019; and any remaining outstanding principal and accrued interest was due and payable on December 31, 2020. The agreement states that the Company may prepay the 2017 Note without premium or penalty.

In 2019, the Company made five payments of principal and accrued interest as outlined in the Restated Note agreement. The Company then prepaid the outstanding principal on the Restated Note in full, with accrued interest, on September 24, 2019.

As of December 31, 2019, there was no remaining balance outstanding on the Company's Consolidated Balance Sheets. Amortization of deferred financing costs related to the 2017 ISB Note was $25,000 for the year ended December 31, 2019. Amortization of the related debt discount was $223,000 for the year ended December 31, 2019.

From March 2017 to December 2017, Groundfloor issued subordinated convertible notes (the "Subordinated Convertible Notes") to investors for total proceeds of $2.1 million (the "2017 Note Financing"). On October 27, 2017, the Company entered into amendments to the outstanding Subordinated Convertible Notes and related Subordinated Convertible Promissory Note Purchase Agreement raising the principal amount of Subordinated Convertible Notes that may be sold to $2.0 million, extending the maturity date, and allowing the Subordinated Convertible Notes, at the option of the holders, to convert outstanding principal and accrued but unpaid interest into shares of the Company's common stock as described below. In November 2017, Groundfloor issued Subordinated Convertible Notes to investors for additional proceeds of $675 thousand. Furthermore, in December 2017, Groundfloor oversubscribed and issued Subordinated Convertible Notes to investors for additional proceeds of $550 thousand. The notes incur interest at the rate of 8% per annum. The outstanding principal and all accrued but unpaid interest is due and payable on the earlier of September 30, 2019 or the consummation of a sale of the Company by consolidation, merger, change of majority ownership, or sale or other disposition of all or substantially all of the assets of the Company (the "Maturity Date"). In the event of a closing of a preferred stock financing with gross proceeds of at least $8.0 million ("Qualified Preferred Financing") prior to the Maturity Date, the outstanding principal and all accrued but unpaid interest would become automatically converted into shares of our preferred stock issued in the financing at a price per share equal to 75% of the price per share of the preferred stock financing. In the event of a closing of a common stock financing under Regulation A with gross proceeds of at least $3.0 million ("Qualified Common Financing") prior to the Maturity Date, then each holder may elect, in its discretion, to convert the outstanding principal and all accrued but unpaid interest into shares of our common stock issued in the financing at a price per share equal to 90% of the price per share of the common stock financing. The indebtedness represented by the Subordinated Notes is subordinated in all respects to the principal of (and premium, if any), unpaid interest on and amounts reimbursable, fees, expenses, costs of enforcement, and other amounts due in connection with the Revolver and ISB Note.

On February 9, 2018, Groundfloor launched an offering of our common stock under Tier 2 of Regulation A pursuant to an offering statement on Form 1-A qualified by the SEC (the "2018 Common Stock Offering"). Groundfloor is offering up to 500,000 shares of our common stock at $10 per share, with a minimum investment of $100, or 10 shares of common stock. The aggregate initial offering price of our common stock will not exceed $5,000,000 in any 12-month period, and there is no minimum offering amount. Groundfloor is also offering a Bonus Share Program where Groundfloor may issue up to 30,000 additional bonus shares of our common stock pursuant to the terms stated therein. As of December 31, 2018, Groundfloor issued 437,917 shares of common stock in the 2018 Common Stock Offering for $4.2 million in proceeds.

On October 12, 2018, the Company entered into a common stock purchase agreement for private placement of 125,000 shares of the Company's common stock for proceeds of $1.5 million.

In January 2019, the Company launched an offering of its common stock under Tier 2 of Regulation A pursuant to an offering statement on Form 1-A qualified by the SEC (the "2019 Common Stock Offering"). The Company offered up to 900,000 shares of common stock at $15.00 per share, with a minimum investment of $150, or 10 shares of common stock. According to the terms of the offering statement, the aggregate initial offering price of the common stock will not exceed $13,500,000 in any 12-month period, and there is no minimum offering amount. The Company may issue up to 30,000 additional bonus shares through an incentive program available to investors who had provided a previous indication of interest in investing in the Company.

The 2019 Common Stock Offering closed on a rolling basis from January 2019 to July 2019. As a result of the offering, the Company received gross proceeds of $3.1 million in exchange for the issuance of 214,535 shares of common stock, including 6,800 bonus shares issued through the incentive program described above.

In conjunction with the 2019 Common Stock Offering, certain holders of Restated Subordinated Convertible Notes converted their outstanding principal and accrued interest into common stock at a contractually agreed upon 10% discount to the offered price. In 2019, $60,000 in notes principal and accrued interest were converted into 4,440 shares of common stock.

From September 2019 to December 2019, the Company issued subordinated convertible notes (the "2019 Subordinated Convertible Notes") to Investors for total proceeds of $3.6 million. The 2019 Subordinated Convertible Notes bear interest at the rate of 10% per annum. The outstanding principal and all accrued but unpaid interest is due and payable on the earlier of August 30, 2021, or the consummation of a sale of the Company by consolidation, merger, change of majority ownership, or sale or other disposition of all or substantially all of the assets of the Company (the "Maturity Date"). In the event of a closing of a preferred stock financing with gross proceeds of at least $8.0 million ("Qualified Preferred Financing") prior to the Maturity Date, the outstanding principal and all accrued but unpaid interest may be converted into shares of preferred stock issued in the financing at a price per share equal to 90% of the offering price per share in the Qualified Preferred Financing. At any time after six months after the issuance of a 2019 Subordinated Convertible Note, the investor may convert all or a portion of the outstanding principal and accrued interest into shares of common stock at 90% of the per share price of common stock at the time of conversion, as reasonably determined by the Board. The indebtedness represented by the 2019 Subordinated Convertible Notes is subordinated in all respects to the principal of (and premium, if any), unpaid interest on and amounts reimbursable, fees, expenses, costs of enforcement, and other amounts due in connection with the Revolver.

Because of the contractual right of noteholders to convert their holdings to common stock at a discount to fair value, the Company determined that the 2019 Subordinated Convertible Notes contain a beneficial conversion feature. The Company recognized this beneficial conversion feature as a debt discount and component of additional paid-in capital at the in-the-money amount of $0.4 million at the time of issuance. The discount is being amortized to interest expense until the earlier of maturity or exercise of the conversion option.

In February 2020, the Company launched an offering of its common stock under Tier 2 of Regulation A pursuant to an offering statement on Form 1-A qualified by the SEC (the "2020 Common Stock Offering"). Participation in the 2020 Common Stock Offering was limited to existing shareholders. The Company offered shares of common stock at $17.50 per share, with a minimum investment of $175, or 10 shares of common stock. As a result of the offering, the Company received gross proceeds of approximately $0.5 million in exchange for the issuance of 30,794 shares of common stock.

In April 2020, the Company obtained an $829,100 loan under the Paycheck Protection Program ("PPP"). The Company used the PPP Loan proceeds to cover payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act. In March 2021, the 2020 PPP loan was forgiven, and the Treasury and Small Business Administration (SBA) notified the Company the loan's principal and interest were deemed paid in full. In April 2021 the Company obtained a new loan under the PPP for $829,000 and used the proceeds consistent with the 2020 PPP loan. The 2021 PPP loan was not forgiven during the current year and is recorded within "Short-term notes payable" in the accompanying audited consolidated financial statements.

In July 2020, the Company launched an offering of 548,546 shares of Series B Preferred Stock at $18.23 per share ("Series B Preferred Stock Offering"). As a result of the offering, the Company has as of December 31, 2020 received gross proceeds of approximately $2.7 million in exchange for the issuance of 159,748 shares of Series B preferred stock. In 2021, the Company received gross proceeds of approximately $3.9 million in exchange for the issuance of 236,976 shares of Series B preferred stock. The Series B Preferred Stock Offering remains open and accepting new investment as of December 31, 2021.

In 2021, certain holders of the 2019 Subordinated Convertible Notes converted their holdings into common stock, or Series B preferred stock, at the discretion of the noteholder. Additionally, noteholders were repaid $1.7 million in principle and $0.3 million in accrued interest at the maturity date. As an incentive to convert, the Company granted all noteholders a time-limited option to convert their holdings on more favorable terms than those specified in the contractual agreement. Pursuant to these terms, Noteholders converted $0.15 million in principle and approximately $0.03 million in accrued interest into 7,463 shares of common stock at a conversion price of $15.75, a 10% discount to the per share price of common stock at the time of conversion, and into 3,759 shares of common stock at a conversion of $17.50, the fair value the common stock at conversion. Noteholders also converted $0.3 in principal and approximately $0.04 million in accrued interest into 16,928 shares of Series B preferred stock at a conversion price of $18.23, a 0% discount to the price per share of Series B preferred stock at the time of conversion.

In November 2021, the Company repaid the remaining principal of $0.7 and accrued but unpaid interest of $0.14 million related to the notes related to the 2019 Subordinated Convertible Notes. Therefore, principal of $0 and $2.8 million on the 2019 Subordinated Convertible Notes, net of an unamortized discount of approximately $0 and $0.13 million, was outstanding as of December 31, 2021, and December 31, 2020, respectively. Accrued interest on the 2019 Subordinated Convertible Notes was approximately $0 and $0.3 million as of December 31, 2021, and December 31, 2020, respectively. The interest expense related to the 2019 Subordinated Convertible Notes for the years ended December 31, 2021, and 2020 was $0.2 million and $0.3 million, respectively.

From August 2021 to November 2021, the Company issued subordinated convertible notes (the "2021 Subordinated Convertible Notes") to Investors for total proceeds of $5.0 million. The 2021 Subordinated Convertible Notes bear interest at the rate of 12% per annum. The outstanding principal and all accrued but unpaid interest are due and payable on the earlier of August 31, 2023, or the consummation of a sale of the Company by consolidation, merger, change of majority ownership, or sale or other disposition of all or substantially all of the assets of the Company (the "Maturity Date"). In the event of a closing of a preferred stock financing with gross proceeds of at least $20.0 million ("Qualified Preferred Financing") prior to the Maturity Date, the outstanding principal and all accrued but unpaid interest may be converted into shares of preferred stock issued in the financing at a price per share equal to 90% of the offering price per share in the Qualified Preferred Financing. At any time after six months after the issuance of a 2021 Subordinated Convertible Note, the investor may convert all or a portion of the outstanding principal and accrued interest into shares of common stock at 90% of the per share price of common stock at the time of conversion, as reasonably determined by the Board.

Because of the contractual right of noteholders to convert their holdings to common stock at a discount to fair value, the Company determined that the 2021 Subordinated Convertible Notes contain a beneficial conversion feature. The Company recognized this beneficial conversion feature as a debt discount and component of additional paid-in capital at the in-the-money amount of approximately $0.6 million. The discount is being amortized to interest expense until the earlier of maturity or exercise of the conversion option.

In August 2021, the Company issued promissory notes (the "2021 Promissory Notes") to investors for total proceeds of $0.6 million. The 2021 Promissory Notes bear interest at the rate of 14% per annum. The outstanding principal and all accrued but unpaid interest is due and payable on the earlier of August 30, 2022, or the date the Company raises at least an aggregate $4.0 million of new cash from any debt or financing closing after September 1, 2021. As a result of cash financing received from other debt instruments, pursuant the 2021 Promissory Note purchase agreement the Company repaid all principle and accrued interest in December 2021.

Groundfloor has incurred losses since its inception, and Groundfloor expects it will continue to incur losses for the foreseeable future. Groundfloor requires cash to meet its operating expenses and for capital expenditures. To date, Groundfloor has funded its cash requirements with proceeds from its convertible note and preferred stock issuances. Groundfloor anticipate that it will continue to incur substantial net losses as it grows the Groundfloor Platform. Groundfloor does not have any committed external source of funds, except as described above. To the extent our capital resources are insufficient to meet its future capital requirements, Groundfloor will need to finance its cash needs through public or private equity offerings or debt financings. Additional equity or debt financing may not be available on acceptable terms, if at all. On October 30, 2017, Groundfloor filed an offering statement on Form 1-A with the SEC for a proposed offering of its common stock. On February 9, 2018, Groundfloor's offering statement on Form 1-A was qualified to issue Groundfloor common stock.

**Plan of Operation**

Prior to September 2015, Groundfloor's operations were limited to issuing Georgia Notes solely in Georgia to Georgia residents pursuant to an intrastate crowdfunding exemption from registration under the Securities Act and qualification under Georgia law. On September 7, 2015, the SEC qualified Groundfloor's first offering statement on Form 1-A covering seven separate series of LROs corresponding to the same number of Projects in eight states and the District of Columbia. Subsequently, Groundfloor has not issued, and do not intend to issue in the future, any additional Georgia Notes. Since that time, Groundfloor has qualified two additional offering statements on Form 1-A in addition to an offering statement on Form 1-A qualified for GRE 1, its wholly-owned subsidiary, in each case under Tier 1 of Regulation A. In January 2018, Groundfloor's offering statement relating to the offer and sale of limited recourse obligations (the "LRO Offering Circular") was qualified by the SEC under Tier 2 of Regulation A, raising the annual aggregate amount of LROs which Groundfloor may offer and sell to $50 million, less any other securities sold by Groundfloor under Regulation A. Groundfloor has filed, and intends to continue to file, post-qualification amendments to the LRO Offering Circular on a regular basis to include additional series of LROs. Groundfloor expect to expand the number of states in which Groundfloor offers and sells LROs during the next 12 months. With this increased geographic footprint, Groundfloor expects that the number of borrowers and corresponding investors, and the volume of loans originated through the Groundfloor Platform, will increase and generate increased revenue from borrower origination and servicing fees.

As the volume of Groundfloor loans and corresponding offerings increase, Groundfloor plans to continue the current strategy of raising equity and, in limited circumstances, debt financing to finance our operations until Groundfloor reaches profitability and becomes cash-flow positive, which Groundfloor does not expect to occur before 2022. Future equity or debt offerings by Groundfloor will be necessary to fund the significant investments in website development, security, investor sourcing, loan processing and marketing necessary to reach profitability. Groundfloor expects to hire more staff to support its expected growth in operations and to invest heavily in marketing throughout the next year.

**Off-Balance Sheet Arrangements**

We do not engage in any off-balance sheet financing activities. We do not have any interest in entities referred to as variable interest entities, which include special purpose entities and other structured finance entities.

**GROUNDFLOOR FINANCE INC.**

**AND SUBSIDIARIES**

**Consolidated Financial Statements**

**December 31, 2021 and 2020**

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

**Table of Contents**

December 31, 2021 and 2020

---

| | |
|:---|:---|
| **[Independent Auditors' Report](#a_001)** | [F-1](#a_001) |

---

**Consolidated Financial Statements**

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Consolidated Balance Sheets](#a_002) | [F-3](#a_002) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Consolidated Statements of Operations](#a_003) | [F-4](#a_003) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Consolidated Statements of Stockholders' Equity (Deficit)](#a_004) | [F-5](#a_004) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Consolidated Statements of Cash Flows](#a_005) | [F-6](#a_005) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Notes to Consolidated Financial Statements](#a_006) | [F-8](#a_006) |

---

![](tm237391d1_1aposimg002.jpg)

**Report of Independent Auditor**

To the Board of Directors

Groundfloor Finance, Inc. and Subsidiaries

Atlanta, Georgia

Opinion

We have audited the accompanying consolidated financial statements of Groundfloor Finance, Inc. and Subsidiaries (the "Company"), which comprise the consolidated balance sheets as of December 31, 2021 and 2020 and the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes to the consolidated financial statements.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, 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.

**Basis for Opinion**

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

**Responsibilities of Management for the Consolidated Financial Statements**

Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the consolidated financial statements are available to be issued.

**Auditor's Responsibilities for the Audit of the Consolidated Financial Statements**

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

In performing an audit in accordance with generally accepted auditing standards, we:

&nbsp;&nbsp;&nbsp;&nbsp;• Exercise
 professional judgment and maintain professional skepticism throughout the audit.

&nbsp;&nbsp;&nbsp;&nbsp;• Identify
 and assess the risks of material misstatement of the consolidated financial statements, whether
 due to fraud or error, and design and perform audit procedures responsive to those risks.
 Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures
 in the consolidated financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;• Obtain
 an understanding of internal control relevant to the audit 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 Company's internal control. Accordingly, no such opinion
 is expressed.

&nbsp;&nbsp;&nbsp;&nbsp;• Evaluate
 the appropriateness of accounting policies used and the reasonableness of significant accounting
 estimates made by management, as well as evaluate the overall presentation of the consolidated
 financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;• Conclude
 whether, in our judgment, there are conditions or events, considered in the aggregate, that
 raise substantial doubt about the Company's ability to continue as a going concern
 for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

**Substantial Doubt about the Company's Ability to Continue as a Going Concern**

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred losses and cash outflows from operations since its inception which result in substantial doubt about the ability of the Company to continue as a going concern. Management's evaluation of the events and conditions and management's plans regarding those matters also are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.

![Text Description automatically generated](image_001.gif)

Atlanta, Georgia

March 11, 2022

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Consolidated Balance Sheets

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2021** | **2020** |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash | $2641950 | $1429172 |
| &nbsp;&nbsp;&nbsp;Loans to developers | 176431710 | 66575374 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for loans to developers | (3164650) | (3360000) |
| &nbsp;&nbsp;&nbsp;Interest receivable on loans to developers | 11790202 | 3545454 |
| &nbsp;&nbsp;&nbsp;Other current assets | 3580237 | 2631801 |
| Total current assets | 191279449 | 70821801 |
| &nbsp;&nbsp;&nbsp;Property, equipment, software, website, and intangible assets, net | 1645617 | 1056577 |
| &nbsp;&nbsp;&nbsp;Other assets | 71302 | 71302 |
| Total assets | $192996368 | $71949680 |
| **Liabilities and Stockholders' Equity (Deficit)** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | $5147829 | $2189807 |
| &nbsp;&nbsp;&nbsp;Accrued interest on limited recourse obligations | 6943896 | 2831984 |
| &nbsp;&nbsp;&nbsp;Limited recourse obligations | 111982315 | 50230668 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for limited recourse obligations | (3636146) | (4304442) |
| &nbsp;&nbsp;&nbsp;Short-term notes payable | 67911273 | 19806920 |
| &nbsp;&nbsp;&nbsp;Convertible notes, net of discount of $490,783 and $126,352 | 4509217 | 2661774 |
| Total current liabilities | 192858384 | 73416711 |
| &nbsp;&nbsp;&nbsp;Other liabilities | 134865 | 138680 |
| Total liabilities | 192993249 | 73555391 |
| Commitments and contingencies (See Note 12) |  |  |
| Stockholders' equity (deficit): |  |  |
| &nbsp;&nbsp;&nbsp;Series A convertible preferred stock, no par, 747,385 shares designated, 747,373 shares issued and outstanding (liquidation preference of $4,999,925) | 4962435 | 4962435 |
| &nbsp;&nbsp;&nbsp;Series Seed convertible preferred stock, no par, 575,000 shares designated, 568,796 shares issued and outstanding (liquidation preference of $2,721,091) | 2609091 | 2609091 |
| &nbsp;&nbsp;&nbsp;Series B convertible preferred stock, no par, 548,546 shares designated, 441,940 and 188,036 shares issued and outstanding (liquidation preference of $8,056,566 and $3,427,896) | 7429483 | 3145092 |
| &nbsp;&nbsp;&nbsp;Common stock, no par, 5,000,000 shares authorized, 2,192,145 and 2,165,923 issued and outstanding | 11895593 | 11596087 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 3310258 | 2336551 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (30203181) | (26254407) |
| &nbsp;&nbsp;&nbsp;Stock subscription receivable | (560) | (560) |
| Total stockholders' equity (deficit) | 3119 | (1605711) |
| Total liabilities and stockholders' equity (deficit) | $192996368 | $71949680 |

---

*See accompanying notes to consolidated financial statements*

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Consolidated Statements of Operations

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2021** | **2020** |
| Non-interest revenue: |  |  |
| &nbsp;&nbsp;&nbsp;Origination fees | $4769504 | $2548305 |
| &nbsp;&nbsp;&nbsp;Loan servicing revenue | 2887096 | 1348332 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-interest revenue | 7656600 | 3896637 |
| Net interest income: |  |  |
| &nbsp;&nbsp;&nbsp;Interest income | 15731444 | 7597436 |
| &nbsp;&nbsp;&nbsp;Interest expense | (12167945) | (6042535) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income | 3563499 | 1554901 |
| Revenue | 11220099 | 5451538 |
| &nbsp;&nbsp;&nbsp;Cost of revenue | (1363150) | (611436) |
| Gross profit | 9856949 | 4840102 |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 4417525 | 3006854 |
| &nbsp;&nbsp;&nbsp;Sales and customer support | 3404287 | 2457720 |
| &nbsp;&nbsp;&nbsp;Development | 1638327 | 1205399 |
| &nbsp;&nbsp;&nbsp;Regulatory | 378911 | 353103 |
| &nbsp;&nbsp;&nbsp;Marketing and promotions | 4251831 | 1453840 |
| Total operating expenses | 14090881 | 8476916 |
| Loss from operations | (4233932) | (3636814) |
| Other Income (expense): |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense on corporate debt instruments | (543942) | (1149819) |
| &nbsp;&nbsp;&nbsp;Gain on loan extinguishment | 829100 | - |
| Total other income (expense), net | 285158 | (1149819) |
| Net loss | $(3948774) | $(4786633) |

---

*See accompanying notes to consolidated financial statements*

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Consolidated Statements of Stockholders' Equity (Deficit)

---

| | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Series A | Series A | Series Seed | Series Seed | Series B | Series B | | | | | | |
|  | Convertible | Convertible | Convertible | Convertible | Convertible | Convertible | | | | | | |
|  | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Common Stock | | | | |
|  | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount |<br>Additional<br>Paid-in<br>Capital |<br>Accumulated<br>Deficit |<br>Stock<br>Subscription<br>Receivable | Total<br>Stockholders'<br>Equity<br>(Deficit) |
| Stockholders' equity (deficit) as of December 31, 2019 | 747373 | $4962435 | 568796 | $2609091 |  | $- | 2102720 | $10564771 | $1802895 | $(21467774) | $(560) | $(1529142) |
| 2020 Crowdfunded equity raise, net of offering costs |  |  |  |  |  |  | 30794 | 538720 |  |  |  | 538720 |
| Issuance of Series B preferred shares, net of offering costs |  |  |  |  | 159748 | 2679234 |  |  |  |  |  | 2679234 |
| Conversion of convertible notes |  |  |  |  | 28288 | 465858 | 30841 | 488707 |  |  |  | 954565 |
| Exercise of stock options |  |  |  |  |  |  | 1568 | 3889 |  |  |  | 3889 |
| Share-based compensation expense |  |  |  |  |  |  |  |  | 533656 |  |  | 533656 |
| Net loss | - | - | - | - | - | - | - | - | - | (4786633) | - | (4786633) |
| Stockholders' equity (deficit) as of December 31, 2020 | 747373 | $4962435 | 568796 | $2609091 | 188036 | $3145092 | 2165923 | $11596087 | $2336551 | $(26254407) | $(560) | $(1605711) |
| Issuance of Series B preferred shares, net of offering costs |  |  |  |  | 236976 | 3975794 |  |  |  |  |  | 3975794 |
| Conversion of convertible notes |  |  |  |  | 16928 | 308597 | 11222 | 183325 |  |  |  | 491922 |
| Exercise of stock options |  |  |  |  |  |  | 7825 | 68180 |  |  |  | 68180 |
| Share-based compensation expense |  |  |  |  |  |  |  |  | 418151 |  |  | 418151 |
| Conversion of Warrants |  |  |  |  |  |  | 7175 | 48001 |  |  |  | 48001 |
| Beneficial conversion feature |  |  |  |  |  |  |  |  | 555556 |  |  | 555556 |
| Net loss | - | - | - | - | - | - | - | - | - | (3948774) | - | (3948774) |
| Stockholders' equity (deficit) as of December 31, 2021 | 747373 | $4962435 | 568796 | $2609091 | 441940 | $7429483 | 2192145 | $11895593 | $3310258 | $(30203181) | $(560) | $3119 |

---

*See accompanying notes to consolidated financial statements*

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Consolidated Statements of Cash Flows

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2021** | **2020** |
| **Cash flows from operating activities** |  |  |
| Net loss | $(3948774) | $(4786633) |
| Adjustments to reconcile net loss to net cash flows from operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 760380 | 527862 |
| &nbsp;&nbsp;&nbsp;Share-based compensation | 418151 | 533656 |
| &nbsp;&nbsp;&nbsp;Noncash interest expense | 191125 | 274674 |
| &nbsp;&nbsp;&nbsp;(Gain)/Loss on sale of real estate owned | (96000) | 16816 |
| &nbsp;&nbsp;&nbsp;Origination of loans held for sale | (3201856) | (1060410) |
| &nbsp;&nbsp;&nbsp;Proceeds from sales of loans held for sale | 5524200 | 1968800 |
| &nbsp;&nbsp;&nbsp;Gain on forgiveness of PPP loan | (829100) |  |
| &nbsp;&nbsp;&nbsp;Debt conversion inducement expense |  | 41633 |
| Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Other assets | (719370) | 8406 |
| &nbsp;&nbsp;&nbsp;Interest receivable on loans to developers | (8244747) | (677540) |
| &nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | 2954208 | (2316392) |
| &nbsp;&nbsp;&nbsp;Accrued interest on limited recourse obligations | 4111912 | 580059 |
| Net cash flows from operating activities | (3079871) | (4889069) |
| **Cash flows from investing activities** |  |  |
| Loan payments to developers | (198289297) | (66314737) |
| Repayments of loans from developers | 81885591 | 69503979 |
| Proceeds from sale of properties held for sale | 3767091 | 1715352 |
| Payments of software and website development costs | (1247488) | (559332) |
| Purchases of computer equipment and furniture and fixtures | (101933) | (53499) |
| Other investing activities | 155040 | (80000) |
| Net cash flows from investing activities | (113830996) | 4211763 |
| **Cash flows from financing activities** |  |  |
| Proceeds from limited recourse obligations | 142331517 | 62279248 |
| Repayments of limited recourse obligations | (79937095) | (66610220) |
| Borrowings from the revolving credit facility |  | 3069028 |
| Repayments on the revolving credit facility |  | (13562280) |
| Proceeds from GROUNDFLOOR Notes | 106252110 | 68950380 |
| Repayments on GROUNDFLOOR Notes | (79133490) | (58057817) |
| Proceeds from Stairs Notes | 287469931 |  |
| Repayments on Stairs Notes | (266484098) |  |
| Proceeds from issuance of 2019 convertible notes |  | 288000 |
| Repayments of 2019 convertible notes | (2296205) |  |
| Proceeds from issuance of 2021 convertible notes | 5000000 |  |
| Proceeds from issuance of Series B convertible preferred stock, net of offering costs | 3975794 | 2679234 |
| Proceeds from issuance of common stock, net of offering costs |  | 538720 |
| Proceeds from loan under Paycheck Protection Program | 829000 | 829100 |
| Exercise of stock options | 68180 | 3889 |
| Proceeds from exercise of warrants | 48001 | - |
| Net cash flows from financing activities | 118123645 | 407282 |
| Net increase (decrease) in cash | 1212778 | (270024) |
| **Cash as of beginning of the year** | 1429172 | 1699196 |
| **Cash as of end of the year** | $2641950 | $1429172 |
| **Supplemental cash flow disclosures:** |  |  |
| &nbsp;&nbsp;&nbsp;Cash paid for interest | $2788431 | $1260238 |

---

*See accompanying notes to consolidated financial statements*

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Consolidated Statements of Cash Flows

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2021** | **2020** |
| **Supplemental disclosure of noncash investing and financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Loans to developers transferred to other real estate owned | $4239270 | $4911985 |
| &nbsp;&nbsp;&nbsp;Write-down of loans to developers and limited recourse obligations | 544595 | 308676 |
| &nbsp;&nbsp;&nbsp;Write-down of interest receivable on loans to developers and accrued interest on limited recourse obligations | 190897 | 321724 |
| &nbsp;&nbsp;&nbsp;Conversion of convertible notes payable and accrued interest into common stock or Series B convertible preferred stock | 491922 | 912933 |
| &nbsp;&nbsp;&nbsp;(Decrease) increase in allowance for loan to developers | (195350) | 640000 |
| &nbsp;&nbsp;&nbsp;(Decrease) increase in allowance for limited recourse obligations | (668296) | 1584442 |

---

*See accompanying notes to consolidated financial statements*

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

**Description of Business**

The terms "we," "our," "GROUNDFLOOR," or the "Company" refer to Groundfloor Finance Inc. and its subsidiaries. The Company was originally organized as a North Carolina limited liability company under the name of Fomentum Labs LLC on January 28, 2013. Fomentum Labs LLC changed its name to Groundfloor LLC on April 26, 2013, and converted into a North Carolina corporation on July 26, 2013. In connection with this conversion, all equity interests in Groundfloor LLC were converted into shares of GROUNDFLOOR Inc.'s common stock. In August 2014, GROUNDFLOOR Inc. converted into a Georgia corporation and changed its name to Groundfloor Finance Inc. The accounting effects of these conversions were reflected retrospectively in the Consolidated Financial Statements. Groundfloor Holdings GA, LLC is the holder of the Revolver, as defined in Note 7. Groundfloor Properties GA LLC was created for the purpose of financing real estate in Georgia. Groundfloor Real Estate 1 LLC, Groundfloor Real Estate 2 LLC, Groundfloor Real Estate 3 LLC, and Groundfloor Yield LLC were created for the purpose of financing real estate in any state. Groundfloor Real Estate, LLC is currently inactive and management does not have plans to use this entity in the near future.

The Company has developed an online investment platform designed to crowdsource financing for real estate development projects (the "Projects"). With this online investment platform (the "Platform"), public investors (the "Investors") are able to choose between multiple Projects, and real estate developers (the "Developers") of the Projects are able to obtain financing. GROUNDFLOOR's financing model replaces traditional sources of financing for Projects with the aggregation of capital from Investors using the internet.

**Basis of Presentation and Liquidity**

The Company's Consolidated Financial Statements include Groundfloor Finance Inc. and its wholly owned subsidiaries, Groundfloor Properties GA LLC; Groundfloor Real Estate, LLC; Groundfloor Holdings GA, LLC; Groundfloor Real Estate 1 LLC; Groundfloor Real Estate 2, LLC; Groundfloor Real Estate 3 LLC; and Groundfloor Yield LLC (collectively the "Company" or "GROUNDFLOOR"). Intercompany transactions and balances have been eliminated upon consolidation.

The Company's Consolidated Financial Statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business.

Operations since inception have consisted primarily of organizing the Company, developing the technology, and securing financing. The accompanying Consolidated Financial Statements have been prepared on a basis which assumes that the Company will continue as a going concern. The Company has incurred losses and cash outflows from operations since its inception. The ultimate success of the Company is dependent on management's ability to develop and market its products and services at levels sufficient to generate operating revenues in excess of expenses.

Management evaluated the condition of the Company and has determined that until such sales levels can be achieved, management will need to secure additional capital to continue growing working capital and fund product development and operations.

Management intends to raise additional debt or equity financing to grow working capital and fund operations. Management believes the Company will obtain additional funding from current and new Investors in order to sustain operations. However, there are no assurances that the Company can be successful in obtaining the additional capital or that such financing will be on terms favorable or acceptable to the Company.

There is substantial doubt that the Company will continue as a going concern for at least 12 months following the date these Consolidated Financial Statements are issued, without additional financing based on the Company's limited operating history and recurring operating losses.

The Consolidated Financial Statements do not include any adjustments that might result from the outcome of the uncertainties described in the Consolidated Financial Statements. In addition, the Consolidated Financial Statements do not include any adjustments relating to the recoverability and classification of assets nor the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

**Use of Estimates**

The preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

**Revenue Recognition**

Revenue primarily results from fees earned on the loans to the Developers (the "Loans"). Fees include "Origination fees" and "Loan servicing revenue" which are paid by the Developers.

Effective for 2019, the Company adopted Accounting Standards Update ("ASU") 2014-09, *Revenue from Contracts with Customers* ("Topic 606"). Topic 606 supersedes the revenue requirements in ASC Topic 605, Revenue Recognition. The Company has evaluated the impact of this accounting standard on its Consolidated Financial Statements and concluded that the Company's contracts with customers continue to fall within the scope of existing guidance. Servicing fees, origination fees, net interest income, and gains and losses on sales of loans remain within the scope of ASC topic 310—Receivables or ASC topic 860—Transfers and Servicing.

**Origination Fees**

"Origination fees" are paid by the Developers for the work performed to facilitate the Loans. The amount to be charged is a percentage based upon the terms of the Loan, including grade, rate, term, and other factors. Origination fees range from 1.0% to 5.0% of the principal amount of a Loan. The origination fee is paid when the Loan is issued to the Developer and deducted from the gross proceeds distributed. A Loan is considered issued when formal closing has occurred and funds have transferred to the Developer's account, which occurs through an Electronic Funds Transfer ("EFT").

The origination fees are recognized as revenue ratably over the term of the Loan, while direct costs to originate Loans are recorded as expenses as incurred.

**Loan Servicing Revenue**

Loan servicing revenue is recognized by the Company, upon recovery, for costs incurred in servicing the Developer's Loan, including managing payments to and from Developers and payments to Investors. The Company records loan servicing revenue as a component of revenue when collected. Direct costs to service Loans are recorded as expenses as incurred.

**Whole Loan Sales**

Under loan sale agreements, the Company sells all of its rights, title, and interest in certain loans. At the time of such sales, the Company may simultaneously enter into loan servicing agreements under which it acquires the right to service the loans. The Company calculates a gain or loss on a whole loan sale based on the net proceeds from the whole loan sale, less the carrying value of the loans sold. All unamortized origination fees incurred in the origination process are recognized directly to Consolidated Statements of Operations and recorded to "Origination fees". For sold loans for which the Company retains servicing rights, the Company compares the expected contractual benefits of servicing to the expected costs of servicing to determine whether a servicing asset or servicing liability arises from the transaction. No servicing rights assets or liabilities have been identified for the years ended December 31, 2021 and 2020.

**Interest Income on Loans to Developers and Interest Expense on Limited Recourse Obligations**

The Company recognizes "Interest income" on Loans and "Interest expense" on the corresponding Investor Georgia Notes (if issued by Groundfloor GA) or LROs (if issued by Groundfloor Finance Inc.) using the accrual method based on the stated interest rate to the extent the Company believes it to be collectable. For the purposes of these Consolidated Financial Statements, "Limited recourse obligations" refers to both Georgia Notes and LROs. Georgia Notes are securities that the Company has issued through its previously registered Georgia-exclusive securities offering, which has since been terminated. LROs are the Company's currently registered securities. Both Georgia Notes and LROs represent similar obligations of the Company.

"Interest income" recorded on "Loans to developers" was $15,731,444 and $7,597,436 for year ended December 31, 2021 and 2020, respectively. Additionally, "Interest expense" incurred on "Limited recourse obligations" was $9,728,837 and $5,090,020 for the year ended December 31, 2021 and 2020, respectively.

**Cash and Cash Equivalents**

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents as of December 31, 2021 and 2020. From time to time, the Company could maintain cash deposits in excess of federally insured limits. The Company believes credit risk related to its cash and cash equivalents to be minimal.

Each investor's escrow account receives Federal Deposit Insurance Corporation ("FDIC") insurance coverage on cash balances subject to normal FDIC coverage rules. Investor funds, whether committed through a LRO or held in escrow, are not included as a part of the Company's cash balance.

**Loans to Developers and Limited Recourse Obligations**

"Loans to developers" are originally recorded at amortized cost (outstanding principal balance, net of discounts, premiums, and unearned income), then subsequently increased as additional draws are disbursed to developers. "Limited recourse obligations" are originally recorded at the original principal amount committed by investors, net of funds not yet to be disbursed to developers on the underlying loans, then subsequently increased as those funds are disbursed to developers. Funds committed by investors in LROs but not yet disbursed to developers on the underlying Loans were approximately $17,834,000 and $20,868,000, as of December 31, 2021 and 2020, respectively. These funds are netted against gross balances of approximately $126,181,000 and $66,794,000 as of December 31, 2021 and 2020, respectively, on the accompanying Consolidated Balance Sheets.

The interest rate associated with a Loan is the same as the interest rate associated with the corresponding Georgia Notes or LROs.

The Company's obligation to pay principal and interest on a Georgia Note or LRO is equal to the pro rata portion of the total principal and interest payments collected from the corresponding Loan. The Company obtains a lien against the property being financed and attempts reasonable collection efforts upon the default of a Loan. The Company is not responsible for repaying "Limited recourse obligations" associated with uncollectable "Loans to developers". Amounts collected related to a defaulted Loan are returned to the Investors based on their pro rata portion of the corresponding Georgia Notes or LROs, if applicable, less collection costs incurred by the Company.

The Investors may remit funds through the Company's online portal prior to the actual Loan being closed. These funds are held in an escrow account controlled by a major bank and are not recognized as an LRO until the Loan is closed and funds are transferred to the Developer, which occurs through an EFT transaction. Each Investor escrow account receives FDIC insurance coverage on cash balances subject to normal FDIC coverage rules.

The Loan and corresponding LROs are recorded on the Company's Consolidated Balance Sheets to "Loans to developers" and "Limited recourse obligations", respectively, once the Loan has closed and funds have been disbursed to borrowers. Loans are considered closed after the promissory note for that Loan has been signed and the security interest has been perfected.

**Interest Receivable and Interest Payable**

"Interest receivable on loans to developers" represents interest income the Company is due to receive from borrowers on the total outstanding principal balance of the loan portfolio as of the balance sheet date. This balance is presented as its own line item, separate from "Loan to developers", on the Company's Consolidated Balance Sheet.

"Accrued interest on limited recourse obligations" represents interest the Company owes investors on the corresponding LROs as of the balance sheet date. This balance is presented as its own line item, separate from "Limited recourse obligations", on the Company's Consolidated Balance Sheet. The interest rate associated with a Loan is the same rate that is associated with the corresponding LRO. The balance of "Interest receivable on loans to developers" and "Accrued interest on limited recourse obligations" offset each other to the extent LROs related to existing loans have been issued with the SEC and funded by investors. The Company's obligation to pay interest on an LRO is equal to the pro-rata portion of the total interest payments collected from the corresponding Loan.

Also included within "Accrued interest on limited recourse obligations" is interest the Company owes investors on GROUNDFLOOR Notes. GROUNDFLOOR Notes is presented within "Short-term notes payable" on the Company's Consolidated Balance Sheet. The interest rate associated with GROUNDFLOOR Notes is the same as the stated interest rate at issuance.

The Company has accrued "Interest receivable on loans to developers" of approximately $11,790,000 and $3,545,000 and "Accrued interest on limited recourse obligations" of approximately $6,943,896 and $2,831,984 as of December 31, 2021 and December 31, 2020, respectively.

**Nonaccrual and Past Due Loans**

Accrual of interest on "Loans to developers" and corresponding "Limited recourse obligations" is discontinued when, in management's opinion, the collection of the interest income appears doubtful. "Interest income" and "Interest expense" on the "Loans to developers" and the corresponding "Limited recourse obligations" are discontinued and placed on nonaccrual status at the time the Loan is 90 days delinquent unless the Loan is well secured and in process of collection. A Loan may also be placed on nonaccrual status when, in management's judgment, the collection of the interest income appears doubtful based on the status of the underlying development project, even if the Loan is not yet 90 days delinquent. Loans may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The "Loans to developers" and corresponding "Limited recourse obligations" are charged off to the extent principal or interest is deemed uncollectible. All interest accrued but later charged off for "Loans to developers" and "Limited recourse obligations" is reversed against "Interest income" and the corresponding LROs recorded "Interest expense".

**Allowance for** **Current Expected Credit Losses**

For the year ended December 31, 2021, the Company adopted the current expected credit loss ("CECL Standard") on January 1, 2021. The CECL Standard replaced the incurred loss model under existing guidance with an expected loss model for instruments measured at amortized cost, including loan receivables and off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments). The Company now records an allowance for credit losses in accordance with the CECL Standard on the loan portfolio on a collective basis by assets with similar risk characteristics. Where assets cannot be classified with other assets due to dissimilar risk characteristics, the Company assessed these assets on an individual basis. With the adoption of CECL, the definition of impaired loans was removed from accounting guidance. Refer to Note 3 "Loans to Developers, Net" in the Consolidated Financial Statements for the year ended December 31, 2020 for disclosure of the Company's impaired loans as of December 31, 2020.

The CECL Standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the economic environment. The Company utilizes a loss-rate approach for estimating current expected credit losses. In accordance with the loss-rate method, an adjusted historical loss rate is applied to the amortized cost of an asset or pool of assets at the balance sheet date.

In determining the CECL allowance, we considered various factors including (i) historical loss experience in our portfolio (ii) current performance of the US residential housing market, (iii) future expectations of the US residential housing market, and (iv) future expectations of short-term macroeconomic environment. Management estimates the allowance for credit losses using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. We utilize a reasonable and supportable forecast period of 12 months. The allowance for credit losses is maintained at a level sufficient to provide for expected credit losses over the life of the loan based on evaluating historical credit loss experience and making adjustments to historical loss information applied to the current loan portfolio. Refer to "Note 3 – Loans to Developers and Allowance for Expected Credit Losses" for further information regarding the CECL allowance.

The Company made an accounting policy election to exclude "Interest receivable on loans to developers" from the amortized cost basis of loans in determining the CECL allowance, as any uncollected accrued interest receivable is written off in a timely manner. Refer to "Nonaccrual and Past Due Loans" above for a description of the Company's policies established to write-off interest.

Payments to holders of Georgia Notes or LROs, as applicable, depend on the payments received on the corresponding Loans; a reduction or increase of the expected future payments on Loans will decrease or increase the reserve for the associated Georgia Notes or LROs. The allowance calculated for loans is accordingly applied as the reserve for Georgia Notes and LROs. The allowance for expected credit losses on "Loans to developers" is presented separately on the Consolidated Balance Sheet as "Allowance for loans to developers" and has a balance of approximately $3,165,000 and $3,360,000 as of December 31, 2021 and 2020, respectively. The allowance for "Limited recourse obligations" is presented separately on the Consolidated Balance Sheet as "Allowance for limited recourse obligations" and has a balance of approximately $3,636,000 and $4,304,000 as of December 31, 2021 and 2020, respectively.

Refer to Note 3 for further discussion regarding the calculation of the allowance for credit losses.

**Other Real Estate Owned**

Foreclosed assets acquired through or in lieu of loan foreclosure are held for sale and are initially recorded at fair value less estimated selling costs. Any write-down to fair value at the time of transfer to foreclosed assets is charged to the allowance for loan losses. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Costs of improvements are capitalized up to the fair value of the property, whereas costs relating to holding foreclosed assets and subsequent adjustments to the value are charged to operations.

**Software Development Costs**

Software development costs primarily include internal and external labor expenses incurred to develop the software that powers the Company's website. Certain costs incurred during the application development stage are capitalized based on specific activities tracked, while costs incurred during the preliminary project stage and post-implementation and operation stages are expensed as incurred. Capitalized software development costs are amortized over the estimated useful life of the related software. The Company recognized approximately $648,000 and $448,000 in expense related to amortization of software development costs for the years ended December 31, 2021 and 2020, respectively.

**Property and Equipment**

Property and equipment consists of computer equipment, furniture and fixtures, leasehold improvements, and office equipment. Property and equipment is stated at historical cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of the life of the lease or the useful life of the improvements. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts, and any resulting gain or loss is credited or charged to income. Repairs and maintenance costs are expensed as incurred.

Depreciation is computed using the following estimated useful lives:

---

| | |
|:---|:---|
| Computer equipment | 3 years |
| Software and website development costs | 3 years |
| Office equipment | 5 years |
| Furniture and fixtures | 5 years |
| Leasehold improvements | 5 years |

---

**Impairment of Long-Lived Assets**

Long-lived assets, such as computer equipment, office equipment, furniture and fixtures, intangible assets, and software and website development costs, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized for an amount by which the carrying amount of the asset exceeds the fair value of the asset.

**Intangible Assets**

Intangible assets consist of the Company's domain names. Intangible assets are being amortized over a 15-year period, their estimated useful lives, on a straight-line basis. The Company recognized approximately $2,000 in amortization expense during the years ended December 31, 2021 and 2020.

**Equity Offering Costs**

The Company accounts for offering costs in accordance with Accounting Standard Codification ("ASC"), ASC 340, *Other Assets and Deferred Costs*. Prior to the completion of an offering, offering costs will be capitalized as deferred offering costs on the balance sheet. The deferred offering costs will be charged to stockholders' equity upon the completion of an offering or to expense if the offering is not completed.

For the year ended December 31, 2020, offering costs of approximately $233,000 incurred in connection with the issuance of Series B preferred stock were deferred and charged against the gross proceeds of the offering in stockholders' equity. Offering costs incurred in connection with the 2020 Common Stock Offering were not material and were expensed as incurred.

For the year ended December 31, 2021, offering costs of approximately $344,000 incurred in connection with the issuance of Series B preferred stock were deferred and charged against the gross proceeds of the offering in stockholders' equity.

**Deferred Revenue**

Deferred revenue consists of origination fee payments received in advance of revenue recognized. The deferred revenue balance is presented within "Accounts Payable and Accrued Expenses" on the Company's Consolidated Balance Sheet and has a balance of approximately $3,522,000 and $1,115,000 as of December 31, 2021 and 2020, respectively.

**Advertising Costs**

The cost of advertising is expensed as incurred and presented within "Marketing and promotions" expenses in the Consolidated Statements of Operations. The Company incurred approximately $2,944,000 and $607,000 in advertising costs during the years ended December 31, 2021 and 2020, respectively.

**Rent Expense**

The Company recognizes rent expense on a straight-line basis over the term of the lease. The difference between rent expense and rent paid is recorded as deferred rent in the Consolidated Balance Sheets as a component of "Other liabilities". Rent expense is presented within "General and administrative" expenses in the Consolidated Statements of Operations. The Company incurred approximately $411,700 and $309,000 in rent expense for office facilities during the years ended December 31, 2021 and 2020, respectively.

**Share-Based Compensation**

The Company recognizes as expense non-cash compensation for all stock-based awards for which vesting is considered probable. Such stock-based awards include stock options and warrants issued as compensation to employees and nonemployees. Non-cash compensation is measured at fair value on the grant date and expensed ratably over the vesting term. The fair value of each stock option and warrant is estimated using the Black-Scholes option pricing model.

**Income Taxes**

Deferred tax assets and liabilities are determined based on the temporary differences between the Consolidated Financial Statements carrying amounts and the tax basis of assets and liabilities using the enacted tax rates in effect in the years in which the differences are expected to reverse. In estimating future tax consequences, all expected future events are considered other than enactment of changes in the tax law or rates.

The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the Consolidated Financial Statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

The determination of recording or releasing income tax valuation allowance is made, in part, pursuant to an assessment performed by management regarding the likelihood that the Company will generate future taxable income against which benefits of its deferred tax assets may or may not be realized. This assessment requires management to exercise significant judgment and make estimates with respect to its ability to generate taxable income in future periods.

---

| | |
|:---|:---|
| **NOTE 2:** | **RECENT ACCOUNTING PRONOUNCEMENTS** |

---

In February 2016, the FASB issued ASU 2016-02, *Leases (Topic 842)* ("ASU 2016-02"), which requires lessees to recognize most leases on the balance sheet as a lease liability and corresponding right-of-use asset. Further clarification of this guidance was subsequently provided by FASB through the issuance of ASU 2018-10, *Codification Improvements to Topic 842, Leases* ("ASU 2018-10"), in July 2018 and the issuance of ASU 2018-11, *Leases (Topic 842): Targeted Improvements* ("ASU 2018-11"), in July 2018. While the guidance in these pronouncements was originally scheduled to take effect for the Company for the year ending December 31, 2020, the FASB subsequently issued ASU 2020-05 in June 2020 deferring the effective date. The guidance in these pronouncements will therefore be effective for the Company for the year ending December 31, 2022. The Company is currently evaluating the effect of this guidance on the Company's Consolidated Financial Statements.

As discussed above under "Allowance for Current Expected Credit Losses", the Company adopted the CECL Standard for the year ended December 31, 2021. This standard is applicable for all of the year ended December 31, 2021. The CECL Standard required an initial effect of adoption to be recorded through a cumulative-effect adjustment to retained earnings as of January 1, 2021. The Company determined the impact of CECL adoption on the previously reported loan allowance was immaterial as adoption of CECL did not materially change the Company's loan allowance procedures – therefore no adjustment was necessary. As a result of the Company's business model and the relationship between originated loans and their corresponding LROs, had an adjustment been necessary the transition effect would have resulted in a balance sheet reclassification with a net $0 impact to the financial statements. Subsequent changes to the CECL allowance are recognized as a provision for credit losses through loan and LRO loss reserves.

In December 2019, the FASB issued Accounting Standards Update 2019-12, *Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes* ("ASU 2019-12"). The amendments in this update simplify the accounting for income taxes by removing certain exceptions in Topic 740 and introducing other changes intended to clarify and improve existing guidance. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2020; for all other entities, the amendments are effective for fiscal years beginning after December 15, 2021. The Company is currently evaluating the impact that the implementation of this standard will have on the Company's Consolidated Financial Statements.

In August 2020, the FASB issued Accounting Standards Update 2020-06, *Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40)* ("ASU 2020-06"). The amendments in this update simplify the accounting for convertible interest by removing the requirement to separately account for an embedded conversion feature from the host contract in certain instances. The guidance is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company is evaluating the impact that the implementation of this standard will have on the Company's Consolidated Financial Statements.

---

| | |
|:---|:---|
| **NOTE 3:** | **LOANS TO DEVELOPERS AND ALLOWNANCE FOR EXPECTED CREDIT LOSSES** |

---

The Company provides financing to borrowers for real estate-related loans. Real estate loans include loans for unoccupied single family or multifamily renovations and new constructions costing between $30,000 and $2,000,000 over six months to eighteen months.

The following table presents the carrying amount of "Loans to developers, net" by performance state as of December 31, 2021 and 2020, respectively:

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2021** | **2020** |
| Loan Performance State: |  |  |
| &nbsp;&nbsp;&nbsp;Current | $131203243 | $41758636 |
| &nbsp;&nbsp;&nbsp;Workout | 37190846 | 9957616 |
| &nbsp;&nbsp;&nbsp;Fundamental Default | 8037621 | 14859122 |
| Amortized Cost as of December 31 | $176431710 | $66575374 |
| &nbsp;&nbsp;&nbsp;Less: Allowance for loan losses | (3164650) | (3360000) |
| Carrying amount as of December 31 | $173267060 | 63215374 |

---

**Allowance for Loan Losses**

In assessing the CECL allowance, we consider historical loss experience, current conditions, and a reasonable and supportable forecast of the microeconomic and macroeconomic environment. We derived an annual historical loss rate based on the Company's historical loss experience in our portfolio and adjusted this rate to reflect our expectations of the future environment based on forecasted data points relative to our loan portfolio.

At adoption on January 1, 2021, the CECL allowance was $3,360,000, consistent with the allowance under the incurred loss model as of December 31, 2020. Accordingly, no cumulative-effect adjustment was recorded to adopt the standard. The CECL allowance decreased from initial adoption on January 1, 2021 through December 31, 2021. The decrease is driven by management's historical loss performance and assessment of microeconomic and macroeconomic conditions as of December 31, 2021.

The following tables present analyses of the allowance for credit losses by portfolio segment for the years ended December 31, 2021 and 2020:

---

| | |
|:---|:---|
|  | **Balance** |
| Allowance for loan losses, December 31, 2020 | $3360000 |
| Cumulative change in accounting principal (Note 2) | - |
| Allowance for loan losses, January 1, 2021 (adjusted for change in accounting estimate) | 3360000 |
| Loan allowance charged off | (414295) |
| Provision for losses | 218945 |
| Recoveries | - |
| Allowance for loan losses, December 31, 2021 | $3164650 |

---

---

| | |
|:---|:---|
|  | **Balance** |
| Balance, December 31, 2019 | $2720000 |
| Allowance for loan loss | 948676 |
| Loans charged off | (308676) |
| Outstanding as of December 31, 2020 | $3360000 |
| Period-end amount allocated to: |  |
| &nbsp;&nbsp;&nbsp;Loans evaluated individually for impairment | $2240000 |
| &nbsp;&nbsp;&nbsp;Loans evaluated collectively for impairment | 560000 |
| &nbsp;&nbsp;&nbsp;General population of loans, other than those specifically identified | 560000 |
| Balance, December 31, 2020 | $3360000 |
| Loans: |  |
| &nbsp;&nbsp;&nbsp;Loans evaluated individually for impairment | $3814468 |
| &nbsp;&nbsp;&nbsp;Loans evaluated collectively for impairment | 11205286 |
| &nbsp;&nbsp;&nbsp;General population of loans, other than those specifically identified | 51555620 |
| Balance, December 31, 2020 | $66575374 |

---

**Portfolio Segmentation**

Management monitors the performance of loans within its portfolio by internally assigned grades and by year of origination. All loans originated by the Company are collateralized against residential real estate, and consistent across many key segmentation considerations such as borrower type, industry, financial asset type, loan term, and loan size. As such, in determining the Company's application of the CECL standard management developed its allowance by evaluating historical losses and applying those adjusted losses to segments of the portfolio with which similar risk characteristics exist.

In assessing estimated credit losses, the segmentation variable used by management includes internal grades assigned to loans at origination. The Groundfloor underwriting team undertakes an assessment of each project and the proposed terms of the underlying loan to finalize the pricing terms (interest rate, maturity, repayment schedule, etc.) that the Company will accept. Groundfloor uses its proprietary Grading Algorithm to assign one of seven letter grades, from A to G, to each Project. The letter grade generally reflects the overall risk of the Loan. The Grading Algorithm factors in the following indicators that take into account the valuation and strength of a particular project and the experience and risk profile of the Borrower.

The relevant factors included within the algorithm that correlate with how well management believes the loan will perform include financial risk (loan to ARV ratio), underwriting risk (quality of valuation report, borrower credit quality and experience), borrower stake (commitment and skin-in-the game), as well as geographic location.

The following table presents "Loans to developers" carrying amount of our loan portfolio by portfolio segment and vintage of origination as of December 31, 2021:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** | **December 31, 2021** |
|  | **2021** | **2020** | **2019** | **2018** | **Total** |
| Loan grades: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;A | $5357918 | $669780 | $147470 | $- | $6175168 |
| &nbsp;&nbsp;&nbsp;B | 13555548 | 2764600 | 1346627 |  | 17666775 |
| &nbsp;&nbsp;&nbsp;C | 103374142 | 10780023 | 1496220 | 1922325 | 117572710 |
| &nbsp;&nbsp;&nbsp;D | 25535132 | 4281098 | 758567 | 148856 | 30723653 |
| &nbsp;&nbsp;&nbsp;E | 4019668 |  | 132976 |  | 4152644 |
| &nbsp;&nbsp;&nbsp;F | 140760 |  |  |  | 140760 |
| &nbsp;&nbsp;&nbsp;G | - | - | - | - | - |
| Amortized Cost | $151983168 | $18495501 | $3881860 | $2071181 | $176431710 |
| &nbsp;&nbsp;&nbsp;Less: Allowance for loan losses |  |  |  |  | (3164650) |
| Carrying Amount |  |  |  |  | $173267060 |

---

**Credit Quality Monitoring**

The Company uses three performance states to better monitor the credit quality of outstanding loans. Outstanding loans are characterized as follows:

*Current* – This status indicates that no events of default have occurred, all payment obligations have been met or none are yet triggered.

*Workout* – This status indicates there has been one or more payment defaults on the Loan and the Company has negotiated a modification of the original terms that does not amount to a fundamental default.

*Fundamental Default* – This status indicates a Loan has defaulted and there is a chance the Company will not be able to collect 100% of the principal amount of the Loan by the extended payment date of the corresponding Georgia Notes or LROs.

All credit quality indicators were updated as of December 31, 2021.

The following table presents "Loans to developers" carrying amount of our loan portfolio by credit quality indicator and vintage of origination as of December 31, 2021:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** | **December 31, 2021** |
|  | **2021** | **2020** | **2019** | **2018** | **Total** |
| Loan performance state: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Current | $131203243 | $- | $- | $- | $131203243 |
| &nbsp;&nbsp;&nbsp;Workout | 20779925 | 15975322 | 435599 |  | 37190846 |
| &nbsp;&nbsp;&nbsp;Fundamental Default | - | 2520179 | 3446261 | 2071181 | 8037621 |
| Amortized Cost | $151983168 | $18495501 | $3881860 | $2071181 | $176431710 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Allowance for loan losses |  |  |  |  | (3164650) |
| Carrying Amount |  |  |  |  | $173267060 |

---

**Nonaccrual and Past Due Loans**

A Loan is placed on nonaccrual status when, in management's judgment, the collection of the interest income appears doubtful. Loans placed in nonaccrual status stop accruing interest and, if collectability of interest is sufficiently doubtful, "Interest receivable on loans to developers" that has been accrued and is subsequently determined to have doubtful collectability is charged to "Interest income" and the corresponding "Accrued interest on limited recourse obligations" that has been accrued and is subsequently determined to have doubtful collectability is charged to "Interest expense." Interest income on Loans that are classified as nonaccrual is subsequently applied to principal until the Loans are returned to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. As of December 31, 2021, the Company placed Loans of approximately $18,118,000 recorded to "Loans to developers" on nonaccrual status. The Company has written off approximately $191,000 of interest receivable in the current period.

The following table presents an aging analysis of past due Loans as of December 31, 2021 and 2020:

---

| | | | |
|:---|:---|:---|:---|
|  | **Amortized<br> Cost** | **Allowance for <br> Loan Losses** | **Loans to<br> Developers,<br> Net** |
| Aging schedule: |  |  |  |
| &nbsp;&nbsp;&nbsp;Current | $133003496 | $531600 | $132471896 |
| &nbsp;&nbsp;&nbsp;Less than 90 days past due | 25692956 | 108774 | 25584182 |
| &nbsp;&nbsp;&nbsp;More than 90 days past due | 17735258 | 2524276 | 15210982 |
| Total as of December 31, 2021 | $176431710 | $3164650 | $173267060 |

---

---

| | | | |
|:---|:---|:---|:---|
|  | **Amortized<br> Cost** | **Allowance for<br> Loan Losses** | **Loans to<br> Developers, net** |
| Aging schedule: |  |  |  |
| &nbsp;&nbsp;&nbsp;Current | $35134514 | $350000 | $34784514 |
| &nbsp;&nbsp;&nbsp;Less than 90 days past due | 10994226 | 270000 | 10724226 |
| &nbsp;&nbsp;&nbsp;More than 90 days past due | 20446634 | 2740000 | 177066341 |
| Total as of December 31, 2020 | $66575374 | $3360000 | $63215374 |

---

The following is a summary of information pertaining to nonaccrual loans as of December 31, 2021:

---

| | |
|:---|:---|
|  | **Balance** |
| Nonaccrual loans | $18118033 |
| Interest income recognized on nonaccrual loans | $2657427 |

---

The following is a summary of information pertaining to impaired loans as of December 31, 2020:

---

| | |
|:---|:---|
|  | **Balance** |
| Nonaccrual loans | $14859122 |
| Interest income recognized on impaired loans | $1251441 |

---

---

| | |
|:---|:---|
| **NOTE 4:** | **OTHER CURRENT ASSETS** |

---

"Other current assets" as of December 31, 2021 and 2020, consists of the following:

---

| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| Other real estate owned (1) | $3001421 | $2154477 |
| Due from related party (2) | 318988 | 434784 |
| Rent deposit, current portion |  | 21302 |
| Other | 259828 | 21239 |
| Other current assets | $3580237 | $2631801 |

---

(1) During the year ended December 31, 2021 the Company transferred $4,239,279 from "Loans to developers"
to "Other current assets". Other real estate owned met the held for sale criteria and have been recorded at the lower of carrying
amount or fair value less cost to sell. There was no impact to the Company's Consolidated Statements of Operations from this transfer.
The Company recorded a decrease of approximately $170,000 to "Loans to developers" and an offsetting decrease to "Limited
recourse obligations".

(2) Loan and accrued interest receivable from related parties. Refer to Note 11 – Related Party Transactions.

---

| | |
|:---|:---|
| **NOTE 5:** | **PROPERTY, EQUIPMENT, SOFTWARE, WEBSITE AND INTANGIBLE ASSETS, NET** |

---

"Property, equipment, software, website development costs, and intangible assets, net" at December 31, 2021 and 2020, consists of the following:

---

| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| Software and website development costs | $3681563 | $2434075 |
| Computer equipment | 169645 | 137514 |
| Leasehold improvements | 29942 | 9838 |
| Furniture and fixtures | 212251 | 206290 |
| Office equipment | 44747 | 46405 |
| Domain names | 30000 | 30000 |
| Total property, equipment, software, website and intangible assets | 4168148 | 2864122 |
| &nbsp;&nbsp;&nbsp;Less: accumulated depreciation and amortization | (2522531) | (1807545) |
| Property, equipment, software, website and intangible assets, net | $1645617 | $1056577 |

---

Depreciation and amortization expense on "Property, equipment, intangible assets, software, and website development costs, net" for the years ended December 31, 2021 and 2020 was approximately $732,000 and $524,000, respectively. Amortization of software and website development costs is included as a component of "Development" and depreciation of property, equipment, and intangible assets is included as a component of "General and administrative" in the Consolidated Statements of Operations.

---

| | |
|:---|:---|
| **NOTE 6:** | **ACCOUNTS PAYABLE AND ACCRUED EXPENSES** |

---

"Accounts payable and accrued expenses" at December 31, 2021 and 2020, consists of the following:

---

| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| Deferred loan origination fees | $3522017 | $1115067 |
| Trade accounts payable | 1103984 | 478712 |
| Accrued employee compensation | 383315 | 104551 |
| Accrued interest expense (1) | 123643 | 333900 |
| Other | 14870 | 10477 |
| Funded loans-in-process (2) | - | 147100 |
| Accounts payable and accrued expenses | $5147829 | $2189807 |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) "Accrued interest expense" includes interest related to corporate debt instruments as described
in Note 7.

&nbsp;&nbsp;&nbsp;&nbsp;(2) Certain whole loans originated by the Company in 2020 and subsequently sold to institutional buyers were
purchased at the contractual loan amount, which comprises both the principal amount disbursed to borrowers prior to the loan sale and
any loan-in-process principal yet to be disbursed. "Funded loans in process" represents the obligation of the Company to disburse
loan-in-process funds received from institutional buyers to borrowers for the underlying loans as draws are requested and approved.

---

| | |
|:---|:---|
| **NOTE 7:** | **DEBT** |

---

**Revolving Credit Facility**

On November 1, 2016, the Company's wholly owned subsidiary, Groundfloor Holdings GA, LLC, as borrower, entered into a revolving credit facility (the "Revolver") with Revolver Capital, LLC. The credit agreement initially provided for revolving loans up to a maximum aggregate principal amount of $1,500,000, proceeds to be used for bridge funding of underlying loans pending approval from the United States Securities and Exchange Commission. Subsequent amendments to the credit agreement in 2016 and 2017 increased the aggregate commitments under the credit facility to $4,500,000.

On April 4, 2018, the Credit Agreement dated as of November 1, 2016, as amended by the First Amendment as of November 11, 2016, the Second Amendment dated as of February 22, 2017 and the Third Amendment dated as of April 7, 2017, was assigned to ACM Alamosa DA LLC. The Company and the lender agreed to amend and restate the Original Credit Agreement in its entirety. The other terms of the credit facility remain unchanged.

On September 18, 2018, the Company increased the Revolving Credit Commitments thereunder from $4,500,000 to $5,500,000. In connection with the increase the Company paid a $10,000 commitment fee, which was capitalized and amortized over a twelve-month period. The other terms of the credit facility remain unchanged.

On August 8, 2019, the Company increased the Revolving Credit Commitments thereunder from $5,500,000 to $8,500,000. In connection with the increase the Company paid a $30,000 commitment fee, which is capitalized and amortized over a twelve-month period. The other terms of the credit facility remain unchanged.

On October 1, 2019, the Company increased the Revolving Credit Commitments thereunder from $8,500,000 to $10,500,000. In connection with the increase the Company paid a $20,000 commitment fee, which is capitalized and amortized over a twelve-month period. The other terms of the credit facility remain unchanged.

The Revolver maturity date was November 2, 2020. The Company had the option to request and the lender may, in its sole discretion, elect to extend the maturity date. The base contractual interest rate applicable throughout the year ended December 31, 2020, was the greater of 10.0 percent per annum and the weighted average underlying loan rate with respect to all underlying borrower loans funded under the Revolver. In the event that a loan funded using proceeds from the Revolver is not repaid in full on or before the repayment date for that loan, the contractual interest rate increases to the greater of 15.0 percent per annum or the underlying loan rate plus 3.0 percent.

In March 2020, in connection with the novel coronavirus pandemic and the related tightening of credit markets, GROUNDFLOOR's creditor informed the Company that it would decease funding of draws on the Revolver for an undefined period of time and replace the lost financing by expanding on other existing sources of lending capital, most importantly the GROUNDFLOOR Notes program. In response, the Company developed a plan to repay the outstanding principal and accrued interest on the Revolver. The outstanding principal and accrued interest on the Revolver were repaid in full in June 2020 and the Company did not renew the revolver at maturity, and as such, no outstanding balance remains as of December 31, 2020.

As of December 31, 2020 the Company had $0 available borrowings and $0 outstanding under the Revolver as presented within Revolving credit facility on the Consolidated Balance Sheets. As of December 31, 2020, the Company reflected approximately $0 of deferred financing costs related to the Revolver as a reduction to the Revolving credit facility in the Consolidated Balance Sheets. Amortization of these costs was approximately $33,000 for the year ended December 31, 2020, presented as a component of "Interest expense on corporate debt instruments" in the Consolidated Statements of Operations. Accrued interest on the Revolver, presented within "Accounts payable and accrued expenses" in the Company's Consolidated Balance Sheets, was $0 at December 31, 2020.

**2019 Subordinated Convertible Notes**

From September 2019 to December 2019, the Company issued subordinated convertible notes (the "2019 Subordinated Convertible Notes") to Investors for total proceeds of $3,607,000. The 2019 Subordinated Convertible Notes bear interest at the rate of 10% per annum. The outstanding principal and all accrued but unpaid interest is due and payable on the earlier of August 30, 2021, or the consummation of a sale of the Company by consolidation, merger, change of majority ownership, or sale or other disposition of all or substantially all of the assets of the Company (the "Maturity Date"). In the event of a closing of a preferred stock financing with gross proceeds of at least $8,000,000 ("Qualified Preferred Financing") prior to the Maturity Date, the outstanding principal and all accrued but unpaid interest may be converted into shares of preferred stock issued in the financing at a price per share equal to 90% of the offering price per share in the Qualified Preferred Financing. At any time after six months after the issuance of a 2019 Subordinated Convertible Note, the investor may convert all or a portion of the outstanding principal and accrued interest into shares of common stock at 90% of the per share price of common stock at the time of conversion, as reasonably determined by the Board. The indebtedness represented by the 2019 Subordinated Convertible Notes is subordinated in all respects to the principal of (and premium, if any), unpaid interest on and amounts reimbursable, fees, expenses, costs of enforcement, and other amounts due in connection with the Revolver.

Because of the contractual right of noteholders to convert their holdings to common stock at a discount to fair value, the Company determined that the 2019 Subordinated Convertible Notes contain a beneficial conversion feature. The Company recognized this beneficial conversion feature as a debt discount and component of additional paid-in capital at the in-the-money amount of approximately $401,000 at the time of issuance. The discount is being amortized to interest expense until the earlier of maturity or exercise of the conversion option. For the years ended December 31, 2021 and 2020, respectively, approximately $126,386 and $242,000 was amortized to "Interest expense on corporate debt instruments" in the Consolidated Statements of Operations.

Certain investors in 2019 Subordinated Convertible Notes purchased their shares through the issuance of advance agreements to the Company ("Advances"). The Advances accrue interest at a rate of 10% per annum and are payable to the Company within an initial term of 30 days, with an investor option to extend the term by 30 days, after which the Advances begin accruing interest at a rate of 14% per annum. The funds advanced to the investors are subject to recourse by the Company against the investors. The Advances, with principal sum of $288,000 as of December 31, 2019, which were recorded as a component of "Other current assets" in the Company's previously issued Consolidated Balance Sheets, were paid in full during the year ended December 31, 2020.

In 2020, certain holders of 2019 Subordinated Convertible Notes converted their holdings into common stock or Series B preferred stock, at the discretion of the Noteholders. Additionally, as an incentive to convert, the Company granted all Noteholders a time-limited option to convert their holdings on more favorable terms than those specified in the contractual agreement. Pursuant to these terms, Noteholders converted $408,000 in principal and approximately $48,000 in accrued interest into 30,841 shares of common stock at a conversion price of $14.88, a 15% discount to the per share price of common stock at the time of conversion. Noteholders also converted $411,000 in principal and approximately $47,000 in accrued interest into 22,760 shares of Series B preferred stock at a conversion price of $16.41, a 10% discount to the offering price in the 2020 Series B Preferred Stock Offering, and into 5,528 shares of Series B preferred stock at a conversion price of $14.58, a 20% discount to the offering price in the 2020 Series B Preferred Stock Offering. Because these Noteholders converted their debt instruments to equity securities of the Company pursuant to an inducement offer, the Company also recognized an expense equal to the fair value of the securities transferred in the conversion in excess of the fair value of the securities issuable pursuant to the original conversion terms. Conversion inducement expense of approximately $42,000 is recognized in the Consolidated Statements of Operations as a component of "General and administrative".

In 2021, certain holders of the 2019 Subordinated Convertible Notes converted their holdings into common stock, or Series B preferred stock, at the discretion of the noteholder. Additionally, noteholders were repaid $1,686,700 in principal and $324,500 in accrued interest at the maturity date. The Company granted all noteholders a time-limited option to convert their holdings on more favorable terms than those specified in the contractual agreement. Noteholders converted $151,000 in principal and approximately $32,000 in accrued interest into 7,463 shares of common stock at a conversion price of $15.75, a 10% discount to the per share price of common stock at the time of conversion, and into 3,759 share of common stock at a conversion of $17.50, the fair value the common stock at conversion. Noteholders also converted $261,000 in principal and approximately $47,000 in accrued interest into 16,928 shares of Series B preferred stock at a conversion price of $18.23, a 0% discount to the price per share of Series B preferred stock at the time of conversion.

In November 2021, the Company repaid the remaining principal of $688,700 and accrued but unpaid interest of $137,000 related to the notes related to the 2019 Subordinated Convertible Notes. Therefore principal of $0 and $2,788,000 on the 2019 Subordinated Convertible Notes, net of an unamortized discount of approximately $0 and $126,000, was outstanding as of December 31, 2021 and December 31, 2020, respectively. Accrued interest on the 2019 Subordinated Convertible Notes, presented within "Accounts payable and accrued expenses" in the Company's Consolidated Balance Sheets, was approximately $0 and $334,000 as of December 31, 2021 and December 31, 2020, respectively. The interest expense related to the 2019 Subordinated Convertible Notes for the years ended December 31, 2021 and 2020 was $208,000 and $334,000, respectively, and included within "Interest expense on corporate debt instruments".

**2021 Subordinated Convertible Notes**

From August 2021 to November 2021, the Company issued subordinated convertible notes (the "2021 Subordinated Convertible Notes") to Investors for total proceeds of $5,000,000. The 2021 Subordinated Convertible Notes bear interest at the rate of 12% per annum. The outstanding principal and all accrued but unpaid interest is due and payable on the earlier of August 31, 2023, or the consummation of a sale of the Company by consolidation, merger, change of majority ownership, or sale or other disposition of all or substantially all of the assets of the Company (the "Maturity Date"). In the event of a closing of a preferred stock financing with gross proceeds of at least $20,000,000 ("Qualified Preferred Financing") prior to the Maturity Date, the outstanding principal and all accrued but unpaid interest may be converted into shares of preferred stock issued in the financing at a price per share equal to 90% of the offering price per share in the Qualified Preferred Financing. At any time after six months after the issuance of a 2021 Subordinated Convertible Note, the investor may convert all or a portion of the outstanding principal and accrued interest into shares of common stock at 90% of the per share price of common stock at the time of conversion, as reasonably determined by the Board. As of November 30, 2021 the funding related to these notes was closed and no additional sales were made to investors. Because of the contractual right of noteholders to convert their holdings to common stock at a discount to fair value, the Company determined that the 2021 Subordinated Convertible Notes contain a beneficial conversion feature. The Company recognized this beneficial conversion feature as a debt discount and component of additional paid-in capital at the in-the-money amount of approximately $555,556 at the time of issuance. The discount is being amortized to interest expense until the earlier of maturity or exercise of the conversion option. For the year ended December 31, 2021 approximately $64,700 BCF was amortized to "Interest expense on corporate debt instruments" in the Consolidated Statements of Operations.

Principal of $5,000,000 on the 2021 Convertible Notes, net of an unamortized discount of approximately $505,500 was outstanding as of December 31, 2021. Accrued interest on the 2021 Subordinated Convertible Notes, presented within "Accounts payable and accrued expenses" in the Company's Consolidated Balance Sheets, was approximately $123,600 as of December 31, 2021. The related interest expense of $123,600 is included within "Interest expense on corporate debt instruments" for the year ended December 31, 2021.

**2021 Promissory Notes**

On August 30, 2021, the Company issued promissory notes (the "2021 Promissory Notes") to investors for total proceeds of $611,040. The 2021 Promissory Notes bear interest at the rate of 14% per annum. The outstanding principal and all accrued but unpaid interest is due and payable on the earlier of August 30, 2022, or the date the Company raises at least an aggregate $4,000,000 of new cash from any debt or financing closing after September 1, 2021.

As a result of cash financing received from other debt instruments, pursuant the 2021 Promissory Note purchase agreement the Company repaid all principal and accrued interest in December 2021. Interest expense related to the 2021 Promissory Notes is included within "Interest expense on corporate debt instruments" on the Consolidated Statement of Operations and equals $21,600 for the year ended December 31, 2021.

**GROUNDFLOOR Notes**

During the years ended December 31, 2021 and 2020, the Company entered into various secured promissory notes, (the "GROUNDFLOOR Notes"), with accredited Investors. The GROUNDFLOOR Notes are used for the purpose of the Company to originate, buy, and service loans for the purpose of building, buying, or rehabilitating single family and multifamily structures, or buying land, for commercial purposes. The GROUNDFLOOR Notes are issued and secured by the assets of Groundfloor Real Estate 1 LLC, a wholly owned subsidiary of Groundfloor Finance, Inc. As collateral security for GROUNDFLOOR Notes, the Company granted first priority security interest in all the loan assets of its wholly owned subsidiary, Groundfloor Real Estate 1 LLC, subject to certain exceptions.

During the year ended December 31, 2020, there were 116 notes entered into with stated interest rates ranging from 2.0% to 10.0% and with terms ranging from 30 days to 12 months. During the year ended December 31, 2021, there were 69 notes entered into with stated interest rates ranging from 2.0% to 14.0% and with terms ranging from 30 days to 12 months. The principal sum of $46,096,000 and $18,978,000 remains outstanding as of December 31, 2021 and 2020, respectively, and is presented in "Short-term notes payable" on the Company's Consolidated Balance Sheets.

Interest expense incurred on GROUNDFLOOR Notes, presented with in "Interest expense" on the Company's Consolidated Statement of Operations, was $2,167,211 and $952,514 for the year ended December 31, 2021 and 2020, respectively. Accrued interest on the GROUNDFLOOR Notes, presented within "Accrued interest on limited recourse obligations" in the Company's Consolidated Balance Sheets, was approximately $352,100 and $326,000 at December 31, 2021 and 2020, respectively.

**Stairs Notes**

The Company entered into various secured promissory notes, (the "Stairs Notes"), with Investors during the year ended December 31, 2021. The Stairs Notes are issued and secured by the assets of Groundfloor Yield LLC, a wholly owned subsidiary of Groundfloor Finance, Inc. Investors in Stairs Notes do not directly invest in Loans held by the Company; rather, the Stairs Notes are general obligations of the Company, and the proceeds thereof will be used primarily to fund the acquisition by the Company of Loans originated by Groundfloor Holdings GA, LLC, to continually expand and replenish the portfolio of Loans owned by the Company. The use of the funds generated by the Stairs Notes offering can be adjusted at the discretion of the business as business needs change.

During the year ended December 31, 2021, there were a total of 368 notes entered into, each with a stated interest rate of 4% and term of 5 days. The principal sum of $20,985,800 remained outstanding as of December 31, 2021 and is presented in "Short-term notes payable" on the Company's Consolidated Balance Sheets. Interest paid to Stairs investors totaled $142,500 for the year ended December 31, 2021 and is presented within "Interest expense" on the Company's Consolidated Statement of Operations.

**Other Short-term Notes Payable**

On November 8, 2019, the Company entered into a short-term note agreement with an investor for a principal sum of $500,000. The note bears simple interest at a stated rate of 6.0% per annum. The outstanding principal and accrued interest were due and payable on February 6, 2020, 90 days from the date of issuance. As part of the issuance, the investor also received 500 detachable warrants for the purchase of common stock. The Company has allocated the proceeds of the note issuance between the debt instrument and the detachable warrants based on their relative fair values. The amount allocated to the warrants was classified as a component of stockholders' equity and recorded as a debt discount in the Consolidated Balance Sheets, which will be amortized to interest expense over the term of the note. As of December 31, 2019, the outstanding principal of $500,000, net of an unamortized discount of approximately $2,000, are presented in "Short-term notes payable" on the Company's Consolidated Balance Sheets. Accrued interest on the note, approximately $5,000 as of December 31, 2019, is presented in "Accounts payable and accrued expenses" in the Consolidated Balance Sheets. This note and accrued interest thereon was repaid in full in the year ended December 31, 2020.

On December 19, 2019, the Company entered into a short-term note agreement with an investor for a principal sum of $500,000. The note bears simple interest at a stated rate of 13.5% per annum. The outstanding principal and accrued interest were due and payable on March 18, 2020, 90 days from the date of issuance. As of December 31, 2019, the outstanding principal of $500,000, net of an unamortized discount of approximately $1,000 related to debt issuance costs, are presented in "Short-term notes payable" on the Company's Consolidated Balance Sheets. Accrued interest on the note, $2,000 as of December 31, 2019, is presented in "Accounts payable and accrued expenses" in the Consolidated Balance Sheets. This note and accrued interest thereon was repaid in full in the year ended December 31, 2020.

On December 20, 2019, the Company entered into a short-term note agreement with an investor for a principal sum of $250,000. The note bears simple interest at a stated annual rate of 6.0% per annum. The outstanding principal and accrued interest are due and payable on March 19, 2020, 90 days from the date of issuance. As part of the issuance, the investor also received 250 detachable warrants for the purchase of common stock. The Company has allocated the proceeds of the note issuance between the debt instrument and the detachable warrants based on their relative fair values. The amount allocated to the warrants was classified as a component of stockholders' equity and recorded as a debt discount in the Consolidated Balance Sheets, which will be amortized to interest expense over the term of the note. As of December 31, 2019, the outstanding principal of $250,000, net of an unamortized discount of approximately $2,000, are presented in "Short-term notes payable" on the Company's Consolidated Balance Sheets. Accrued interest on the note, approximately $500 as of December 31, 2019, is presented in "Accounts payable and accrued expenses" in the Consolidated Balance Sheets. This note and accrued interest thereon was repaid in full in the year ended December 31, 2020.

**Paycheck Protection Program Loan**

The Paycheck Protection Program ("PPP"), established by the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and sponsored by the U.S. Small Business Administration ("SBA"), and is providing small businesses – sole proprietors, independent contractors, and, with certain industry exceptions, businesses with fewer than 500 employees – the opportunity to apply for a loan of up to $10 million to cover up to eight weeks of payroll costs, including benefits. Funds may also be used to cover interest on mortgage obligations, leases, and utilities incurred or in place before February 15, 2020. Based on current SBA guidance, PPP loans can be forgiven as long as (i) loan proceeds are used for covered expenses, (ii) full-time employee headcount is maintained during the eight-week period covered by the PPP loan, (iii) compensation for employees who earned less than $100,000 on an annualized basis in 2019 is not reduced by more than 25% during the covered period, and (iv) not more than 40% of the amount forgiven may be for non-payroll costs. In April 2020, the Company obtained an $829,100 loan under the PPP ("First PPP Loan"). The Company used the First PPP Loan proceeds to cover payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act. In January 2021, the Company applied for forgiveness of the

First PPP Loan with the Secretary of the Treasury and Small Business Administration (SBA). In March 2021, the Company received notice that our request for forgiveness was approved, and our First PPP Loan principal and interest were deemed paid in full. Upon the forgiveness of our obligations of the First PPP Loan promissory note, a gain was recognized of $829,100 in "Other income (expense)" on the Consolidated Statement of Operations for the year ended December 31, 2021.

The Company's First PPP Loan balance, presented within "Short-term notes payable" in the Company's Consolidated Balance Sheets, was $0 and $829,100 at December 31, 2021 and 2020, respectively.

In April 2021, the Company obtained a new loan under the PPP ("Second PPP Loan") for $829,000. The Company used the Second PPP Loan proceeds to cover payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act. In August 2021, the Company submitted an application for 100% loan forgiveness related to the Second PPP Loan received in 2021 through the Paycheck Protection Program. The application is pending as of the date of issuance of these financial statements. The Company's Second PPP Loan balance, presented within "Short-term notes payable" in the Company's Consolidated Balance Sheets, was $829,000 at December 31, 2021.

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| | |
|:---|:---|
| **NOTE 8:** | **STOCKHOLDERS' Equity (Deficit)** |

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**Capital Structure**

***Authorized Shares*** - As of December 31, 2021, the Company is authorized to issue 5,000,000 shares of no par value common stock and 1,316,181 shares of no par value preferred stock. The preferred stock has been designated as Series A Preferred Stock (the "Series A"), consisting of 747,385 shares, and Series Seed Preferred Stock (the "Series Seed"), consisting of 568,796 shares (collectively, "Preferred Stock").

**Common Stock Transactions**

In February 2018, the Company launched an offering of its common stock under Tier 2 of Regulation A pursuant to an offering statement on Form 1-A qualified by the SEC (the "2018 Common Stock Offering"). The Company offered up to 500,000 shares of common stock at $10 per share, with a minimum investment of $100, or ten shares of common stock. The aggregate initial offering price of the common stock will not exceed $5,000,000 in any 12-month period, and there is no minimum offering amount. The Company may issue up to 30,000 additional bonus shares. The 2018 Common Stock Offering closed on July 31, 2018. During the 2018 Common Stock Offering, the Company issued 437,917 shares of common stock for gross proceeds of $4,228,700. The Company incurred offering costs of approximately $125,000 related to the 2018 Common Stock Offering.

In conjunction with the 2018 Common Stock Offering, certain holders of Restated Subordinated Convertible Notes converted their outstanding principal and accrued interest into common stock at a contractually agreed upon 10% discount to the offered price. In 2018, approximately $278,000 in notes principal and accrued interest were converted into 30,847 shares of common stock. In 2019, approximately $1,289,000 in notes principal and accrued interest were converted into 143,223 shares of common stock.

In October 2018, the Company entered into a common stock purchase agreement for private placement of 125,000 shares of the Company's common stock for gross proceeds of $1,500,000.

In January 2019, the Company launched an offering of its common stock under Tier 2 of Regulation A pursuant to an offering statement on Form 1-A qualified by the SEC (the "2019 Common Stock Offering"). The Company offered up to 900,000 shares of common stock at $15.00 per share, with a minimum investment of $150, or 10 shares of common stock. According to the terms of the offering statement, the aggregate initial offering price of the common stock will not exceed $13,500,000 in any 12-month period, and there is no minimum offering amount. The Company may issue up to 30,000 additional bonus shares through an incentive program available to investors who had provided a previous indication of interest in investing in the Company. The 2019 Common Stock Offering closed on a rolling basis from January 2019 to July 2019. As a result of the offering, the Company received gross proceeds of approximately $3,115,000 in exchange for the issuance of 214,535 shares of common stock, including 6,800 bonus shares issued through the incentive program described above. The proceeds are presented in the Consolidated Balance Sheets as a component of stockholders' equity, net of direct offering costs of approximately $42,000 incurred.

In conjunction with the 2019 Common Stock Offering, certain holders of Restated Subordinated Convertible Notes converted their outstanding principal and accrued interest into common stock at a contractually agreed upon 10% discount to the offered price. In 2019, approximately $60,000 in notes principal and accrued interest were converted into 4,440 shares of common stock.

In February 2020, the Company launched an offering of its common stock under Tier 2 of Regulation A pursuant to an offering statement on Form 1-A qualified by the SEC (the "2020 Common Stock Offering"). Participation in the 2020 Common Stock Offering was limited to existing shareholders. The Company offered shares of common stock at $17.50 per share, with a minimum investment of $175, or 10 shares of common stock. According to the terms of the offering statement, the aggregate initial offering price of the common stock will not exceed $5,000,000 in any 12-month period, and there is no minimum offering amount. As a result of the offering, the Company received gross proceeds of approximately $539,000 in exchange for the issuance of 30,794 shares of common stock.

**Preferred Stock Transactions**

***Series A***

During 2015, the Company issued 709,812 shares of Series A to Investors for total proceeds of $4,748,705. In conjunction with the equity issuance, the Company converted all outstanding promissory notes payable and accrued interest totaling $251,295 into 37,561 shares of Series A.

***Series Seed***

During 2015 and 2014, the Company issued 201,146 and 91,259 shares, respectively, to Investors for total proceeds of $1,047,000 and $475,000. In conjunction with the equity issuance in 2014, the Company converted all outstanding convertible notes payable and accrued interest totaling $1,098,388 into 276,391 shares of Series Seed.

***Series B***

In July 2020, the Company launched an offering of 548,546 shares of Series B Preferred Stock at $18.23 per share ("Series B Preferred Stock Offering"). According to the terms of the offering statement, the aggregate initial offering price of the Series B Stock will not exceed $10,000,000 in any 12-month period, and the Company will not execute sales of any securities under Regulation A that aggregate more than $50,000,000 in any twelve-month period.

Since the launch of the offering, the Company has offered its Series B Stock on a continuous basis directly through the Company website, and also on the online platform utilized by SI Securities, LLC located at <u>www.seedinvest.com</u>, to both accredited and non-accredited investors.

The offering closed July 2021. As a result of the offering, the Company has, as of December 31, 2021, received gross proceeds of approximately $7,232,279 in exchange for the issuance of 396,724 shares of Series B preferred stock, presented net of offering costs of $575,989 in the Consolidated Balance Sheets as a component of stockholders' equity. Pursuant to the offering, certain holders of 2019 Subordinated Convertible Notes converted their holdings into Series B Preferred Stock as discussed in Note 7.

***Voting*** - The holders of Preferred Stock are entitled to one vote for each share of common stock into which the preferred shares are convertible.

***Liquidation*** - Upon any liquidation, dissolution, or winding up of the Company, the holders of Series A shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment shall be made to the holders of common stock or Series Seed, an amount per share equal to the greater of: i) the Series A original issue price of $6.69 per share, plus any dividends declared but unpaid, and ii) such amount per share as would have been payable had all shares of Series A been converted into common stock immediately prior to such liquidation, dissolution, or winding up. If the available assets are insufficient to pay the holders of shares of Series A the full amount to which they shall be entitled, then all of the available assets shall be distributed to the holders of the Series A pro rata in accordance with their ownership thereof.

After payment in full of the Series A preference amount, the Series Seed stockholders are entitled to a liquidation preference equal to the greater of: i) the Series Seed original issue price of $5.205 per share, plus any dividends declared but unpaid, or ii) such amount per share as would have been payable had all shares of Series Seed been converted into common stock immediately prior to such liquidation, dissolution, or winding up. If the available assets are insufficient to pay the holders of shares of Series Seed the full amount to which they shall be entitled, then all of the available assets shall be distributed to the holders of the Series Seed pro rata in accordance with their ownership thereof. Any assets remaining after such preferential distribution shall be distributed to holders of the common stock.

After payment in full of the Series Seed preference amount, the Series B stockholders are entitled to a liquidation preference equal to the greater of: i) the Series B original issue price of $18.23 per share, plus any dividends declared but unpaid, or ii) such amount per share as would have been payable had all shares of Series Seed been converted into common stock immediately prior to such liquidation, dissolution, or winding up. If the available assets are insufficient to pay the holders of shares of Series Seed the full amount to which they shall be entitled, then all of the available assets shall be distributed to the holders of the Series Seed pro rata in accordance with their ownership thereof.

Any assets remaining after such preferential distribution shall be distributed to holders of the common stock.

***Conversion*** - Shares of Preferred Stock are convertible into shares of common stock at the option of the holder at any time. The number of common stock shares for Preferred Stock can be determined by dividing the original issue price by the then-effective conversion price.

***Mandatory Conversion*** - All outstanding shares of Preferred Stock shall automatically be converted into shares of common stock upon the closing of the sales of shares of common stock to the public, with gross proceeds to the Company of at least $20,000,000. All outstanding shares of Series A, Series Seed, and Series B Stock shall automatically be converted into shares of common stock by the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least a majority of the then outstanding shares of Series A, Series Seed, and Series B Stock, respectively, each voting as a single class.

***Dividends*** - All dividends shall be declared pro rata on the common stock and Preferred Stock on a pari passu basis according to the numbers of common stock held by such holders on an as converted basis.

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| | |
|:---|:---|
| **NOTE 9:** | **stock options and warrants** |

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**Stock Option**s

In August 2013, the Company adopted the 2013 Stock Option Plan (the "Plan"). The Plan provides incentives to eligible employees, officers, and directors in the form of incentive stock options, non-qualified stock options, and restricted stock awards. The Company may also grant other stock-based awards under the Plan, including performance-based awards. The Company has reserved a total of 400,000 shares of common stock for issuance under the Plan. Of these shares, 4,863 shares are available for future stock option grants as of December 31, 2021.

The Board of Directors has the authority to administer the Plan and determine, among other things, the interpretation of any provisions of the Plan, the eligible employees who are granted options, the number of options that may be granted, vesting schedules, and option exercise prices. The Company's stock options have a contractual life not to exceed ten years. The Company issues new shares of common stock upon exercise of stock options.

During 2021, the Company granted performance-based awards to employees that entitled the recipients to earn up to 130,000 shares, if certain performance criteria are achieved over a three-year period. The actual number of shares to be issued will be determined by when performance criteria are met during the three-year period. The performance-based awards granted are based upon the Company's ability to achieve certain investor customer acquisition targets. Performance based awards are recognized as compensation expense based on fair value on date of grant, the number of shares management ultimately expects to vest and the vesting period. The performance-based shares expected to be exercised by management are included as granted in the option activity table below. The Company estimated the fair value of each performance-based award granted under the Plans on the date of grant using a Black-Scholes-Merton option pricing model that uses the assumptions noted in the table below.

During 2021, compensation expense of $17,700 was recognized for performance awards granted in 2021. The total unrecognized compensation cost related to performance awards was $194,700 at December 31, 2021 and the weighted-average period over which this expense will be recognized is 2.3 years.

Due to limited historical data, the Company estimates stock price volatility based on the actual volatility of comparable publicly traded companies over the expected life of the option. The expected term represents the average time that options that vest are expected to be outstanding. The expected term for options granted to non-employees is the contractual life. The risk-free rate is based on the United States Treasury yield curve for the expected life of the option.

Management used the Black-Scholes-Merton option pricing model to determine the fair value of options issued during the years ended December 31, 2021 and 2020.

The assumptions used to calculate the fair value of stock options granted are as follows:

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| | | |
|:---|:---|:---|
| **For the Year Ended December 31, 2021** | **Non-<br> Employees** | **Employees** |
| Estimated dividend yield | -% | -% |
| Expected stock price volatility | 55.0% | 50.0% |
| Risk-free interest rate | 1.3% | 1.1% |
| Expected life of options (in years) | 10.0 | 6.25 |
| Weighted-average fair value per share | $10.74 | $8.45 |

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| | | |
|:---|:---|:---|
| **For the Year Ended December 31, 2020** | **Non-<br> Employees** | **Employees** |
| Estimated dividend yield | -% | -% |
| Expected stock price volatility | 55.0% | 50.0% |
| Risk-free interest rate | 1.52% | 0.34 - 1.40% |
| Expected life of options (in years) | 10.0 | 6.25 |
| Weighted-average fair value per share | $11.28 | $8.35 |

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The following summarizes the stock option activity for the years ended December 31, 2021 and 2020:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Shares** | **Weighted-<br> Average<br> Exercise<br> Price** | **Weighted-<br> Average<br> Remaining<br> Contractual<br> Term** | **Aggregate<br> Intrinsic<br> Value** |
| Outstanding as of December 31, 2019 | 324208 | $6.25 |  |  |
| Exercised | (1568) | 2.48 |  |  |
| Terminated | (53608) | 11.70 |  |  |
| Granted | 101147 | 17.50 |  |  |
| Outstanding as of December 31, 2020 | 370179 | $8.55 |  |  |
| Exercised | (7825) | 8.71 |  |  |
| Terminated | (33124) | 16.47 |  |  |
| Granted | 87706 | 18.81 |  |  |
| Outstanding as of December 31, 2021 | 416936 | $10.08 | 6.5 | $3803000 |
| Exercisable as of December 31, 2021 | 297737 | 7.00 | 5.4 | 3633000 |
| Expected to vest after December 31, 2021 | 119199 | $17.78 | 9.2 | $168000 |

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The following table summarizes certain information about all stock options outstanding as of December 31, 2021:

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| | | | |
|:---|:---|:---|:---|
| **Exercise Price** | **Number of Options<br> Outstanding** | **Weighted-Average<br> Remaining<br> Contractual Life (In<br> Years)** | **Number of Options<br> Exercisable** |
| $0.67 | 64000 | 2.0 | 64000 |
| 1.87 | 36000 | 3.6 | 36000 |
| 2.40 | 68367 | 5.3 | 68367 |
| 3.99 | 10000 | 2.8 | 10000 |
| 10.00 | 20975 | 6.6 | 18733 |
| 12.00 | 32251 | 7.0 | 24833 |
| 15.00 | 26740 | 7.6 | 17146 |
| 17.50 | 90923 | 8.9 | 58658 |
| 19.20 | 67680 | 9.8 | - |
|  | 416936 |  | 297737 |

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As of December 31, 2021, there was approximately $976,000 of total unrecognized compensation cost related to stock option arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 2.8 years. The total intrinsic value of stock option awards exercised was approximately $79,800 during the fiscal year ended December 31, 2021.

During the year ended December 31, 2021, the company issued 87,706 stock options and 7,825 stock options were exercised.

The Company recorded approximately $32,200 and $59,000 in non-employee and $372,300 and $475,000 in employee share-based compensation expense during 2021 and 2020, respectively**.**

**Restricted Stock**

In October 2021, an employee purchased 34,720 shares of common stock at a purchase price of $19.20, under the terms of a restricted common stock purchase agreement. These shares were purchased in exchange for a promissory note (the "Promissory Note") equal to $666,624. The 2021 issuance vests in equal installments every three-months after the Initial Vesting Commencement Date, subject to the employee's continuous service with the Company. The Company may repurchase all of the unvested shares following the employee's termination at the original purchase price. The Promissory Note accrue interest at the rate of .86% per annum, and are repayable at the earlier of (a) October 15, 2025; (b) the occurrence of SOX compliance issues; or (c) the occurrence of a change of control. The Promissory Note is fully collateralized by the 34,720 shares purchased by the employee per the restricted common stock purchase agreement.

The Promissory Note issued by the Company is stated as a full-recourse note however management has accounted for the Promissory Note as a non-recourse since note is forgiven in 1/5<sup>th</sup> installments at the yearly anniversary of employment and the amount of the note is aligned with a corresponding percentage of the underlying shares. Accordingly, the non-recourse note received by the Company as consideration for the issuance of the restricted stock has been considered a stock option for accounting purposes as the substance is similar to the grant of an option. The exercise price is the principal due on the note. The stated interest rate of the Promissory Note is reflected as the dividend yield. The fair value of the award is recognized over the requisite service period (not the term of the Promissory Note) through a charge to compensation cost. The maturity date of the Promissory Notes reflects the legal term for purposes of valuing the award.

The fair value of the restricted stock granted to employees in exchange for a Promissory Note is estimated on the grant date using the Black-Scholes option pricing model using the following assumptions:

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| | |
|:---|:---|
| **For the Year Ended December 31, 2021** | **Non-<br> Employees** |
| Estimated dividend yield | -% |
| Expected stock price volatility | 50.0% |
| Risk-free interest rate | 1.2% |
| Expected life of options (in years) | 6.25 |
| Weighted-average fair value per share | $9.38 |

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A summary of the Company's restricted stock activity and related information is as follows:

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| | | |
|:---|:---|:---|
|  | **Shares** | **Weighted-<br> Average<br> Exercise<br> Price** |
| Unvested as of December 31, 2020 |  | $- |
| Granted | 34720 | 19.20 |
| Vested |  |  |
| Forfeited | - | - |
| Unvested as of December 31, 2021 | 34720 | $19.20 |

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**Warrants**

The Company has 45,550 and 52,725 warrants issued and outstanding, for the purchase of common stock, at December 31, 2021 and 2020, respectively. The Company recognized expense of approximately $0 and $4,000 related to amortization of warrant discounts for the year ended December 31, 2021, and 2020, respectively.

The Company did not issue warrants during the years ended December 31, 2021 or 2020.

In October 2021, 7,175 outstanding warrants from the Company's 2017 warrant issuance were exercised for the purchase of common stock at a price of $6.69 per share. Payment in the amount of $48,001 was received in exchange for the shares. This conversion is presented as an increase to "Common Stock" as of December 31, 2021. No warrants were exercised during the year ended December 31, 2020.

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| | |
|:---|:---|
| **NOTE 10:** | **INCOME TAXES** |

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The Company has incurred net operating losses since inception. Due to the Company's history of losses, there is not enough evidence at this time to support the conclusion that it will generate future income of a sufficient amount and nature to utilize the benefits of the Company's net deferred tax assets. Accordingly, the Company fully reduced its net deferred tax assets by a valuation allowance, since it has been determined that it is more likely than not that all of the deferred tax assets will not be realized.

On December 22, 2017, the United States enacted new tax reform legislation which reduced the corporate tax rate to 21% effective for the tax year beginning January 1, 2018. Under Accounting Standards Codification 740, the effects of new tax legislation are recognized in the period which includes the enactment date. As a result, the deferred tax assets and liabilities existing on the enactment date must be revalued to reflect the rate at which these deferred balances will reverse. The corresponding adjustment would generally affect the income tax expense (benefit) shown on the Consolidated Statements of Operations. However, since the Company has a full valuation allowance applied against its deferred tax asset, there is no impact to the income tax expense for the year ended December 31, 2021. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of the Company's deferred income tax assets and liabilities as of December 31, 2021 and 2020, are as follows:

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| | | |
|:---|:---|:---|
|  | **2021** | **2020** |
| Deferred income tax assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Net operating loss carryforwards | $6951000 | $6156000 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 98000 | 27000 |
| &nbsp;&nbsp;&nbsp;Share-based compensation | 154000 | 142000 |
| &nbsp;&nbsp;&nbsp;Accrued interest |  | 130000 |
| &nbsp;&nbsp;&nbsp;Research and development credit | 256000 | 152000 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 38000 | 31000 |
| &nbsp;&nbsp;&nbsp;Valuation allowance | (7497000) | (6638000) |
|  | $- | $- |

---

The Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such asset. The valuation allowance increased by approximately $859,000 and $1,142,000, respectively, during the years ended December 31, 2021 and 2020.

As of December 31, 2021, the Company has federal and state net operating loss carryforwards of approximately $29,777,000 available to offset future federal and state taxable income, which begin to expire in 2033 and 2028. In general, a corporation's ability to utilize its NOL and research and development credit carryforwards may be substantially limited due to the ownership change limitations as required by Section 382 and 383 of the Internal Revenue Code of 1986, as amended (Code), as well as similar state provisions. The federal and state Section 382 and 383 limitations may limit the use of a portion of the Company's domestic NOL and tax credit carryforwards. Further, a portion of the carryforwards may expire before being applied to reduce future income tax liabilities.

Income taxes computed at the statutory federal income tax rate are reconciled to the provision for income tax expense for 2021 and 2020 as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **2021** | **2021** | **2020** | **2020** |
|  | **Amount** | **% of Pre-Tax<br> Earnings** | **Amount** | **% of Pre-Tax<br> Earnings** |
| Income tax expense (benefit) at statutory rate | $(829000) | (21.0)% | $(1005000) | (21.0)% |
| State taxes (net of federal benefit) | (184000) | (4.7)% | (222000) | (4.6)% |
| Non-taxable income | (174000) | (4.4)% |  |  |
| Non-deductible expenses | 447000 | 11.3% | 497000 | 10.4% |
| True-up adjustment for deferred items | (119000) | (3.0)% | (412000) | (8.6)% |
| Change in valuation allowance | 859000 | 21.8% | 1142000 | 23.8% |
| Provision for income tax expense | $- | 0.0% | $- | 0.0% |

---

The Company recognizes interest and penalties related to uncertain tax positions in the provision for income taxes. As of December 31, 2021 and 2020, the Company had no accrual related to uncertain tax positions.

---

| | |
|:---|:---|
| **NOTE 11:** | **RELATED PARTY TRANSACTIONS** |

---

**ISB Development Corp.**

The Company issued a short-term note in November 2019 to ISB Development Corp., an entity owned and operated by a director of the Company, for a principal sum of $500,000. The short-term note and accrued interest thereon were repaid in full in 2020. See Note 7, under the heading "Other short-term notes payable," for further discussion and disclosure related to the related party note.

**Moma Walnut, LLC**

In June 2019, the Company extended a fully collateralized loan to Moma Walnut, LLC, an entity that is owned and operated by a director of the Company. The loan has a principal amount of $400,000, bears interest at a stated rate of 5% per annum, and was initially due within 30 days. Terms were subsequently modified in August 2019 to increase the interest rate to 13% per annum and extend the maturity date to August 11, 2020. In September 2020, the terms were again amended to retroactively change the interest rate to 10% per annum and to require monthly interest payments. As of December 31, 2021 and 2020, the related party loan receivable and accrued interest thereon are presented in the Consolidated Balance Sheets as a component of "Other current assets" in the amount of $318,000 and $404,000, respectively.

**Employee Loan**

In November 2020, an employee of the Company was extended a loan in the amount of $30,000, bearing interest at a rate of 1% per annum. The loan matured on October 31, 2021. As of December 31, 2021 and 2020, the related party loan receivable and accrued interest thereon are presented in the Consolidated Balance Sheets as a component of "Other current assets" in the amount of approximately $0, and $30,000, respectively.

---

| | |
|:---|:---|
| **NOTE 12:** | **COMMITMENTS AND CONTINGENCIES** |

---

The Company has a noncancelable operating lease agreement for office space. The lease contains a renewal option within 67 months of the commencement date of September 2018. Additionally, the company amended the lease to acquire approximately 4,000 sq ft of new office space within the current building. Rent expense for operating leases, which has escalating rents over the term of the lease, is recorded on a straight-line basis over the minimum lease terms. Rent expense under the operating lease was approximately $411,000 and $309,000 as a component of "General and administrative" in the Consolidated Statements of Operations for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, the approximate amounts of the annual future minimum lease payments under noncancelable operating leases obligations are as follows:

---

| | |
|:---|:---|
|  | **Balance** |
| Years ending December 31, |  |
| 2022 | $432710 |
| 2023 | 445679 |
| 2024 | 151754 |
| 2025 | - |
|  | $1030143 |

---

The Company is subject to legal proceedings which arise in the ordinary course of business. In the opinion of the Company, the resolution of these matters will not have a material adverse impact on the Company's consolidated financial position or results of operations.

---

| | |
|:---|:---|
| **NOTE 13:** | **SUBSEQUENT EVENTS** |

---

Subsequent events were evaluated through March 11, 2022, the date the Financial Statements were available to be issued. Based on this evaluation, it was determined subsequent events occurred that require disclosure in the financial statements.

In January 2022, the Company amended and restated its article of incorporation to increase the authorized number of Preferred Stock shares to 2,001,457 and to designate 243,348 of the newly authorized shares as Series B-2 Preferred Stock ("Series B-2 Stock"). Pursuant to this offering, from January 1, 2022 through the issuance date of these financial statements, the Company has received gross proceeds of approximately $5,800,000 in exchange for the issuance of 189,271 shares of Series B-2 Stock from a third-party investor. In addition to purchasing Series B-2 Stock, the third-party investor executed the purchase of 60,764 shares of Common Stock through direct, secondary transfer of shares owned by existing shareholders. As such, this Common Stock transfer did not result in cash proceeds received or issuance costs incurred by the Company and resulted in no impact to the Company's gross capitalization.

In January 2022, the Company amended its 2013 Stock Option Plan (the "Plan") to increase the number of shares of Common Stock reserved for issuance from 400,000 as it existed at December 31, 2021, to 950,000 shares.

**PART III — EXHIBITS**

**Exhibit Index**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;**Exhibit<br> Number** | &nbsp;&nbsp;**Exhibit Description<br> (hyperlink)** | &nbsp;&nbsp;**Filed<br> Herewith** | &nbsp;&nbsp;**Form** | &nbsp;&nbsp;**File No** | &nbsp;&nbsp;**Exhibit** | &nbsp;&nbsp;**Filing Date** |
| [1.1](http://www.sec.gov/Archives/edgar/data/1588504/000110465920043243/tm2013067d1_ex1-1.htm) | [Agreement dated February 14, 2020, by and between Groundfloor Finance Inc. and SI Securities, LLC](http://www.sec.gov/Archives/edgar/data/1588504/000110465920043243/tm2013067d1_ex1-1.htm) |  | [1-A](http://www.sec.gov/Archives/edgar/data/1588504/000110465920043243/tm2013067d1_ex1-1.htm) | [024-11188](http://www.sec.gov/Archives/edgar/data/1588504/000110465920043243/tm2013067d1_ex1-1.htm) | [1.1](http://www.sec.gov/Archives/edgar/data/1588504/000110465920043243/tm2013067d1_ex1-1.htm) | [April 3, 2020](http://www.sec.gov/Archives/edgar/data/1588504/000110465920043243/tm2013067d1_ex1-1.htm) |
| [2.1](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex2-1.htm) | [Form of Groundfloor Finance Inc. Third Amended and Restated Articles of Incorporation](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex2-1.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex2-1.htm) | [024-11188](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex2-1.htm) | [2.1](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex2-1.htm) | [June 8, 2020](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex2-1.htm) |
| [2.2](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex2-2.htm) | [Groundfloor Finance Inc. Bylaws](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex2-2.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex2-2.htm) | [024-10440](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex2-2.htm) | [2.2](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex2-2.htm) | [July 1, 2015](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex2-2.htm) |
| [3.1](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex3-1.htm) | [Amended and Restated Investors' Rights Agreement](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex3-1.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex3-1.htm) | [024-10496](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex3-1.htm) | [3.1](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex3-1.htm) | [November 25, 2015](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex3-1.htm) |
| [3.2](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-2.htm) | [Form of Preferred Stock Voting Agreement](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-2.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-2.htm) | [024-10758](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-2.htm) | [3.2](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-2.htm) | [February 7, 2018](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-2.htm) |
| [3.3](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-3.htm) | [Common Stock Voting Agreement](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-3.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-3.htm) | [024-10758](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-3.htm) | [3.3](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-3.htm) | [February 7, 2018](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-3.htm) |
| [3.4](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-4.htm) | [Common Stock Subscription Agreement](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-4.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-4.htm) | [024-10758](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-4.htm) | [3.4](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-4.htm) | [February 7, 2018](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex3-4.htm) |
| [4.1](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex4-1.htm) | [Form of Series B Stock Subscription Agreement](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex4-1.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex4-1.htm) | [024-11188](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex4-1.htm) | [4.1](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex4-1.htm) | [June 8, 2020](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex4-1.htm) |
| [4.2](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex4-2.htm) | [Form of Series B Stock Investors' Rights Agreement](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex4-2.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex4-2.htm) | [024-11188](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex4-2.htm) | [4.2](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex4-2.htm) | [June 8, 2020](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex4-2.htm) |
| [6.1](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-1.htm) | [Executive Employment Agreement with Brian Dally dated November 19, 2014](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-1.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-1.htm) | [024-10440](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-1.htm) | [6.1](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-1.htm) | [July 1, 2015](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-1.htm) |
| [6.2](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-2.htm) | [Executive Employment Agreement with Nikhil Bhargava dated November 19, 2014](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-2.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-2.htm) | [024-10440](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-2.htm) | [6.2](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-2.htm) | [July 1, 2015](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-2.htm) |
| [6.3](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-6.htm) | [2013 Stock Option Plan](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-6.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-6.htm) | [024-10440](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-6.htm) | [6.6](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-6.htm) | [July 1, 2015](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-6.htm) |
| [6.4](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-8.htm) | [Option Award Agreement for Michael Olander Jr.](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-8.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-8.htm) | [024-10440](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-8.htm) | [6.8](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-8.htm) | [July 1, 2015](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex6-8.htm) |
| [6.5](http://www.sec.gov/Archives/edgar/data/1588504/000114420415058488/v421765_ex6-11.htm) | [Option Award Agreement for Richard Tuley](http://www.sec.gov/Archives/edgar/data/1588504/000114420415058488/v421765_ex6-11.htm) |  | [1-A](http://www.sec.gov/Archives/edgar/data/1588504/000114420415058488/v421765_ex6-11.htm) | [024-10488](http://www.sec.gov/Archives/edgar/data/1588504/000114420415058488/v421765_ex6-11.htm) | [6.11](http://www.sec.gov/Archives/edgar/data/1588504/000114420415058488/v421765_ex6-11.htm) | [October 7, 2015](http://www.sec.gov/Archives/edgar/data/1588504/000114420415058488/v421765_ex6-11.htm) |
| [6.6](http://www.sec.gov/Archives/edgar/data/1588504/000114420415058488/v421765_ex6-12.htm) | [Option Award Agreement for Bruce Boehm](http://www.sec.gov/Archives/edgar/data/1588504/000114420415058488/v421765_ex6-12.htm) |  | [1-A](http://www.sec.gov/Archives/edgar/data/1588504/000114420415058488/v421765_ex6-12.htm) | [024-10488](http://www.sec.gov/Archives/edgar/data/1588504/000114420415058488/v421765_ex6-12.htm) | [6.12](http://www.sec.gov/Archives/edgar/data/1588504/000114420415058488/v421765_ex6-12.htm) | [October 7, 2015](http://www.sec.gov/Archives/edgar/data/1588504/000114420415058488/v421765_ex6-12.htm) |
| [6.7](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex3-1.htm) | [Series Seed Preferred Stock Purchase Agreement](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex3-1.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex3-1.htm) | [024-10440](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex3-1.htm) | [3.1](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex3-1.htm) | [July 1, 2015](http://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex3-1.htm) |
| [6.8](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex6-18.htm) | [Series A Preferred Stock Purchase Agreement](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex6-18.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex6-18.htm) | [024-10496](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex6-18.htm) | [6.18](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex6-18.htm) | [November 25, 2015](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex6-18.htm) |
| [6.9](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex6-19.htm) | [Right of First Refusal and Co-Sale Agreement](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex6-19.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex6-19.htm) | [024-10496](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex6-19.htm) | [6.19](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex6-19.htm) | [November 25, 2015](http://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex6-19.htm) |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| [6.10](http://www.sec.gov/Archives/edgar/data/1588504/000114420417052996/tv477155_ex6-10.htm) | [Promissory Note and Security Agreement, as amended](http://www.sec.gov/Archives/edgar/data/1588504/000114420417052996/tv477155_ex6-10.htm) |  | [1-A POS](http://www.sec.gov/Archives/edgar/data/1588504/000114420417052996/tv477155_ex6-10.htm) | [024-10496](http://www.sec.gov/Archives/edgar/data/1588504/000114420417052996/tv477155_ex6-10.htm) | [6.10](http://www.sec.gov/Archives/edgar/data/1588504/000114420417052996/tv477155_ex6-10.htm) | [October 18, 2017](http://www.sec.gov/Archives/edgar/data/1588504/000114420417052996/tv477155_ex6-10.htm) |
| [6.11](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex6-11.htm) | [Loan Purchase Agreement with Harvest Residential Loan Acquisition, LLC](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex6-11.htm) |  | [1-A POS](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex6-11.htm) | [024-10758](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex6-11.htm) | [6.11](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex6-11.htm) | [February 7, 2018](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex6-11.htm) |
| [6.12](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex6-12.htm) | [Servicing Agreement with Harvest Residential Loan Acquisition, LLC](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex6-12.htm) |  | [1-A POS](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex6-12.htm) | [024-10758](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex6-12.htm) | [6.12](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex6-12.htm) | [February 7, 2018](http://www.sec.gov/Archives/edgar/data/1588504/000114420418006258/tv485101_ex6-12.htm) |
| [6.13](http://www.sec.gov/Archives/edgar/data/1588504/000110465920073451/tm2021875d2_ex6-13.htm) | [Amended and Restated Credit Agreement, dated April 4, 2018 by and among Groundfloor Holdings GA, LLC and ACM Alamosa DA LLC](http://www.sec.gov/Archives/edgar/data/1588504/000110465920073451/tm2021875d2_ex6-13.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000110465920073451/tm2021875d2_ex6-13.htm) | [024-11188](http://www.sec.gov/Archives/edgar/data/1588504/000110465920073451/tm2021875d2_ex6-13.htm) | [6.13](http://www.sec.gov/Archives/edgar/data/1588504/000110465920073451/tm2021875d2_ex6-13.htm) | [June 15, 2020](http://www.sec.gov/Archives/edgar/data/1588504/000110465920073451/tm2021875d2_ex6-13.htm) |
| [8.1](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex8-1.htm) | [Escrow Agreement by and among Groundfloor Finance Inc., SI Securities, LLC, and The Bryn Mawr Trust Company of Delaware](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex8-1.htm) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex8-1.htm) | [024-11188](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex8-1.htm) | [8.1](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex8-1.htm) | [June 8, 2020](http://www.sec.gov/Archives/edgar/data/1588504/000110465920070546/tm2021875d1_ex8-1.htm) |
| [10.1](http://www.sec.gov/Archives/edgar/data/1588504/000110465920073451/tm2021875d2_partiiandiii.htm#signatures) | [Power of attorney](http://www.sec.gov/Archives/edgar/data/1588504/000110465920073451/tm2021875d2_partiiandiii.htm#signatures) |  | [1-A/A](http://www.sec.gov/Archives/edgar/data/1588504/000110465920073451/tm2021875d2_partiiandiii.htm#signatures) | [024-11188](http://www.sec.gov/Archives/edgar/data/1588504/000110465920073451/tm2021875d2_partiiandiii.htm#signatures) | [10.1](http://www.sec.gov/Archives/edgar/data/1588504/000110465920073451/tm2021875d2_partiiandiii.htm#signatures) | [June 15, 2020](http://www.sec.gov/Archives/edgar/data/1588504/000110465920073451/tm2021875d2_partiiandiii.htm#signatures) |
| [11.1](https://www.sec.gov/Archives/edgar/data/1588504/000110465922119477/tm2227304d2_ex11-1.htm) | [Consent of Cherry Bekaert LLP](https://www.sec.gov/Archives/edgar/data/1588504/000110465922119477/tm2227304d2_ex11-1.htm) |  | [1-A](https://www.sec.gov/Archives/edgar/data/1588504/000110465922119477/tm2227304d2_ex11-1.htm) | [024-11188](https://www.sec.gov/Archives/edgar/data/1588504/000110465922119477/tm2227304d2_ex11-1.htm) | [11.1](https://www.sec.gov/Archives/edgar/data/1588504/000110465922119477/tm2227304d2_ex11-1.htm) | [November 16, 2022](https://www.sec.gov/Archives/edgar/data/1588504/000110465922119477/tm2227304d2_ex11-1.htm) |
| [11.2](tm237391d1_ex12-1.htm) | [Consent of Robbins Ross Alloy Belinfante Littlefield LLC (included as part of Exhibit 12.1)](tm237391d1_ex12-1.htm) | [X](tm237391d1_ex12-1.htm) |  |  |  |  |
| [12.1](tm237391d1_ex12-1.htm) | [Opinion of Robbins Ross Alloy Belinfante Littlefield LLC](tm237391d1_ex12-1.htm) | [X](tm237391d1_ex12-1.htm) |  |  |  |  |

---

**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 Atlanta, State of Georgia, on February 10, 2023.

---

| | |
|:---|:---|
| **GROUNDFLOOR FINANCE INC.** | **GROUNDFLOOR FINANCE INC.** |
| By: | /s/ Nick Bhargava |
| Name: | Nick Bhargava |
| Title: | Executive Vice President, Secretary and Acting Chief Financial Officer |

---

This offering statement has been signed by the following persons in the capacities and on the dates indicated.

---

| | | |
|:---|:---|:---|
| Signature | Title | Date |
| \* | President, Chief Executive Officer and Director (Principal Executive Officer) | February 10, 2023 |
| **Brian Dally** | President, Chief Executive Officer and Director (Principal Executive Officer) |  |
| /s/ Nick Bhargava | Executive Vice President, Secretary, Acting Chief Financial Officer and Director (Principal Financial and Accounting Officer) | February 10, 2023 |
| **Nick Bhargava** | Executive Vice President, Secretary, Acting Chief Financial Officer and Director (Principal Financial and Accounting Officer) |  |
| \* | Director | February 10, 2023 |
| **Sergei Kouzmine** |  |  |
| \* | Director | February 10, 2023 |
| **Bruce Boehm** |  |  |
| \* | Director | February 10, 2023 |
| **Michael Olander Jr.** |  |  |
| \* | Director | February 10, 2023 |
| **Richard Tuley Jr.** |  |  |

---

---

| | |
|:---|:---|
| \*By: | /s/ Nick Bhargava |
| Nick Bhargava | Nick Bhargava |
| Attorney-in-fact | Attorney-in-fact |

---

## Ex1A-12

**Exhibit 12.1**

**VINCENT R. RUSSO**

DIRECT LINE: 404-856-3260

Email: vrusso@robbinsfirm.com

February 13, 2023

**<u>VIA ELECTRONIC MAIL</u>**

Groundfloor Finance Inc.

600 Peachtree St. NE

Suite 810<br> Atlanta, GA 30308

<u>nick@groundfloor.us</u>

---

| | |
|:---|:---|
| **Re:** | **<u>Post-Qualification Amendment No. 1 to Offering Statement on Form 1-A</u>** |

---

Ladies and Gentlemen:

At your request, we have examined Post-Qualification Amendment No. 1 (the "Amendment"), dated February 13, 2023, to the Offering Statement on Form 1-A of Groundfloor Finance Inc. (the "Company") (File 024-12013), which was initially qualified by the Securities and Exchange Commission (the "Commission") on November 22, 2022 pursuant to the provisions of Regulation A of the Securities Act of 1933, as amended (the "Securities Act"). The Amendment is being filed in connection with the offer and sale of up to $29,992,600 aggregate principal amount of Limited Recourse Obligations (the "Securities") offered by the Company. The Securities will be purchased and sold pursuant to a Form of Investor Agreement (the "Investor Agreement") and a Standard Form of LRO Agreement (the "LRO Agreement") as set forth in Part III of the Offering Statement, and as entered into between the Company and each purchaser of the Securities ("Purchasers").

In rendering this opinion, we have examined such records and documents as we have deemed necessary in order to give the opinion set forth herein, including the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Fifth Amended and Restated Articles of Incorporation of the Company filed with the Georgia Secretary of State on January 24, 2023;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The Bylaws of the Company (filed as Exhibit 2.2 to the Offering Statement);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) The Amendment, the Offering Statement, the Offering Circular included as Part II of the Offering Statement, and the exhibits filed as a part thereof or incorporated therein by reference;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Action of the Directors of the Company authorizing the offer and sale of the Securities pursuant to the terms of the Amendment; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) Public records of the Georgia Secretary of State indicating the Company is active and in good standing pursuant to the Georgia Business Corporation Code.

**Robbins ♦ Alloy ♦ Belinfante ♦ Littlefield** **<sub>LLC</sub>**

500 14<sup>th</sup> Street, NW · Atlanta, GA 303318 · www.robbinsfirm.com

Groundfloor Finance Inc.

February 13, 2023

In reviewing documents for this opinion, we have assumed and express no opinion as to the authenticity and completeness of all documents submitted to us, including the conformity of all copies to the originals, and the legal capacity of all persons or entities executing the documents. Additionally, in rendering the opinions set forth below, we have assumed that: (i) each Purchaser has the legal capacity or power, corporate or other, to enter into and perform all such obligations under the Investor Agreement and LRO Agreement; (ii) any and all representations of the Company are correct as to questions of fact; (iii) unless otherwise exempt, the Securities will be properly qualified as necessary in each state in which the Securities are to be offered or sold; and (iv) the public offer or sale of the Securities shall be exempt from registration under Section 3(b) of the Securities Act.

This opinion is qualified by and subject to, and we render no opinion with respect to, the following limitations and exceptions to the enforceability of the Securities:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The effect of the laws of bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance, and other similar laws now or hereafter in effect relating to or affecting the rights and remedies of creditors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The effect of general principles of equity and similar principles, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, public policy and unconscionability, and the possible unavailability of specific performance, injunctive relief, or other equitable remedies, regardless of whether in a proceeding in equity or at law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The effect of laws relating to banking, usury or permissible rates of interest for loans, forbearances or the use of money;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The effect of provisions relating to indemnification, exculpation or contribution, to the extent such provisions may be held unenforceable as contrary to federal or state securities laws; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) The financial condition of the Company.

The opinions expressed herein are limited to the laws of the State of Georgia, as currently in effect and without regard to principles or laws regarding choice of law or conflict of laws, and whether the Securities are the valid and binding obligations of the Company. No opinion is expressed with respect to any other laws or any effect that such other laws may have on the opinions expressed herein.

**Robbins ♦ Alloy ♦ Belinfante ♦ Littlefield** **<sub>LLC</sub>**

500 14<sup>th</sup> Street, NW · Atlanta, GA 303318 · www.robbinsfirm.com

Groundfloor Finance Inc.

February 13, 2023

This opinion is based on our understanding that prior to issuing any Securities, the Company will advise us in writing of the terms thereof and other information material thereto, and will file such supplement or amendment to this opinion (if any) as we may reasonably consider necessary or appropriate with respect to such Securities. We also assume the Company will timely file any and all supplements or amendments to the Amendment, the Offering Statement or the Offering Circular as are necessary to comply with applicable laws in effect from time to time; however, we undertake no responsibility to monitor the Company's future compliance with applicable laws, rules or regulations of the Commission or any other governmental body.

Based upon the foregoing, we are of the following opinion that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Company is a corporation validly existing, in good standing, under the laws of the State of Georgia;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The Company has the power to create the obligation covered by the Amendment, and has taken the required steps to authorize entering into the obligations covered by the Amendment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) The Securities have been duly authorized by the Company; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) The Securities, when paid for by and delivered to the Purchasers in accordance with the terms of the Investor Agreement and the LRO Agreement, will be valid, binding obligations of the Company in accordance with the terms therein.

This opinion is intended solely for use in connection with the issuance and sale of the Securities subject to the Amendment and is not to be relied upon for any other purpose. This opinion is based on facts and law existing as of the first date written above and rendered as of such date. Specifically, and without implied limitation, we assume no obligation to advise the Company of any fact, circumstance, event or change in the law subsequent to the date of effectiveness of the Amendment, compliance with any continuing disclosure requirements that may be applicable, or of any facts that may thereafter be brought to our attention whether or not such occurrence would affect or modify any of the opinions expressed herein.

We hereby consent to the filing of this opinion as Exhibit 12.1 to the Amendment and to the reference to our firm under the caption "Legal Matters" in the Offering Circular constituting a part of the Amendment. In giving such consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission promulgated thereunder.

---

| |
|:---|
| Sincerely yours, |
| /s/ Vincent R. Russo |
| On behalf of Robbins Alloy <br> Belinfante Littlefield LLC |

---

**Robbins ♦ Alloy ♦ Belinfante ♦ Littlefield** **<sub>LLC</sub>**

500 14<sup>th</sup> Street, NW · Atlanta, GA 303318 · www.robbinsfirm.com

### UNITED STATES SECURITIES AND EXCHANGE COMMISSION
**Washington, D.C. 20549**

## FORM 1-A

### REGULATION A OFFERING STATEMENT
### UNDER THE SECURITIES ACT OF 1933

### Item 1. Issuer Information

**Exact name of issuer:** GROUNDFLOOR FINANCE INC.

**Jurisdiction of Incorporation/Organization:** GA

**Year of Incorporation:** 2013

**CIK:** 0001588504

**I.R.S. Employer Identification Number:** 46-3414189

**Primary Standard Industrial Classification Code:** 6199

**Total number of full-time employees:** 40

**Total number of part-time employees:** 0

**Address of Principal Executive Offices:** 600 Peachtree Street, Suite 810, ATLANTA, GA 30308

**Company Phone:** 404-850-9225

**Person to contact:** Nick Bhargava

### Financial Statements

**Balance Sheet Information**

| Metric                                   | Amount        |
|:---|:---|
| Cash and Cash Equivalents                | $2641950.00   |
| Investment Securities                    | $0.00         |
| Accounts and Notes Receivable            | $188708801.00 |
| Property, Plant and Equipment (PP&E)     | $1645617.00   |
| Total Assets                             | $192996368.00 |
| Accounts Payable and Accrued Liabilities | $12091725.00  |
| Long-Term Debt                           | $180901524.00 |
| Total Liabilities                        | $192993249.00 |
| Total Stockholders' Equity               | $3119.00      |
| Total Liabilities and Equity             | $192996368.00 |

**Statement of Comprehensive Income Information**

| Metric                                    | Amount       |
|:---|:---|
| Total Revenues                            | $11220099.00 |
| Costs and Expenses Applicable to Revenues | $-1363150.00 |
| Depreciation and Amortization             | $-760380.00  |
| Net Income                                | $-3948774.00 |
| Earnings Per Share - Basic                | -1.82        |
| Earnings Per Share - Diluted              | -0.89        |

**Auditor Information**

| Metric          | Amount             |
|:---|:---|
| Name of Auditor | Cherry Bekaert LLP |

### Outstanding Securities

| Class                        |   Outstanding | CUSIP     | Publicly Traded   |
|:---|---:|:---|:---|
| Common Stock                 |       2192145 | 000000N/A | N/A               |
| Series Seed                  |        568796 | 000000N/A | N/A               |
| Convertible Promissory Notes |        296507 | 000000N/A | N/A               |

### Item 2. Issuer Eligibility
- [x] The issuer certifies that all of the statements in this part are true.

### Item 3. Application of Rule 262
- [x] The issuer certifies that it is not disqualified and has not been involved in any disqualifying event.

### Item 4. Summary Information Regarding the Offering

**Tier:** Tier2

**Financial Statement Status:** Audited

**Type of Securities Offered:** Other(describe)

**Is this a delayed or continuous offering?** Yes

**Was or is the offering to take place within one year after qualification?** Yes

**Was or is the offering to commence within two days after qualification?** No

**Is this a best efforts offering?** Yes

**Was there any solicitation of interest?** No

**Are there any resale securities by affiliates of the issuer?** No

**Offering Amounts**

| Description                                                     | Amount       |
|:---|:---|
| Number of securities offered                                    | 29992600     |
| Number of securities outstanding                                | 0            |
| Price per security                                              | $10.00       |
| Issuer's aggregate offering price                               | $29992600.00 |
| Aggregate offering price of securities held by security holders | $0.00        |
| Aggregate price of securities offered concurrently              | $38208550.00 |
| Total aggregate offering price                                  | $72851950.00 |

**Anticipated Fees**

| Service Provider   | Name                        | Fees     |
|:---|:---|:---|
| Auditor            |  |  |
| Legal              | Manatt Phelps; Robbins Ross | $1000.00 |
| Promoters          |  |  |

**Estimated Net Proceeds to the Issuer:** —

### Item 5. Jurisdictions in Which Securities are to be Offered

- All States and Territories

### Item 6. Unregistered Securities Issued or Sold Within One Year

**Name of Such Issuer:** Groundfloor Real Estate 1, LLC.

**Title of Securities Issued:** LROs

**Total Amount of Securities Issued:** 35182080

**Amount of such securities sold by principal security holders:** 0

**Aggregate consideration:** $35,182,080 were issued and sold pursuant to Offering Circular File No. 024-11094.

**Basis for aggregate consideration:** —

**Securities Act Exemption:** Regulation A